HR 2646 IH

To amend the Internal Revenue Code of 1986 to provide common sense tax relief for families.

July 29, 1999

Mrs. MCCARTHY of New York introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide common sense tax relief for families.

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

SECTION 1. SHORT TITLE.

(a) SHORT TITLE- This Act may be cited as the `Common Sense Family Tax Relief Act of 1999'.

(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

(c) TABLE OF CONTENTS-

Sec. 1. Short title.

TITLE I--TAX RELIEF FOR FAMILIES

Sec. 101. Elimination of marriage penalty in standard deduction.

Sec. 102. Expansion of dependent care tax credit.

Sec. 103. Credit for employer expenses in providing certain dependent care services.

Sec. 104. Reduction in individual capital gain tax rates.

Sec. 105. Capital gains tax rates applied to capital gains of designated settlement funds.

TITLE II--TAX RELIEF FOR BUSINESSES

Sec. 201. Permanent extension of research credit; increase in percentages under alternative incremental credit.

Sec. 202. Repeal of limitation on estate tax deduction for family-owned business interests.

TITLE III--EDUCATIONAL OPPORTUNITIES

Sec. 301. Elimination of 60-month limit on student loan interest deduction.

Sec. 302. Credit for information technology training program expenses.

Sec. 303. Certain credits related to education and children allowed against alternative minimum tax.

TITLE IV--TAX RELIEF FOR RETIREMENT SAVINGS

Sec. 401. Increase in deduction for individual retirement plan savings.

Sec. 402. Adjustment in monthly exempt amount for purposes of the social security earnings test.

TITLE V--INCENTIVE FOR AFFORDABLE HOUSING

Sec. 501. Increase in State ceiling on low-income housing credit.

TITLE VI--INCENTIVES FOR HEALTH CARE AND LONG-TERM CARE

Sec. 601. Deduction for 100 percent of health insurance costs of self-employed individuals.

Sec. 602. Credit for taxpayers with long-term care needs.

TITLE I--TAX RELIEF FOR FAMILIES

SEC. 101. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.

(a) IN GENERAL- Paragraph (2) of section 63(c) (relating to standard deduction) is amended--

(1) by striking `$5,000' in subparagraph (A) and inserting `twice the dollar amount in effect under subparagraph (C) for the taxable year',

(2) by adding `or' at the end of subparagraph (B),

(3) by striking `in the case of' and all that follows in subparagraph (C) and inserting `in any other case.', and

(4) by striking subparagraph (D).

(b) TECHNICAL AMENDMENTS-

(1) Subparagraph (B) of section 1(f)(6) is amended by striking `(other than with' and all that follows through `shall be applied' and inserting `(other than with respect to sections 63(c)(4) and 151(d)(4)(A)) shall be applied'.

(2) Paragraph (4) of section 63(c) is amended by adding at the end the following flush sentence:

`The preceding sentence shall not apply to the amount referred to in paragraph (2)(A).'.

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

SEC. 102. EXPANSION OF DEPENDENT CARE TAX CREDIT.

(a) IN GENERAL- Paragraph (2) of section 21(a) (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) MINIMUM CREDIT ALLOWED FOR STAY-AT-HOME PARENTS- Section 21(e) (relating to special rules) is amended by adding at the end the following:

`(11) MINIMUM CREDIT ALLOWED FOR STAY-AT-HOME PARENTS- Notwithstanding subsection (d), in the case of any taxpayer with one or more qualifying individuals described in subsection (b)(1)(A) under the age of 1 at any time during the taxable year, such taxpayer shall be deemed to have employment-related expenses with respect to such qualifying individuals in an amount equal to the greater of--

`(A) the amount of employment-related expenses incurred for such qualifying individuals for the taxable year (determined under this section without regard to this paragraph), or

`(B) $125 for each month in such taxable year during which such qualifying individual is under the age of 1.'.

(c) INFLATION ADJUSTMENT OF DOLLAR AMOUNTS-

(1) Section 21 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 $125 amount in subsection (e)(11)(B) 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 ($1 in the case of the $60 amount in subsection (e)(11)(B)), such amount shall be rounded to the next lowest multiple thereof.'

