HR 2085 IH

To amend the Internal Revenue Code of 1986 to end the marriage penalty, to provide estate tax relief for family-owned farms and other family-owned businesses, to provide a tax credit for long term care needs, to expand the child and dependent care tax credit, to increase the deduction for health insurance costs for self-employed individuals, and to adjust for inflation the exemption amounts used to calculate the individual alternative minimum tax.

June 9, 1999

Ms. HOOLEY of Oregon (for herself and Mr. WALDEN of Oregon) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to end the marriage penalty, to provide estate tax relief for family-owned farms and other family-owned businesses, to provide a tax credit for long term care needs, to expand the child and dependent care tax credit, to increase the deduction for health insurance costs for self-employed individuals, and to adjust for inflation the exemption amounts used to calculate the individual alternative minimum tax.

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 `Family Tax Reduction Act of 1999'.

SEC. 2. INCREASE OF STANDARD DEDUCTION FOR JOINT RETURNS TO END MARRIAGE PENALTY.

(a) IN GENERAL- Paragraph (2) of section 63(c) of the Internal Revenue Code of 1986 (relating to basic standard deduction) is amended to read as follows:

`(2) BASIC STANDARD DEDUCTION- For purposes of paragraph (1), the basic standard deduction is--

`(A) $8,600 in the case of--

`(i) a joint return, or

`(ii) a surviving spouse (as defined in section 2(a)),

`(B) $6,350 in the case of a head of household (as defined in section 2(b)), and

`(C) 1/2 the dollar amount applicable under subparagraph (A) in any other case.'

(b) INFLATION ADJUSTMENT- Paragraph (4) of section 63(c) of such Code is amended to read as follows:

`(4) ADJUSTMENTS FOR INFLATION-

`(A) ADJUSTMENT OF BASIC STANDARD DEDUCTION- In the case of any taxable year beginning in a calendar year after 2000, each dollar amount contained in paragraph (2) 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 by substituting `calendar year 1999' for `calendar year 1992' in subparagraph (B) thereof.

`(B) ADJUSTMENT OF OTHER AMOUNTS- In the case of any taxable year beginning in a calendar year after 1988, each dollar amount contained in paragraph (5)(A) or subsection (f) 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 by substituting `calendar year 1987' for `calendar year 1992' in subparagraph (B) thereof.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 3. INCREASE IN DEDUCTION FROM ESTATE TAX FOR FAMILY-OWNED FARMS AND OTHER FAMILY-OWNED BUSINESS INTERESTS.

(a) IN GENERAL- Subsection (a) of section 2057 of the Internal Revenue Code of 1986 (relating to family-owned business interests) is amended--

(1) in paragraph (2), by striking `$675,000' and inserting `$5,000,000'; and

(2) by striking paragraph (3).

(b) CHANGE IN PERIOD OF OWNERSHIP AND MATERIAL PARTICIPATION- Subparagraph (D) of section 2057(b)(1) of such Code (relating to estates to which section applies) is amended--

(1) by striking `8-year period' and inserting `7-year period'; and

(2) by striking `5 years' and inserting `4 years'.

(c) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to estates of decedents dying after December 31, 2000.

SEC. 4. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

(a) ALLOWANCE OF CREDIT-

(1) IN GENERAL- Section 24(a) of the Internal Revenue Code of 1986 (relating to allowance of child tax credit) is amended to read as follows:

`(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--

`(1) $500 multiplied by the number of qualifying children of the taxpayer, plus

`(2) $1,000 multiplied by the number of applicable individuals with respect to whom the taxpayer is an eligible caregiver for the taxable year.

In any case in which the applicable individual and the eligible caregiver are the same individual, the credit allowed by paragraph (2) with respect to such individual shall not exceed the aggregate amount paid by the taxpayer during the taxable year (not compensated for by insurance or otherwise) for qualified long-term care services (as defined in section 7702B(c)) for such individual.'

(2) ADDITIONAL CREDIT FOR TAXPAYER WITH 3 OR MORE SEPARATE CREDIT AMOUNTS- So much of section 24(d) of such Code as precedes paragraph (1)(A) thereof is amended to read as follows:

`(d) ADDITIONAL CREDIT FOR TAXPAYERS WITH 3 OR MORE SEPARATE CREDIT AMOUNTS-

`(1) IN GENERAL- If the sum of the number of qualifying children of the taxpayer and the number of applicable individuals with respect to which the taxpayer is an eligible caregiver is 3 or more for any taxable year, the aggregate credits allowed under subpart C shall be increased by the lesser of--'.

