Title: Cost-of-Living Refund Act of 2019
Policy area: Taxation

Summary:
Cost-of-Living Refund Act of 2019
This bill modifies the earned income tax credit to (1) increase its credit percentage and modify the phaseout amount, (2) include for purposes of the credit certain qualifying dependents and students, and (3) set forth requirements for advance payments of the credit.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 527 Introduced in Senate (IS)]

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116th CONGRESS
  1st Session
                                 S. 527

To amend the Internal Revenue Code of 1986 to modify the earned income 
   tax credit to account for the amount by which economic growth has 
            outpaced income growth, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 14, 2019

   Mr. Brown introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modify the earned income 
   tax credit to account for the amount by which economic growth has 
            outpaced income growth, and for other purposes.

    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 ``Cost-of-Living Refund Act of 2019''.

SEC. 2. MODIFICATION OF EARNED INCOME TAX CREDIT.

    (a) In General.--
            (1) Increase in credit percentage.--The table in section 
        32(b)(1) of the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``7.65'' in the second column 
                (relating to credit percentage) and inserting ``30'';
                    (B) by striking ``7.65'' in the third column 
                (relating to phaseout percentage) and inserting 
                ``15.98'';
                    (C) by striking ``34'' and inserting ``65.28'';
                    (D) by striking ``40'' and inserting ``76.80''; and
                    (E) by striking ``45'' and inserting ``86.40''.
            (2) Earned income amount and phaseout amount.--
                    (A) In general.--Subparagraph (A) of section 
                32(b)(2) of such Code is amended by striking ``Subject 
                to subparagraph (B), the earned income amount and the 
                phaseout amount'' and inserting ``Subject to 
                subparagraph (B)--
                            ``(i) Phaseout amount.--The phaseout amount 
                        is $18,340.
                            ``(ii) Earned income amount.--The earned 
                        income amount''.
                    (B) Credit phase-in ends.--Section 32(b)(2)(A)(ii) 
                of such Code, as amended by subparagraph (A), is 
                further amended by striking the table and inserting the 
                following:

``In the case of an                                   The earned income
  eligible individual with:                                  amount is:
        1 qualifying child.................................    $10,000 
        2 or more qualifying children......................    $14,040 
        No qualifying children............................. $10,000.''.

    (b) Eligibility Age.--Subclause (II) of section 32(c)(1)(A)(ii) of 
the Internal Revenue Code of 1986 is amended by striking ``25'' and 
inserting ``21''.
    (c) Conforming and Technical Amendment.--Paragraph (1) of section 
32(j) of the Internal Revenue Code of 1986 is amended to read as 
follows:
            ``(1) In general.--In the case of any taxable year 
        beginning after 2019, each of the dollar amounts in subsections 
        (b)(2) and (i)(1) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting in 
                subparagraph (A)(ii) thereof--
                            ``(i) in the case of amounts in subsection 
                        (b)(2)(A), by substituting `calendar year 2018' 
                        for `calendar year 2016', and
                            ``(ii) in the case of amounts in subsection 
                        (i)(1), by substituting `calendar year 1995' 
                        for `calendar year 2016'.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2018.

SEC. 3. EXPANSION OF EARNED INCOME TAX CREDIT.