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

(3) Paragraph (2) of section 21(d) 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) CREDIT ALLOWED BASED ON RESIDENCY IN CERTAIN CASES- Subsection (e) of section 21 is amended by adding at the end the following new paragraph:

`(12) 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) for each full month that the requirement of subparagraph (B) is met.'

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

SEC. 103. CREDIT FOR EMPLOYER EXPENSES IN PROVIDING CERTAIN DEPENDENT CARE SERVICES.

(a) GENERAL RULE- Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:

`SEC. 45D. EMPLOYER EXPENSES IN PROVIDING DEPENDENT CARE SERVICES.

`(a) GENERAL RULE- For purposes of section 38, the employer day care center credit determined under this section for the taxable year is the amount determined under subsection (b) with respect to each qualified day care center of the taxpayer.

`(b) CREDIT PER FACILITY- For purposes of this section--

`(1) IN GENERAL- The amount determined under this subsection for any taxable year with respect to any qualified day care facility of the taxpayer is 50 percent of the excess (if any) of--

`(A) the expenses paid or incurred by the taxpayer during the taxable year in providing dependent care services at such facility for employees, over

`(B) the aggregate amount received or accrued during the taxable year by the employer for such services.

`(2) DEPRECIATION ALLOWANCES- For purposes of paragraph (1), depreciation allowances under section 167 shall be treated as expenses.

`(c) QUALIFIED DAY CARE CENTER- For purposes of this section, the term `qualified day care center' means any day care center--

`(1) which is operated by the taxpayer exclusively for purposes of providing dependent care services to employees,

`(2) which is located on the business premises of the taxpayer or on a site adjacent to such premises,

`(3) which complies with all applicable laws and regulations of a State or unit of local government, and

`(4) the operation of which is part of a dependent care assistance program (as defined in section 129(d)).'

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT- Subsection (b) of section 38 is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end thereof the following new paragraph:

`(13) the employer day care center credit determined under section 45D(a).'

(c) DENIAL OF DOUBLE BENEFIT- Section 280C is amended by adding at the end thereof the following new subsection:

`(d) CREDIT FOR EMPLOYER DAY CARE CENTER EXPENSES- No deduction shall be allowed for that portion of the expenses referred to in section 45D(b)(1)(A) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45D(a).'

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

`Sec. 45D. Employer expenses in providing dependent care services.'

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 104. REDUCTION IN INDIVIDUAL CAPITAL GAIN TAX RATES.

(a) IN GENERAL-

(1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by striking `10 percent' and inserting `7.5 percent'.

(2) The following sections are each amended by striking `20 percent' and inserting `15 percent':

(A) Section 1(h)(1)(C).

(B) Section 55(b)(3)(C).

(C) Section 1445(e)(1).

(D) The second sentence of section 7518(g)(6)(A).

(E) The second sentence of section 607(h)(6)(A) of the Merchant Marine Act, 1936.

(3) Sections 1(h)(1)(D) and 55(b)(3)(D) are each amended by striking `25 percent' and inserting `20 percent'.

(b) CONFORMING AMENDMENTS-

(1) Section 311 of the Taxpayer Relief Act of 1997 is amended by striking subsection (e).

(2) Section 1(h) is amended--

(A) by striking paragraphs (2), (9), and (13),

(B) by redesignating paragraphs (3) through (8) as paragraphs (2) through (7), respectively, and

(C) by redesignating paragraphs (10), (11), and (12) as paragraphs (8), (9), and (10), respectively.

(3) Paragraph (3) of section 55(b) is amended by striking `In the case of taxable years beginning after December 31, 2000, rules similar to the rules of section 1(h)(2) shall apply for purposes of subparagraphs (B) and (C).'.

(4) Paragraph (7) of section 57(a) is amended--

(A) by striking `42 percent' and inserting `6 percent', and

(B) by striking the last sentence.