(3) CONFORMING AMENDMENTS-

(A) The heading for section 32(n) of such Code is amended by striking `CHILD' and inserting `FAMILY CARE'.

(B) The heading for section 24 is amended to read as follows:

`SEC. 24. FAMILY CARE CREDIT.'

(C) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 24 and inserting the following new item:

`Sec. 24. Family care credit.'.

(b) DEFINITIONS- Section 24(c) of such Code (defining qualifying child) is amended to read as follows:

`(c) DEFINITIONS- For purposes of this section--

`(1) QUALIFYING CHILD-

`(A) IN GENERAL- The term `qualifying child' means any individual if--

`(i) the taxpayer is allowed a deduction under section 151 with respect to such individual for the taxable year,

`(ii) such individual has not attained the age of 17 as of the close of the calendar year in which the taxable year of the taxpayer begins, and

`(iii) such individual bears a relationship to the taxpayer described in section 32(c)(3)(B).

`(B) EXCEPTION FOR CERTAIN NONCITIZENS- The term `qualifying child' shall not include any individual who would not be a dependent if the first sentence of section 152(b)(3) were applied without regard to all that follows `resident of the United States'.

`(2) APPLICABLE INDIVIDUAL-

`(A) IN GENERAL- The term `applicable individual' means, with respect to any taxable year, any individual who has been certified, before the due date for filing the return of tax for the taxable year (without extensions), by a physician (as defined in section 1861(r)(1) of the Social Security Act) as being an individual with long-term care needs described in subparagraph (B) for a period--

`(i) which is at least 180 consecutive days, and

`(ii) a portion of which occurs within the taxable year.

Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the 12 month period ending on such due date (or such other period as the Secretary prescribes) a physician (as so defined) has certified that such individual meets such requirements.

`(B) INDIVIDUALS WITH LONG-TERM CARE NEEDS- An individual is described in this subparagraph if the individual meets any of the following requirements:

`(i) The individual is at least 6 years of age and--

`(I) is unable to perform (without substantial assistance from another individual) at least 3 activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or

`(II) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to perform at least 1 activity of daily living (as so defined).

`(ii) The individual is at least 2 but not 6 years of age and is unable due to a loss of functional capacity to perform (without substantial assistance from another individual) at least 2 of the following activities: eating, transferring, or mobility.

`(iii) The individual is under 2 years of age and requires specific durable medical equipment by reason of a severe health condition or requires a skilled practitioner trained to address the individual's condition to be available if the individual's parents or guardians are absent.

`(3) ELIGIBLE CAREGIVER-

`(A) IN GENERAL- A taxpayer shall be treated as an eligible caregiver for any taxable year with respect to the following individuals:

`(i) The taxpayer.

`(ii) The taxpayer's spouse.

`(iii) An individual with respect to whom the taxpayer is allowed a deduction under section 151 for the taxable year.

`(iv) An individual who would be described in clause (iii) for the taxable year if section 151(c)(1)(A) were applied by substituting for the exemption amount an amount equal to the sum of the exemption amount, the standard deduction under section 63(c)(2)(C), and any additional standard deduction under section 63(c)(3) which would be applicable to the individual if clause (iii) applied.

`(v) An individual who would be described in clause (iii) for the taxable year if--

`(I) the requirements of clause (iv) are met with respect to the individual, and

`(II) the requirements of subparagraph (B) are met with respect to the individual in lieu of the support test of section 152(a).

`(B) RESIDENCY TEST- The requirements of this subparagraph are met if an individual has as his principal place of abode the home of the taxpayer and--

`(i) in the case of an individual who is an ancestor or descendant of the taxpayer or the taxpayer's spouse, is a member of the taxpayer's household for over half the taxable year, or

`(ii) in the case of any other individual, is a member of the taxpayer's household for the entire taxable year.

`(C) SPECIAL RULES WHERE MORE THAN 1 ELIGIBLE CAREGIVER-

`(i) IN GENERAL- If more than 1 individual is an eligible caregiver with respect to the same applicable individual for taxable years ending with or within the same calendar year, a taxpayer shall be treated as the eligible care giver if each such individual (other than the taxpayer) files a written declaration (in such form and manner as the Secretary may prescribe) that such individual will not claim such applicable individual for the credit under this section.

