Title: Youth Tax Fairness Act of 2019
Policy area: Taxation

Summary:
Youth Tax Fairness Act of 2019
This bill amends the Internal Revenue Code to treat certain income as earned income for purposes of the taxation of the unearned income of certain children (i.e., the kiddie tax). Such income includes (1) distributions from qualified disability trusts, (2) certain military survivor benefits, (3) certain first responder survivor benefits, (4) certain Indian tribal payments, (5) certain scholarships or fellowship grants, (6) Alaska permanent fund dividends, and (7) Social Security benefits. Treating such income as earned income allows it to be taxed at lower rates.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4728 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 4728

 To amend the Internal Revenue Code of 1986 to modify the taxation of 
                  unearned income of certain children.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 17, 2019

    Ms. Moore (for herself, Mr. Estes, Mr. Cisneros, Mr. Young, Mr. 
 Panetta, Mr. Cole, Mr. Kildee, Mr. Calvert, Ms. Davids of Kansas, Mr. 
   Steube, and Ms. Haaland) introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to modify the taxation of 
                  unearned income of certain children.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Youth Tax Fairness Act of 2019''.

SEC. 2. MODIFICATION OF TAXATION OF UNEARNED INCOME OF CERTAIN 
              CHILDREN.

    (a) Certain Income Treated as Earned Income for Purposes of Kiddie 
Tax.--Section 1(g)(4)(C) of the Internal Revenue Code of 1986 is 
amended to read as follows:
                    ``(C) Treatment of certain amounts as earned 
                income.--For purposes of this subsection, each of 
                following amounts shall be treated as earned income of 
                the child referred to in paragraph (1) to the extent 
                included in the gross income of such child:
                            ``(i) Distributions from qualified 
                        disability trusts.--Any amount included in the 
                        gross income of such child under section 652 or 
                        662 by reason of being a beneficiary of a 
                        qualified disability trust (as defined in 
                        section 642(b)(2)(C)(ii)).
                            ``(ii) Certain military survivor 
                        benefits.--Any benefit under laws administered 
                        by the Secretary of Defense or the Secretary of 
                        Veterans Affairs which is received by such 
                        child by reason of the child being the survivor 
                        of a deceased member of the Armed Forces or of 
                        a deceased veteran.
                            ``(iii) Certain first responder survivor 
                        benefits.--Any payment made by Federal, State, 
                        or local government to such child if such 
                        payment is made by reason of the death of the 
                        parent of such child during such parent's 
                        service as a law enforcement officer, 
                        firefighter, paramedic, or emergency medical 
                        technician.
                            ``(iv) Certain indian tribal payments.--Any 
                        payment made by an Indian tribal government (as 
                        defined in section 139E(c)(1)), or from a trust 
                        of which the Indian tribal government is 
                        treated as the owner under subpart E of part I 
                        of subchapter J, to such child if--
                                    ``(I) such child is an enrolled 
                                member of the tribe with respect to 
                                such Indian tribal government, and
                                    ``(II) such payment is received by 
                                such child by reason of such 
                                enrollment.
                            ``(v) Certain scholarships or fellowship 
                        grants.--Any scholarship or fellowship grant 
                        which is received by such child if--
                                    ``(I) such child is a candidate for 
                                a degree at an educational organization 
                                described in section 170(b)(1)(A)(ii), 
                                and
                                    ``(II) such scholarship or grant 
                                supports such candidacy.
                            ``(vi) Alaska permanent fund dividends.--
                        Any Alaska Permanent Fund dividend.
                            ``(vii) Social security benefits.--Any 
                        social security benefit (as defined in section 
                        86(d)).''.
    (b) Repeal of Temporary Rule for Taxation of Unearned Income of 
Certain Children.--Section 1(j) of such Code is amended by striking 
paragraph (4).
    (c) Application to Alternative Minimum Tax.--
            (1) In general.--Section 59(j)(1)(A) of such Code is 
        amended by inserting ``and including amounts treated as earned 
        income under section 1(g)(4)(C)'' after ``section 911(d)(2)''.
            (2) Suspension of kiddie tax limitation on alternative 
        minimum tax exemption during period of increased exemption.--
        Section 55(d)(4)(A) of such Code is amended by striking ``and'' 
        at the end of clause (i)(II), by striking the period at the end 
        of clause (ii)(III) and inserting ``, and'', and by adding at 
        the end the following new clause:
                            ``(iii) subsection (j) of section 59 shall 
                        not apply.''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Repeal of temporary rule for taxation of unearned 
        income of certain children.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendment made by subsection (b) shall apply 
                to taxable years beginning after December 31, 2018.
                    (B) Elective retroactive application.--In the case 
                of a taxpayer who elects the application of this 
                subparagraph (at such time and in such manner as the 
                Secretary of the Treasury (or the Secretary's designee) 
                may provide), the amendment made by subsection (b) 
                shall apply to taxable years beginning after December 
                31, 2017.
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