(c) TRANSITIONAL RULES FOR TAXABLE YEARS WHICH INCLUDE JULY 1, 1999- For purposes of applying section 1(h) of the Internal Revenue Code of 1986 in the case of a taxable year which includes July 1, 1999--

(1) The amount of tax determined under subparagraph (B) of section 1(h)(1) of such Code shall be the sum of--

(A) 7.5 percent of the lesser of--

(i) the net capital gain taking into account only gain or loss properly taken into account for the portion of the taxable year on or after such date (determined without regard to collectibles gain or loss, gain described in section (1)(h)(6)(A)(i) of such Code, and section 1202 gain), or

(ii) the amount on which a tax is determined under such subparagraph (without regard to this subsection), plus

(B) 10 percent of the excess (if any) of--

(i) the amount on which a tax is determined under such subparagraph (without regard to this subsection), over

(ii) the amount on which a tax is determined under subparagraph (A).

(2) The amount of tax determined under subparagraph (C) of section (1)(h)(1) of such Code shall be the sum of--

(A) 15 percent of the lesser of--

(i) the excess (if any) of the amount of net capital gain determined under subparagraph (A)(i) of paragraph (1) of this subsection over the amount on which a tax is determined under subparagraph (A) of paragraph (1) of this subsection, or

(ii) the amount on which a tax is determined under such subparagraph (C) (without regard to this subsection), plus

(B) 20 percent of the excess (if any) of--

(i) the amount on which a tax is determined under such subparagraph (C) (without regard to this subsection), over

(ii) the amount on which a tax is determined under subparagraph (A) of this paragraph.

(3) The amount of tax determined under subparagraph (D) of section (1)(h)(1) of such Code shall be the sum of--

(A) 20 percent of the lesser of--

(i) the amount which would be determined under section 1(h)(6)(A)(i) of such Code taking into account only gain properly taken into account for the portion of the taxable year on or after such date, or

(ii) the amount on which a tax is determined under such subparagraph (D) (without regard to this subsection), plus

(B) 25 percent of the excess (if any) of--

(i) the amount on which a tax is determined under such subparagraph (D) (without regard to this subsection), over

(ii) the amount on which a tax is determined under subparagraph (A) of this paragraph.

(4) For purposes of applying section 55(b)(3) of such Code, rules similar to the rules of paragraphs (1), (2), and (3) of this subsection shall apply.

(5) In applying this subsection with respect to any pass-thru entity, the determination of when gains and loss are properly taken into account shall be made at the entity level.

(6) Terms used in this subsection which are also used in section 1(h) of such Code shall have the respective meanings that such terms have in such section.

(d) EFFECTIVE DATES-

(1) IN GENERAL- Except as otherwise provided by this subsection, the amendments made by this section shall apply to taxable years ending after June 30, 1999.

(2) WITHHOLDING- The amendment made by subsection (a)(2)(C) shall apply to amounts paid after the date of the enactment of this Act.

(3) SMALL BUSINESS STOCK- The amendments made by subsection (b)(4) shall apply to dispositions on or after July 1, 1999.

SEC. 105. CAPITAL GAINS TAX RATES APPLIED TO CAPITAL GAINS OF DESIGNATED SETTLEMENT FUNDS.

(a) IN GENERAL- Paragraph (1) of section 468B(b) (relating to taxation of designated settlement funds) is amended by inserting `(subject to section 1(h))' after `maximum rate'.

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

TITLE II--TAX RELIEF FOR BUSINESSES

SEC. 201. PERMANENT EXTENSION OF RESEARCH CREDIT; INCREASE IN PERCENTAGES UNDER ALTERNATIVE INCREMENTAL CREDIT.

(a) CREDIT MADE PERMANENT-

(1) IN GENERAL- Section 41 (relating to credit for increasing research activities) is amended by striking subsection (h).

(2) CONFORMING AMENDMENT- Paragraph (1) section 45C(b) is amended by striking subparagraph (D).

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to amounts paid or incurred after June 30, 1999.

(b) INCREASE IN PERCENTAGES UNDER ALTERNATIVE INCREMENTAL CREDIT-

(1) IN GENERAL- Subparagraph (A) of section 41(c)(4) is amended--

(A) by striking `1.65 percent' and inserting `2.65 percent',

(B) by striking `2.2 percent' and inserting `3.2 percent', and

(C) by striking `2.75 percent' and inserting `3.75 percent'.

(2) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after June 30, 1999.

SEC. 202. REPEAL OF LIMITATION ON ESTATE TAX DEDUCTION FOR FAMILY-OWNED BUSINESS INTERESTS.

