EITC Modernization Act

I 117TH CONGRESS 1ST SESSION H. R. 174 To amend the Internal Revenue Code of 1986 to extend the earned income tax credit to all taxpayers with dependents and to qualifying students, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JANUARY 4, 2021 Mrs. WATSON COLEMAN (for herself and Ms. MOORE of Wisconsin) 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 extend the earned income tax credit to all taxpayers with de- pendents and to qualifying students, and for other pur- poses. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘EITC Modernization 4 Act’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 174 IH (1) The Federal earned income tax credit is a 1 refundable tax credit for lower- and middle-income 2 working individuals and families whose earnings are 3 below an income threshold. 4 (2) Since its establishment in 1975, the credit 5 has increased family income, reduced child poverty, 6 and promoted employment by supplementing the 7 earnings of low-wage workers, including military 8 families. 9 (3) The credit has a positive impact on the edu- 10 cation and health of children living in poverty. 11 (4) The credit has a positive economic impact 12 on local economies and businesses because it puts 13 more money in the hands of low- and middle-income 14 working people who spend the money on immediate 15 needs, such as groceries, school supplies, car repairs, 16 rent, and health care. 17 (5) The widening gap between the incomes of 18 the wealthiest Americans and those of middle- and 19 lower-income Americans is alarming. 20 (6) There is an urgent need to address that 21 gap, including through measures like this legislation 22 and by raising the Federal minimum wage which to- 23 gether increase the wages of working Americans, 24 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 174 IH widen the path to income stability, and narrow in- 1 come inequality. 2 SEC. 3. MODIFICATIONS OF THE EARNED INCOME TAX 3 CREDIT. 4 (a) INCLUSION OF INDIVIDUALS WITH QUALIFYING 5 DEPENDENTS.— 6 (1) IN GENERAL.—Section 32(c)(1) of the In- 7 ternal Revenue Code of 1986 is amended— 8 (A) in subparagraph (A), by striking 9 ‘‘qualifying child’’ each place such term appears 10 and inserting ‘‘qualifying dependent’’, and 11 (B) by striking subparagraphs (B) and (F) 12 and by redesignating subparagraphs (C), (D), 13 and (E) as subparagraphs (B), (C), and (D), 14 respectively. 15 (2) QUALIFYING DEPENDENT DEFINED.—Sec- 16 tion 32(c) of such Code is amended by redesignating 17 paragraphs (3) and (4) as paragraphs (5) and (6), 18 and by inserting after paragraph (2) the following 19 new paragraphs: 20 ‘‘(3) QUALIFYING DEPENDENT.— 21 ‘‘(A) IN GENERAL.—The term ‘qualifying 22 dependent’ means, with respect to a taxable 23 year— 24 ‘‘(i) a qualifying child, 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 174 IH ‘‘(ii) an aged dependent, or 1 ‘‘(iii) a qualifying individual described 2 in subparagraph (B) or (C) of section 3 21(b)(1). 4 ‘‘(B) IDENTIFICATION REQUIREMENTS.— 5 No credit shall be allowed under this section 6 with respect to a qualifying dependent unless 7 the taxpayer includes the name, age, and TIN 8 of the individual on the return of tax for the 9 taxable year. 10 ‘‘(C) PLACE OF ABODE.—The term ‘quali- 11 fying dependent’ shall not include an individual 12 unless such individual has a principal place of 13 abode in the United States for more than one- 14 half of such taxable year. 15 ‘‘(4) AGED DEPENDENT.—The term ‘aged de- 16 pendent’ means a dependent for whom a deduction 17 is allowable under section 151 who has attained the 18 age of 65 before the close of the taxable year.’’. 19 (3) CONFORMING AMENDMENTS.— 20 (A) The tables in paragraphs (1) and (2) 21 of section 32(b) of such Code are each amend- 22 ed— 23 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 174 IH (i) by striking ‘‘qualifying child’’ each 1 place it appears and inserting ‘‘qualifying 2 dependent’’, and 3 (ii) by striking ‘‘qualifying children’’ 4 each place it appears and inserting ‘‘quali- 5 fying dependents’’. 6 (B) Section 32(c)(5) of such Code, as re- 7 designated by this Act, is amended by striking 8 subparagraphs (C) and (D). 9 (C) Section 32(m) of such Code is amend- 10 ed by striking ‘‘(c)(3)(D)’’ and inserting 11 ‘‘(c)(3)(B)’’. 12 (b) INCLUSION OF QUALIFYING STUDENTS.— 13 (1) IN GENERAL.