    (a) Inclusion of Individuals With Qualifying Dependents.--
            (1) In general.--Section 32(c)(1) of the Internal Revenue 
        Code of 1986 is amended--
                    (A) in subparagraph (A), by striking ``qualifying 
                child'' each place such term appears and inserting 
                ``qualifying dependent'', and
                    (B) by striking subparagraphs (B) and (F) and by 
                redesignating subparagraphs (C), (D), and (E) as 
                subparagraphs (B), (C), and (D), respectively.
            (2) Qualifying dependent defined.--Section 32(c) of such 
        Code is amended by redesignating paragraphs (3) and (4) as 
        paragraphs (4) and (5), respectively, and by inserting after 
        paragraph (2) the following:
            ``(3) Qualifying dependent.--
                    ``(A) In general.--The term `qualifying dependent' 
                means, with respect to a taxable year--
                            ``(i) a qualifying child,
                            ``(ii) a dependent for whom a deduction is 
                        allowable under section 151 who--
                                    ``(I) has attained the age of 65 
                                before the close of the taxable year, 
                                or
                                    ``(II) is an individual described 
                                in section 21(b)(1)(B), or
                            ``(iii) an individual described in section 
                        21(b)(1)(C).
                    ``(B) Identification requirements.--No credit shall 
                be allowed under this section with respect to a 
                qualifying dependent unless the taxpayer includes the 
                name, age, and TIN of the individual on the return of 
                tax for the taxable year.
                    ``(C) Place of abode.--The term `qualifying 
                dependent' shall not include an individual unless such 
                individual has a principal place of abode in the United 
                States for more than one-half of such taxable year.''.
            (3) Conforming amendments.--
                    (A) The tables in paragraphs (1) and (2) of section 
                32(b) of such Code are each amended--
                            (i) by striking ``qualifying child'' each 
                        place it appears and inserting ``qualifying 
                        dependent'', and
                            (ii) by striking ``qualifying children'' 
                        each place it appears and inserting 
                        ``qualifying dependents''.
                    (B) Section 32(c)(4) of such Code, as redesignated 
                by this Act, is amended by striking subparagraphs (C) 
                and (D).
                    (C) Section 32(m) of such Code is amended by 
                striking ``subsections (c)(1)(E) and (c)(3)(D)'' and 
                inserting ``subsections (c)(1)(D) and (c)(3)(B)''.
    (b) Inclusion of Qualifying Students.--
            (1) In general.--Section 32(c)(1)(A) of such Code is 
        amended by striking ``or'' at the end of clause (i), by 
        striking the period at the end of clause (ii)(III) and 
        inserting ``, or'', and by inserting after clause (ii)(III) the 
        following new clause:
                            ``(iii) any individual who is a qualifying 
                        student.''.
            (2) Qualifying student defined.--Section 32(c)(1) of such 
        Code, as amended by subsection (a), is further amended by 
        adding at the end the following new subparagraph:
                    ``(E) Qualifying student.--
                            ``(i) In general.--The term `qualifying 
                        student' means, with respect to a taxable year, 
                        an individual who is an eligible student (as 
                        defined in section 25A(b)(3)) with respect to 
                        an institution of higher education (as defined 
                        in section 101 of the Higher Education Act of 
                        1965) who--
                                    ``(I)(aa) has qualified for a 
                                Federal Pell Grant with respect to the 
                                academic year beginning in such taxable 
                                year, or
                                    ``(bb) whose modified adjusted 
                                gross income (as defined in section 
                                24(b)(1)) is less than 250 percent of 
                                the poverty line (defined in section 
                                529A(b)(7)(B)) as for the size of the 
                                family involved for the taxable year, 
                                and
                                    ``(II) is not a dependent for whom 
                                a deduction is allowable under section 
                                151 to another taxpayer for any taxable 
                                year beginning in the same calendar 
                                year as such taxable year.
                            ``(ii) Family size.--For purposes of this 
                        subparagraph, in determining the poverty line 
                        applicable to the taxpayer, the family size 
                        with respect to such taxpayer shall be equal to 
                        the number of individuals for whom such 
                        taxpayer is allowed a deduction under section 
                        151 for the taxable year.''.
            (3) Conforming amendment.--Section 32(c)(1)(A)(ii) of such 
        Code is amended by inserting ``(other than a qualifying 
        student)'' after ``any other individual''.
    (c) Minimum Credit for Students and for Individuals With Certain 
Qualifying Dependents.--Section 32(a) of such Code is amended by adding 
at the end the following new paragraph:
            ``(3) Minimum credit for students and for individuals with 
        certain qualifying dependents.--
                    ``(A) In general.--In the case of an eligible 
                individual who is a qualifying student or who has a 
                specified dependent for the taxable year, the amount 
                determined under paragraph (1) (before the application 
                of paragraph (2)) and the amount determined under 
                paragraph (2)(A) shall not be less than $1,200.
                    ``(B) Specified dependent.--For purposes of this 
                paragraph, the term `specified dependent' means any 
                qualifying dependent (other than a qualifying child who 
                has attained the age of 7 before the close of the 
                taxable year).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 4. ADVANCE PAYMENT OF EARNED INCOME CREDIT.