(a) IN GENERAL- Subsection (a) of section 2057 (relating to family-owned business interests) is amended to read as follows:

`(a) ALLOWANCE OF DEDUCTION- For purposes of the tax imposed by section 2001, in the case of an estate of a decedent to which this section applies, the value of the taxable estate shall be determined by deducting from the value of the gross estate the adjusted value of the qualified family-owned business interests of the decedent which are described in subsection (b)(2).'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to estates of decedents dying after the date of the enactment of this Act.

TITLE III--EDUCATIONAL OPPORTUNITIES

SEC. 301. ELIMINATION OF 60-MONTH LIMIT ON STUDENT LOAN INTEREST DEDUCTION.

(a) IN GENERAL- Section 221 (relating to interest on education loans) is amended by striking subsection (d) and by redesignating subsections (e), (f), and (g) as subsections (d), (e), and (f), respectively.

(b) CONFORMING AMENDMENT- Section 6050(e) is amended by striking `section 221(e)(1)' and inserting `section 221(d)(1)'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply with respect to any loan interest paid after December 31, 1997.

SEC. 302. CREDIT FOR INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits) is amended by adding at the end the following:

`SEC. 45E. INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES.

`(a) GENERAL RULE- For purposes of section 38, in the case of an employer, the information technology training program credit determined under this section is an amount equal to 20 percent of information technology training program expenses paid or incurred by the taxpayer during the taxable year.

`(b) ADDITIONAL CREDIT PERCENTAGE FOR CERTAIN PROGRAMS- The percentage under subsection (a) shall be increased by 5 percentage points for information technology training program expenses paid or incurred by the taxpayer with respect to a program operated--

`(1) in an empowerment zone or enterprise community designated under part I of subchapter U,

`(2) in a school district in which a least 50 percent of the students attending schools in such district are eligible for free or reduced-cost lunches under the school lunch program established under the National School Lunch Act,

`(3) in an area designated as a disaster area by the Secretary of Agriculture or by the President under the Disaster Relief and Emergency Assistance Act in the taxable year or the 4 preceding taxable years,

`(4) in a rural enterprise community designated under section 766 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1999, or

`(5) in an area designated by the Secretary of Agriculture as a Rural Economic Area Partnership Zone, or

`(6) by an employer who has 200 or fewer employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

`(c) LIMITATION- The amount of information technology training program expenses with respect to an individual which may be taken into account under subsection (a) for the taxable year shall not exceed $6,000.

`(d) INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES- For purposes of this section--

`(1) IN GENERAL- The term `information technology training program expenses' means expenses paid or incurred by reason of the participation of the employer in any information technology training program.

`(2) INFORMATION TECHNOLOGY TRAINING PROGRAM- The term `information technology training program' means a program--

`(A) for the training of computer programmers, systems analysts, and computer scientists or engineers (as such occupations are defined by the Bureau of Labor Statistics),

`(B) involving a partnership of--

`(i) employers, and

`(ii) State training programs, school districts, university systems, or certified commercial information technology training providers, and

`(C) at least 50 percent of the costs of which are paid or incurred by the employers.

`(3) CERTIFIED COMMERCIAL INFORMATION TECHNOLOGY TRAINING PROVIDER- The term `certified commercial information technology training providers' means a private sector provider of educational products and services utilized for training in information technology which is certified with respect to--

`(A) the curriculum that is used for the training, or

`(B) the technical knowledge of the instructors of such provider,

by 1 or more software publishers or hardware manufacturers the products of which are a subject of the training.

`(e) DENIAL OF DOUBLE BENEFIT- No deduction or credit under any other provision of this chapter shall be allowed with respect to information technology training program expenses (determined without regard to the limitation under subsection (c)).

`(f) ALLOCATIONS- For purposes of this section, rules similar to the rules of section 41(f)(2) shall apply.'

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT- Section 38(b) (relating to current year business credit) is amended by striking `plus' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, plus', and by adding at the end the following:

`(14) the information technology training program credit determined under section 45E.'

