Restoring Tax Fairness for States and Localities Act

IIB 116TH CONGRESS 2D SESSION H. R. 5377 IN THE SENATE OF THE UNITED STATES JANUARY 3, 2020 Received; read twice and referred to the Committee on Finance AN ACT To amend the Internal Revenue Code of 1986 to modify the limitation on deduction of State and local taxes, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 2 HR 5377 RFS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Restoring Tax Fair- 2 ness for States and Localities Act’’. 3 SEC. 2. ELIMINATION FOR 2019 OF MARRIAGE PENALTY IN 4 LIMITATION ON DEDUCTION OF STATE AND 5 LOCAL TAXES. 6 (a) IN GENERAL.—Section 164(b) of the Internal 7 Revenue Code of 1986 is amended by adding at the end 8 the following new paragraph: 9 ‘‘(7) SPECIAL RULE FOR LIMITATION ON INDI- 10 VIDUAL DEDUCTIONS FOR 2019.—In the case of a 11 taxable year beginning after December 31, 2018, 12 and before January 1, 2020, if the adjusted gross 13 income of the taxpayer for such taxable year does 14 not exceed $100,000,000, paragraph (6) shall be ap- 15 plied by substituting ‘($20,000 in the case of a joint 16 return)’ for ‘($5,000 in the case of a married indi- 17 vidual filing a separate return)’.’’. 18 (b) EFFECTIVE DATE.—The amendment made by 19 this section shall apply to taxable years beginning after 20 December 31, 2018. 21 SEC. 3. ELIMINATION FOR 2020 AND 2021 OF LIMITATION ON 22 DEDUCTION OF STATE AND LOCAL TAXES. 23 (a) IN GENERAL.—Section 164(b) of the Internal 24 Revenue Code of 1986, as amended by section 2, is further 25 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 3 HR 5377 RFS amended by adding at the end the following new para- 1 graph: 2 ‘‘(8) SUSPENSION OF DOLLAR LIMITATION ON 3 STATE AND LOCAL TAXES FOR 2020 AND 2021.— 4 ‘‘(A) IN GENERAL.—In the case of any 5 taxable year beginning in 2020 or 2021, sub- 6 paragraph (B) of paragraph (6) shall not apply. 7 ‘‘(B) EXCEPTION FOR CERTAIN HIGH-IN- 8 COME TAXPAYERS.—Subparagraph (A) shall 9 not apply to any taxpayer for any taxable year 10 if the adjusted gross income of such taxpayer 11 for such taxable year exceeds $100,000,000.’’. 12 (b) CONFORMING AMENDMENTS.—Section 164(b)(6) 13 of the Internal Revenue Code of 1986 is amended— 14 (1) by striking ‘‘For purposes of subparagraph 15 (B)’’ and inserting ‘‘For purposes of this section’’; 16 (2) by striking ‘‘January 1, 2018’’ and insert- 17 ing ‘‘January 1, 2022’’; 18 (3) by striking ‘‘December 31, 2017, shall’’ and 19 inserting ‘‘December 31, 2021, shall’’; and 20 (4) by adding at the end the following: ‘‘For 21 purposes of this section, in the case of State or local 22 taxes with respect to any real or personal property 23 paid during a taxable year beginning in 2020 or 24 2021, the Secretary shall prescribe rules which treat 25 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 4 HR 5377 RFS all or a portion of such taxes as paid in a taxable 1 year or years other than the taxable year in which 2 actually paid as necessary or appropriate to prevent 3 the avoidance of the limitations of this subsection.’’. 4 (c) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to taxes paid or accrued in taxable 6 years beginning after December 31, 2019. 7 SEC. 4. INCREASE IN DEDUCTION FOR CERTAIN EXPENSES 8 OF ELEMENTARY AND SECONDARY SCHOOL 9 TEACHERS. 10 (a) INCREASE.—Section 62(a)(2)(D) of the Internal 11 Revenue Code of 1986 is amended by striking ‘‘$250’’ and 12 inserting ‘‘$1,000’’. 13 (b) CONFORMING AMENDMENTS.—Section 62(d)(3) 14 of the Internal Revenue Code of 1986 is amended— 15 (1) by striking ‘‘2015’’ and inserting ‘‘2019’’; 16 (2) by striking ‘‘$250’’ and inserting ‘‘$1,000’’; 17 and 18 (3) in subparagraph (B), by striking ‘‘2014’’ 19 and inserting ‘‘2018’’. 20 (c) EFFECTIVE DATE.—The amendments made by 21 this section shall apply to taxable years beginning after 22 December 31, 2018. 23 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 5 HR 5377 RFS SEC. 5. ABOVE-THE-LINE DEDUCTION ALLOWED FOR CER- 1 TAIN EXPENSES OF FIRST RESPONDERS. 2 (a) IN GENERAL.—Section 62(a)(2) of the Internal 3 Revenue Code of 1986 is amended by adding at the end 4 the following new subparagraph: 5 ‘‘(F) CERTAIN EXPENSES OF FIRST RE- 6 SPONDERS.—The deductions allowed by section 7 162 which consist of expenses, not in excess of 8 $1,000, paid or incurred by a first responder— 9 ‘‘(i) as tuition or fees for the partici- 10 pation of the first responder in profes- 11 sional development courses related to serv- 12 ice as a first responder; or 13 ‘‘(ii) for uniforms used by the first re- 14 sponder in service as a first responder.’’. 15 (b) FIRST RESPONDER DEFINED.—Section 62(d) of 16 the Internal Revenue Code of 1986 is amended by adding 17 at the end the following new paragraph: 18 ‘‘(4) FIRST RESPONDER.