    (a) In General.--Chapter 25 of subtitle C of the Internal Revenue 
Code of 1986 is amended by inserting after section 3506 the following 
new section:

``SEC. 3507. ADVANCE PAYMENT OF EARNED INCOME CREDIT.

    ``(a) Advance Payment.--
            ``(1) In general.--An employer making payment of wages to 
        an employee with respect to whom an eligibility certificate is 
        in effect shall, at the time of paying such wages for the 
        payroll period elected by the employee under paragraph (2), 
        make an additional lump sum payment to such employee equal to 
        the earned income advance amount (except as provided in 
        subsection (b)(1)(C)(ii)) of such employee.
            ``(2) Payments available after 6 months of employment 
        during calendar year.--For purposes of paragraph (1), an 
        employee with respect to whom an eligibility certificate is in 
        effect for the calendar year may elect to receive the earned 
        income advance amount at the same time as wages for any payroll 
        period which begins after the employee has been paid wages by 
        the employer for a period of not less than 6 months during such 
        calendar year.
    ``(b) Eligibility Certificate.--
            ``(1) In general.--For purposes of this section, an 
        eligibility certificate is a statement submitted by an employee 
        to the employer which--
                    ``(A) certifies that the employee is eligible to 
                receive the credit provided by section 32 for the 
                taxable year,
                    ``(B) certifies that the employee does not have an 
                eligibility certificate in effect for the calendar year 
                with respect to the payment of wages by another 
                employer, and
                    ``(C) certifies that--
                            ``(i) an eligibility certificate has not 
                        been in effect for the spouse of the employee 
                        on any date during the calendar year, or
                            ``(ii) such a certificate is in effect for 
                        the spouse of the employee, and the employee is 
                        eligible to receive only \1/2\ the earned 
                        income advance amount otherwise determined with 
                        respect to the employee.
            ``(2) Employer not responsible for verification.--For 
        purposes of this section, an employer shall not--
                    ``(A) be required to verify any certification made 
                by an employee in the statement described in paragraph 
                (1), or
                    ``(B) be held liable for any false claims or 
                statements made by an employee in regards to such 
                statement.
    ``(c) Earned Income Advance Amount.--
            ``(1) Determination of amount.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                term `earned income advance amount' means, with respect 
                to any payroll period, the amount of the credit 
                provided under section 32 as determined--
                            ``(i) on the basis of the wages of the 
                        employee from the employer during such calendar 
                        year through such payroll period, and
                            ``(ii) in accordance with tables issued by 
                        the Secretary.
                    ``(B) Limitation.--For each calendar year, except 
                as provided in subparagraph (C), the earned income 
                advance amount shall not exceed $500.
                    ``(C) Adjustment for inflation.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning after 2021, the $500 
                        amount in subparagraph (B) shall be increased 
                        by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins determined by 
                                substituting `calendar year 2020' for 
                                `calendar year 2016' in subparagraph 
                                (A)(ii) thereof.
                            ``(ii) Rounding.--If any increase 
                        determined under paragraph (1) is not a 
                        multiple of $10, such increase shall be rounded 
                        to the nearest multiple of $10.
            ``(2) Armed forces.--In the case of an employee who is a 
        member of the Armed Forces of the United States, the earned 
        income advance amount shall be determined by taking into 
        account the total wages of such employee, as determined for 
        purposes of section 32.
            ``(3) Advance amount tables.--For purposes of paragraph 
        (1)(A)(ii), the tables issued by the Secretary shall be similar 
        in form to the tables issued under section 3402 and, to the 
        extent feasible, coordinated with such tables.
    ``(d) Payments To Be Treated as Payments of Withholding and FICA 
Taxes.--
            ``(1) In general.--Payments made by an employer under 
        subsection (a) to an employee--
                    ``(A) shall not be treated as payment of 
                compensation, and
                    ``(B) shall be treated as made out of--
                            ``(i) amounts required to be deducted and 
                        withheld for the payroll period under section 
                        3401,
                            ``(ii) amounts required to be deducted for 
                        the payroll period under section 3102, and