—Section 32(c)(1)(A) of such 14 Code is amended by striking ‘‘or’’ at the end of 15 clause (i), by striking the period at the end of clause 16 (ii)(III) and inserting ‘‘, or’’, and by inserting after 17 clause (ii)(III) the following new clause: 18 ‘‘(iii) any individual who is a quali- 19 fying student.’’. 20 (2) QUALIFYING STUDENT DEFINED.—Section 21 32(c)(1) of such Code, as amended by subsection 22 (a), is further amended by adding at the end the fol- 23 lowing new subparagraph: 24 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 174 IH ‘‘(E) QUALIFYING STUDENT.—The term 1 ‘qualifying student’ means, with respect to a 2 taxable year, an individual who is an eligible 3 student (as defined in section 25A(b)(3)) with 4 respect to an institution of higher education (as 5 defined in section 101 of the Higher Education 6 Act of 1965) who— 7 ‘‘(i) is not a dependent for whom a 8 deduction is allowable under section 151 to 9 another taxpayer for any taxable year be- 10 ginning in the same calendar year as such 11 taxable year, and 12 ‘‘(ii) either— 13 ‘‘(I) is qualified for a Federal 14 Pell Grant with respect to the aca- 15 demic year beginning in such taxable 16 year, or 17 ‘‘(II) has modified adjusted gross 18 income of less than 250 percent of the 19 poverty line for the size of the family 20 involved for the taxable year. 21 ‘‘(F) DEFINITIONS.—For purposes of this 22 subparagraph: 23 ‘‘(i) MODIFIED ADJUSTED GROSS IN- 24 COME.—The term ‘modified adjusted gross 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 174 IH income’ means the adjusted gross income 1 of the taxpayer for the taxable year in- 2 creased by any amount excluded from 3 gross income under section 911, 931, or 4 933. 5 ‘‘(ii) POVERTY LINE.— 6 ‘‘(I) IN GENERAL.—The term 7 ‘poverty line’ has the meaning given 8 such term in section 673(2) of the 9 Community Services Block Grant Act 10 (42 U.S.C. 9902(2)), including any 11 revision required by such section. 12 ‘‘(II) FAMILY SIZE.—For pur- 13 poses of determining the poverty line 14 applicable to the taxpayer, the family 15 size with respect to any taxpayer shall 16 be equal to the number of individuals 17 for whom the taxpayer is allowed a 18 deduction under section 151 (relating 19 to allowance of deduction for personal 20 exemptions) for the taxable year.’’. 21 (3) CONFORMING AMENDMENT.—Section 22 32(c)(1)(A)(ii) of such Code is amended by inserting 23 ‘‘(other than a qualifying student)’’ after ‘‘any other 24 individual’’. 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 174 IH (c) MINIMUM CREDIT FOR STUDENTS AND FOR INDI- 1 VIDUALS WITH CERTAIN QUALIFYING DEPENDENTS.— 2 Section 32(a) of such Code is amended by adding at the 3 end the following new paragraph: 4 ‘‘(3) MINIMUM CREDIT FOR STUDENTS AND 5 FOR INDIVIDUALS WITH CERTAIN QUALIFYING DE- 6 PENDENTS.— 7 ‘‘(A) IN GENERAL.—In the case of a quali- 8 fying student, or an eligible individual who has 9 a specified dependent for the taxable year, the 10 amount determined under paragraph (1) (be- 11 fore the application of paragraph (2)) and the 12 amount determined under paragraph (2)(A) 13 shall not be less than $1,200. 14 ‘‘(B) SPECIFIED DEPENDENT.—For pur- 15 poses of this paragraph, the term ‘specified de- 16 pendent’ means any qualifying dependent (other 17 than a qualifying child who has attained the 18 age of 7 before the close of the taxable year).’’. 19 (d) MONTHLY PAYMENT.—Section 32 of such Code, 20 as amended by this Act, is further amended by adding 21 at the end the following new subsection: 22 ‘‘(n) MONTHLY PAYMENT.— 23 ‘‘(1) IN GENERAL.—In the case of an individual 24 who is entitled to a refund relating to an overpay- 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 174 IH ment of tax imposed by this subtitle that exceeds 1 $240 (but only to the extent such refund does not 2 exceed the credit allowed under this section) such in- 3 dividual may elect to have the Secretary, in lieu of 4 such refund, make a payment equal to— 5 ‘‘(A) 2⁄13 of such refund (with interest) 6 during the earlier of the first practicable month 7 or the second month that begins after the date 8 the return was filed, and 9 ‘‘(B) 1⁄13 of such refund (with interest) 10 during each of the 11 months subsequent to the 11 month determined under subparagraph (A). 12 ‘‘(2) METHOD OF PAYMENT.—A payment made 13 under this subsection shall be made by direct deposit 14 or by general-use prepaid card, or by such other 15 method (other than by check) as the Secretary may 16 prescribe and the taxpayer may elect. 17 ‘‘(3) ONE-TIME INCREASE.