(c) NO CARRYBACKS- Subsection (d) of section 39 (relating to carryback and carryforward of unused credits) is amended by adding at the end the following:

`(9) NO CARRYBACK OF SECTION 45E CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the information technology training program credit determined under section 45E may be carried back to a taxable year ending before the date of the enactment of section 45E.'

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following:

`Sec. 45E. Information technology training program expenses.'

(e) EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred after the date of enactment of this Act in taxable years ending after such date.

SEC. 303. CERTAIN CREDITS RELATED TO EDUCATION AND CHILDREN ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.

(a) IN GENERAL- Subsection (a) of section 26 (relating to limitation based on amount of tax) is amended to read as follows:

`(a) LIMITATION BASED ON AMOUNT OF TAX- The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of--

`(1) the taxpayer's regular tax liability for the taxable year, and

`(2) the tax imposed for the taxable year by section 55(a).

Paragraph (2) shall not apply to the credits allowable by sections 22, 23, and 25, and this sentence shall be applied before the preceding sentence.'

(b) CHILD CREDIT- Subsection (d) of section 24 is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2).

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

TITLE IV--TAX RELIEF FOR RETIREMENT SAVINGS

SEC. 401. INCREASE IN DEDUCTION FOR INDIVIDUAL RETIREMENT PLAN SAVINGS.

(a) INCREASE IN MAXIMUM AMOUNT OF DEDUCTION- Subparagraph (A) of section 219(b)(1) (relating to maximum amount of deduction) is amended by striking `$2,000' and inserting `$5,000'.

(b) CONFORMING AMENDMENTS- Subsections (a)(1), (b)(2), (j), and (p)(8) of section 408 are each amended by striking `$2,000' each place it appears and inserting `$5,000'.

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

SEC. 402. ADJUSTMENT IN MONTHLY EXEMPT AMOUNT FOR PURPOSES OF THE SOCIAL SECURITY EARNINGS TEST.

(a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE- Section 203(f)(8)(D) of the Social Security Act (42 U.S.C. 403(f)(8)(D)) is amended--

(1) in clause (iii), by inserting `and' at the end; and

(2) by striking clauses (iv) through (vii) and inserting the following new clause:

`(iv) for each month of any taxable year ending after 1999 and before 2001, $2,500.'.

(b) CONFORMING AMENDMENTS-

(1) Section 203(f)(8)(B)(ii) of such Act (42 U.S.C. 403(f)(8)(B)(ii)) is amended--

(A) by striking `after 2001 and before 2003' and inserting `after 1999 and before 2001'; and

(B) in subclause (II), by striking `2001' and inserting `1998'.

(2) The second sentence of section 223(d)(4)(A) of such Act (42 U.S.C. 423(d)(4)(A)) is amended by inserting `and section 402 of the Common Sense Family Tax Relief Act of 1999' after `1996'.

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

TITLE V--INCENTIVE FOR AFFORDABLE HOUSING

SEC. 501. INCREASE IN STATE CEILING ON LOW-INCOME HOUSING CREDIT.

(a) IN GENERAL- Clause (i) of section 42(h)(3)(C) (relating to State housing credit ceiling) is amended by striking `$1.25' and inserting `$1.75'.

(b) ADJUSTMENT OF STATE CEILING FOR INCREASES IN COST-OF-LIVING- Paragraph (3) of section 42(h) (relating to housing credit dollar amount for agencies) is amended by adding at the end the following new subparagraph:

`(H) COST-OF-LIVING ADJUSTMENT-

`(i) IN GENERAL- In the case of a calendar year after 2000, the dollar amount contained in subparagraph (C)(i) 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 such calendar year by substituting `calendar year 1999' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any increase under clause (i) is not a multiple of 5 cents, such increase shall be rounded to the next lowest multiple of 5 cents.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to calendar years after 1999.

TITLE VI--INCENTIVES FOR HEALTH CARE AND LONG-TERM CARE

SEC. 601. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

(a) IN GENERAL- Paragraph (1) of section 162(l) 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 an amount equal to 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 this section shall apply to taxable years beginning after December 31, 1999.

SEC. 602. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

(a) ALLOWANCE OF CREDIT-

(1) IN GENERAL- Section 24(a) (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) 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) 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 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) (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) 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) 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.

END