—For purposes of sub- 19 section (a)(2)(F), the term ‘first responder’ means, 20 with respect to any taxable year, any individual who 21 is employed as a law enforcement officer, firefighter, 22 paramedic, or emergency medical technician for at 23 least 1,000 hours during such taxable year.’’. 24 (c) INFLATION ADJUSTMENT.—Section 62(d)(3) of 25 the Internal Revenue Code of 1986, as amended by section 26 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 6 HR 5377 RFS 4, is further amended by striking ‘‘the $1,000 amount in 1 subsection (a)(2)(D)’’ and inserting ‘‘the $1,000 amount 2 in each of subparagraphs (D) and (F) of subsection 3 (a)(2)’’. 4 (d) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to taxable years beginning after 6 December 31, 2019. 7 SEC. 6. INCREASE OF TOP MARGINAL INDIVIDUAL INCOME 8 TAX RATE UNDER TEMPORARY RULES. 9 (a) IN GENERAL.—The tables contained in subpara- 10 graphs (A), (B), (C), (D), and (E) of section 1(j)(2) of 11 the Internal Revenue Code of 1986 are each amended by 12 striking ‘‘37%’’ and inserting ‘‘39.6%’’ and— 13 (1) in subparagraph (A)— 14 (A) by striking ‘‘$600,000’’ each place 15 such term appears and inserting ‘‘$479,000’’; 16 and 17 (B) by striking ‘‘$161,379’’ and inserting 18 ‘‘$119,029’’; 19 (2) in subparagraph (B)— 20 (A) by striking ‘‘$500,000’’ each place 21 such term appears and inserting ‘‘$452,400’’; 22 and 23 (B) by striking ‘‘$149,298’’ and inserting 24 ‘‘$132,638’’; 25 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 7 HR 5377 RFS (3) in subparagraph (C)— 1 (A) by striking ‘‘$500,000’’ each place 2 such term appears and inserting ‘‘$425,800’’; 3 and 4 (B) by striking ‘‘$150,689.50’’ and insert- 5 ing ‘‘$124,719.50’’; and 6 (4) in subparagraph (D)— 7 (A) by striking ‘‘$300,000’’ each place 8 such term appears and inserting ‘‘$239,500’’; 9 and 10 (B) by striking ‘‘$80,689.50’’ and insert- 11 ing ‘‘$59,514.50’’. 12 (b) CONFORMING AMENDMENTS.— 13 (1) Section 1(j)(4)(B)(iii) of the Internal Rev- 14 enue Code of 1986 is amended— 15 (A) in the matter preceding subclause (I), 16 by striking ‘‘37 percent’’ and inserting ‘‘39.6 17 percent’’; 18 (B) in subclause (II), by striking ‘‘37-per- 19 cent bracket’’ and inserting ‘‘39.6-percent 20 bracket’’; and 21 (C) in the heading, by striking ‘‘37-PER- 22 CENT BRACKET’’ and inserting ‘‘39.6-PERCENT 23 BRACKET’’. 24 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 8 HR 5377 RFS (2) Section 1(j)(4)(C) of such Code is amend- 1 ed— 2 (A) in clause (i)(II), by striking ‘‘para- 3 graph (5)(B)(i)(IV)’’ and inserting ‘‘paragraph 4 (5)(B)(iv)’’; and 5 (B) by amending clause (ii) to read as fol- 6 lows: 7 ‘‘(ii) the amount which would (without 8 regard to this paragraph) be taxed at a 9 rate below 39.6 percent shall not be more 10 than the sum of— 11 ‘‘(I) the earned taxable income of 12 such child, plus 13 ‘‘(II) the maximum dollar 14 amount for the 35-percent rate brack- 15 et for estates and trusts.’’. 16 (3) The heading of section 1(j)(5) of such Code 17 is amended to read as follows: ‘‘APPLICATION OF 18 ZERO PERCENT CAPITAL GAIN RATE BRACKETS’’. 19 (4) Subparagraphs (A) and (B) of section 20 1(j)(5) of such Code are amended to read as follows: 21 ‘‘(A) IN GENERAL.—Subsection 22 (h)(1)(B)(i) shall be applied by substituting 23 ‘below the maximum zero rate amount’ for 24 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 9 HR 5377 RFS ‘which would (without regard to this paragraph) 1 be taxed at a rate below 25 percent’. 2 ‘‘(B) MAXIMUM ZERO RATE AMOUNT DE- 3 FINED.—For purposes of subparagraph (A), the 4 term ‘maximum zero rate amount’ means— 5 ‘‘(i) in the case of a joint return or 6 surviving spouse, $77,200; 7 ‘‘(ii) in the case of an individual who 8 is a head of household (as defined in sec- 9 tion 2(b)), $51,700; 10 ‘‘(iii) in the case of any other indi- 11 vidual (other than an estate or trust), an 12 amount equal to 1⁄2 of the amount in effect 13 for the taxable year under clause (i); and 14 ‘‘(iv) in the case of an estate or trust, 15 $2,600.’’. 16 (5) Section 1(j)(5)(C) of such Code is amended 17 by striking ‘‘clauses (i) and (ii) of’’. 18 (c) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to taxable years beginning after 20 December 31, 2019. 21 (d) SECTION 15 NOT TO APPLY.—Section 15 of the 22 Internal Revenue Code of 1986 shall not apply to any 23 VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377 10 HR 5377 RFS change in a rate of tax by reason of any amendment made 1 by this section. 2 Passed the House of Representatives December 19, 2019. Attest: CHERYL L. JOHNSON, Clerk. VerDate Sep 11 2014 21:05 Jan 03, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5377.RFS H5377