—The first time an 18 individual receives a payment under this subsection, 19 paragraph (1)(A) shall be applied by substituting 20 ‘4⁄13’ for ‘2⁄13’.’’. 21 (e) SPECIAL RULE FOR NEW LOW-INCOME PAR- 22 ENTS.—Section 32 of such Code, as amended by this Act, 23 is further amended by adding at the end the following new 24 subsection: 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 174 IH ‘‘(o) SPECIAL RULE FOR NEW LOW-INCOME PAR- 1 ENTS.— 2 ‘‘(1) IN GENERAL.—In the case of an individual 3 who— 4 ‘‘(A) is eligible for payments under sub- 5 section (o)(1) with respect to a refund for a 6 taxable year, and 7 ‘‘(B) has a qualifying child who is born or 8 adopted during the following taxable year and 9 not later than the penultimate month for which 10 the taxpayer is eligible for such payments, 11 the amount of any such payments made after such 12 birth or adoption shall be adjusted to the amount 13 such payments would be if such qualifying child were 14 a qualifying child of the taxpayer under this section 15 for the taxable year to which such payments relate. 16 ‘‘(2) QUALIFYING CHILD DETERMINATION.— 17 For purposes of determining if a child is a quali- 18 fying child for purposes of this subsection, sub- 19 section (m) shall be applied by inserting ‘or, in the 20 case of an adoption, such other identifying informa- 21 tion as specified by the Secretary’ before the period 22 at the end.’’. 23 (f) AGE OF ELIGIBLE INDIVIDUALS WITHOUT DE- 24 PENDENTS.—Section 32(c)(1)(A)(ii)(II) of such Code is 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 174 IH amended by striking ‘‘age 25 but not attained age 65’’ 1 and inserting ‘‘age 18’’. 2 (g) EFFECTIVE DATE.—The amendments made by 3 this section shall apply to taxable years beginning after 4 the date of the enactment of this Act. 5 SEC. 4. RETURN PREPARATION PROGRAMS FOR LOW-IN- 6 COME TAXPAYERS. 7 (a) IN GENERAL.—Chapter 77 of such Code is 8 amended by inserting after section 7526A the following 9 new section: 10 ‘‘SEC. 7526B. RETURN PREPARATION PROGRAMS FOR LOW- 11 INCOME TAXPAYERS. 12 ‘‘(a) ESTABLISHMENT OF VOLUNTEER INCOME TAX 13 ASSISTANCE MATCHING GRANT PROGRAM.—The Sec- 14 retary, through the Internal Revenue Service, shall estab- 15 lish a Community Volunteer Income Tax Assistance 16 Matching Grant Program under which the Secretary may, 17 subject to the availability of appropriated funds, make 18 grants to provide matching funds for the development, ex- 19 pansion, or continuation of qualified return preparation 20 programs assisting low-income taxpayers and members of 21 underserved populations. 22 ‘‘(b) USE OF FUNDS.— 23 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 174 IH ‘‘(1) IN GENERAL.—Qualified return prepara- 1 tion programs may use grants received under this 2 section for— 3 ‘‘(A) ordinary and necessary costs associ- 4 ated with program operation in accordance with 5 cost principles under the applicable Office of 6 Management and Budget circular, including— 7 ‘‘(i) wages or salaries of persons co- 8 ordinating the activities of the program, 9 ‘‘(ii) developing training materials, 10 conducting training, and performing qual- 11 ity reviews of the returns prepared under 12 the program, 13 ‘‘(iii) equipment purchases, and 14 ‘‘(iv) vehicle-related expenses associ- 15 ated with remote or rural tax preparation 16 services, 17 ‘‘(B) outreach and educational activities 18 described in subsection (c)(2)(B), and 19 ‘‘(C) services related to financial education 20 and capability, asset development, and the es- 21 tablishment of savings accounts in connection 22 with tax return preparation. 23 ‘‘(2) USE OF GRANTS FOR OVERHEAD EX- 24 PENSES PROHIBITED.—No grant received under this 25 VerDate Sep 11 2014 22:31 Feb 02, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H174.IH H174 kjohnson on DSK79L0C42PROD with BILLS 13 •HR 174 IH section may be used for overhead expenses that are 1 not directly related to a qualified return preparation 2 program. 3 ‘‘(c) APPLICATION.— 4 ‘‘(1) IN GENERAL.—Each applicant for a grant 5 under this section shall submit an application to the 6 Secretary at such time, in such manner, and con- 7 taining such information as the Secretary may rea- 8 sonably require. 9 ‘‘(2) PRIORITY.—In awarding grants under this 10 section, the Secretary shall give priority to applica- 11 tions which demonstrate— 12 ‘‘(A) assistance to low-inco [Text truncated for display. 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