`(ii) NO AGREEMENT- If each individual required under clause (i) to file a written declaration under clause (i) does not do so, the individual with the highest modified adjusted gross income (as defined in section 32(c)(5)) shall be treated as the eligible caregiver.

`(iii) MARRIED INDIVIDUALS FILING SEPARATELY- In the case of married individuals filing separately, the determination under this subparagraph as to whether the husband or wife is the eligible caregiver shall be made under the rules of clause (ii) (whether or not one of them has filed a written declaration under clause (i)).'.

(c) IDENTIFICATION REQUIREMENTS-

(1) IN GENERAL- Section 24(e) of such Code is amended by adding at the end the following new sentence: `No credit shall be allowed under this section to a taxpayer with respect to any applicable individual unless the taxpayer includes the name and taxpayer identification number of such individual, and the identification number of the physician certifying such individual, on the return of tax for the taxable year.'.

(2) ASSESSMENT- Section 6213(g)(2)(I) of such Code is amended--

(A) by inserting `or physician identification' after `correct TIN', and

(B) by striking `child' and inserting `family care'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 5. EXPANSION OF CHILD AND DEPENDENT CARE TAX CREDIT.

(a) INCREASE OF MAXIMUM CREDIT RATE- Paragraph (2) of section 21(a) of the Internal Revenue Code of 1986 (relating to expenses for household and dependent care services necessary for gainful employment) is amended to read as follows:

`(2) APPLICABLE PERCENTAGE DEFINED- For purposes of paragraph (1), the term `applicable percentage' means 50 percent reduced (but not below 20 percent) by 1 percentage point for each $1,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $30,000.'.

(b) CREDIT ALLOWED BASED ON RESIDENCY IN CERTAIN CASES- Subsection (e) of section 21 of such Code is amended by adding at the end the following new paragraph:

`(11) CREDIT ALLOWED BASED ON RESIDENCY IN CERTAIN CASES- In the case of a taxpayer--

`(A) who does not satisfy the household maintenance test of subsection (a) for any period, but

`(B) whose principal place of abode for such period is also the principal place of abode of any qualifying individual,

then such taxpayer shall be treated as satisfying such test for such period but the amount of credit allowable under this section with respect to such individual shall be determined by allowing only 1/12 of the limitation under subsection (c)(1) for each full month that the requirement of subparagraph (B) is met.'

(c) INFLATION ADJUSTMENT OF DOLLAR AMOUNTS-

(1) Section 21 of such Code is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

`(f) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2000, the $30,000 amount contained in subsection (a), the $2,400 amount in subsection (c), and the $500 amount in subsection (f) shall be increased by an amount equal to--

`(1) such dollar amount, multiplied by

`(2) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting `calendar year 1999' for `calendar year 1992' in subparagraph (B) thereof.

If the increase determined under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.'

(2) Paragraph (2) of section 21(c) of such Code is amended by striking `$4,800' and inserting `twice the dollar amount applicable under paragraph (1)'.

(3) Paragraph (2) of section 21(d) of such Code is amended by striking `less than--' and all that follows through the end of the first sentence and inserting `less than 1/12 of the amount which applies under subsection (c) to the taxpayer for the taxable year.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 6. DEDUCTION FOR HEALTH INSURANCE COSTS FOR SELF-EMPLOYED INDIVIDUALS.

(a) IN GENERAL- Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 is amended to read as follows:

`(1) ALLOWANCE OF DEDUCTION- In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and dependents.'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1999.

SEC. 7. INFLATION ADJUSTMENT FOR ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNT FOR INDIVIDUALS.

(a) IN GENERAL- Section 55(d) of the Internal Revenue Code of 1986 (relating to exemption amount) is amended by adding at the end the following:

`(4) INFLATION ADJUSTMENT-

`(A) IN GENERAL- In the case of any taxable year beginning in a calendar year after 2002, each of the dollar amounts contained in paragraphs (1) and (3) 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 by substituting `calendar year 2000' for `calendar year 1992' in subparagraph (B) thereof.

`(B) ROUNDING- If any increase determined under subparagraph (A) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.'

(b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 2002.

SEC. 8. EFFECTIVE DATE SUBJECT TO ENACTMENT OF LEGISLATION EXTENDING THE SOLVENCY OF SOCIAL SECURITY AND MEDICARE.

Notwithstanding any other effective date provision in this Act, this Act and the amendments made by this Act shall not take effect until after the enactment of legislation to extend the solvency of the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund, and to ensure that no funds from such trust funds are used to pay for any tax expenditure resulting from the provisions of this Act.

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