                            ``(iii) amounts of the taxes imposed for 
                        the payroll period under section 3111,
                as if the employer had paid to the Secretary, on the 
                day on which the wages are paid to the employee, an 
                amount equal to such payments.
            ``(2) Advance payments exceed taxes due.--In the case of 
        any employer, if for any payroll period the aggregate amount of 
        earned income advance payments exceeds the sum of the amounts 
        referred to in paragraph (1)(B), the employer shall pay only so 
        much of such earned income advance payment as does not exceed 
        such sum, and shall not make any further advance payments to 
        the employee for the calendar year.
            ``(3) Failure to make advance payments.--Failure to make 
        any payment of an earned income advance amount as required 
        under this section shall be treated as the failure at such time 
        to deduct and withhold under chapter 24 an amount equal to the 
        earned income advance amount.
    ``(e) Submission of Certificate.--
            ``(1) Effective period.--An eligibility certificate 
        submitted to an employer at any time during the calendar year 
        shall continue in effect with respect to the employee during 
        such calendar year until revoked by the employee or until 
        another such certificate takes effect under this section.
            ``(2) Requirement to revoke certificate.--In the case of an 
        employee who has submitted an eligibility certificate under 
        this section and subsequently becomes ineligible for the credit 
        provided under section 32 for the taxable year, the employee 
        shall, not later than 10 days after becoming ineligible for 
        such credit, submit to the employer a revocation of such 
        certificate.
            ``(3) Form and contents of certificate.--Eligibility 
        certificates shall be in such form and contain such other 
        information as the Secretary may by regulations prescribe.
    ``(f) Taxpayers Making Prior Fraudulent or Reckless Claims.--
            ``(1) In general.--No earned income advance amount shall be 
        paid under this section for any taxable year in the 
        disallowance period.
            ``(2) Disallowance period.--For purposes of paragraph (1), 
        the disallowance period is--
                    ``(A) the period of 10 taxable years after the most 
                recent taxable year for which there was a final 
                determination that the taxpayer's claim of an earned 
                income advance amount under this section was due to 
                fraud, and
                    ``(B) the period of 2 taxable years after the most 
                recent taxable year for which there was a final 
                determination that the taxpayer's claim of an earned 
                income advance amount under this section was due to 
                reckless or intentional disregard of rules and 
                regulations (but not due to fraud).
    ``(g) Taxable Year.--The term `taxable year' means the last taxable 
year of the employee under subtitle A beginning in the calendar year in 
which the wages are paid.
    ``(h) IRS Notification.--The Internal Revenue Service shall take 
such steps as may be appropriate to ensure that taxpayers who receive a 
refund of the credit under section 32 are aware of the availability of 
earned income advance amounts under this section.''.
    (b) Coordination With Advance Payments.--Section 32 of the Internal 
Revenue Code of 1986 is amended by inserting after subsection (f) the 
following new subsection:
    ``(g) Coordination With Advance Payments of Earned Income Credit.--
            ``(1) Recapture of advance payments.--If any payment is 
        made to the individual by an employer under section 3507 during 
        any calendar year, then the tax imposed by this chapter for the 
        individual's last taxable year beginning in such calendar year 
        shall be increased by the aggregate amount of such payments.
            ``(2) Reconciliation of payments advanced and credit 
        allowed.--Any increase in tax under paragraph (1) shall not be 
        treated as tax imposed by this chapter for purposes of 
        determining the amount of any credit (other than the credit 
        allowed by subsection (a)) allowable under this part.''.
    (c) Filing Requirement.--Section 6012(a) of the Internal Revenue 
Code of 1986 is amended--
            (1) in paragraph (7), by striking ``and'' at the end,
            (2) in paragraph (8), by adding ``and'' at the end, and
            (3) by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Every individual who receives payments during the 
        calendar year in which the taxable year begins under section 
        3507;''.
    (d) Receipts for Employees.--Section 6051(a) of the Internal 
Revenue Code of 1986 is amended by inserting after paragraph (6) the 
following new paragraph:
            ``(7) the total amount paid to the employee under section 
        3507 (relating to advance payment of earned income credit),''.
    (e) Clerical Amendment.--The table of sections for chapter 25 of 
subtitle C of the Internal Revenue Code of 1986 is amended by inserting 
after the item relating to section 3506 the following new item:

``Sec. 3507. Advance payment of earned income credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2020.
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