Restoring Tax Fairness for States and Localities Act

II 116TH CONGRESS 2D SESSION S. 3178 To amend the Internal Revenue Code of 1986 to modify the limitation on deduction of State and local taxes, and for other purposes. IN THE SENATE OF THE UNITED STATES JANUARY 9, 2020 Mr. SCHUMER (for himself, Mr. WYDEN, and Mr. MENENDEZ) 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 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 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Restoring Tax Fair- 4 ness for States and Localities Act’’. 5 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 3178 IS SEC. 2. ELIMINATION FOR 2019 OF MARRIAGE PENALTY IN 1 LIMITATION ON DEDUCTION OF STATE AND 2 LOCAL TAXES. 3 (a) IN GENERAL.—Section 164(b) of the Internal 4 Revenue Code of 1986 is amended by adding at the end 5 the following new paragraph: 6 ‘‘(7) SPECIAL RULE FOR LIMITATION ON INDI- 7 VIDUAL DEDUCTIONS FOR 2019.—In the case of a 8 taxable year beginning after December 31, 2018, 9 and before January 1, 2020, if the adjusted gross 10 income of the taxpayer for such taxable year does 11 not exceed $100,000,000, paragraph (6) shall be ap- 12 plied by substituting ‘($20,000 in the case of a joint 13 return)’ for ‘($5,000 in the case of a married indi- 14 vidual filing a separate return)’.’’. 15 (b) EFFECTIVE DATE.—The amendment made by 16 this section shall apply to taxable years beginning after 17 December 31, 2018. 18 SEC. 3. ELIMINATION FOR 2020 AND 2021 OF LIMITATION ON 19 DEDUCTION OF STATE AND LOCAL TAXES. 20 (a) IN GENERAL.—Section 164(b) of the Internal 21 Revenue Code of 1986, as amended by section 2, is further 22 amended by adding at the end the following new para- 23 graph: 24 ‘‘(8) SUSPENSION OF DOLLAR LIMITATION ON 25 STATE AND LOCAL TAXES FOR 2020 AND 2021.— 26 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 3178 IS ‘‘(A) IN GENERAL.—In the case of any 1 taxable year beginning in 2020 or 2021, sub- 2 paragraph (B) of paragraph (6) shall not apply. 3 ‘‘(B) EXCEPTION FOR CERTAIN HIGH-IN- 4 COME TAXPAYERS.—Subparagraph (A) shall 5 not apply to any taxpayer for any taxable year 6 if the adjusted gross income of such taxpayer 7 for such taxable year exceeds $100,000,000.’’. 8 (b) CONFORMING AMENDMENTS.—Section 164(b)(6) 9 of the Internal Revenue Code of 1986 is amended— 10 (1) by striking ‘‘For purposes of subparagraph 11 (B)’’ and inserting ‘‘For purposes of this section’’; 12 (2) by striking ‘‘January 1, 2018’’ and insert- 13 ing ‘‘January 1, 2022’’; 14 (3) by striking ‘‘December 31, 2017, shall’’ and 15 inserting ‘‘December 31, 2021, shall’’; and 16 (4) by adding at the end the following: ‘‘For 17 purposes of this section, in the case of State or local 18 taxes with respect to any real or personal property 19 paid during a taxable year beginning in 2020 or 20 2021, the Secretary shall prescribe rules which treat 21 all or a portion of such taxes as paid in a taxable 22 year or years other than the taxable year in which 23 actually paid as necessary or appropriate to prevent 24 the avoidance of the limitations of this subsection.’’. 25 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 3178 IS (c) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to taxes paid or accrued in taxable 2 years beginning after December 31, 2019. 3 SEC. 4. INCREASE IN DEDUCTION FOR CERTAIN EXPENSES 4 OF ELEMENTARY AND SECONDARY SCHOOL 5 TEACHERS. 6 (a) INCREASE.—Section 62(a)(2)(D) of the Internal 7 Revenue Code of 1986 is amended by striking ‘‘$250’’ and 8 inserting ‘‘$1,000’’. 9 (b) CONFORMING AMENDMENTS.—Section 62(d)(3) 10 of the Internal Revenue Code of 1986 is amended— 11 (1) by striking ‘‘2015’’ and inserting ‘‘2019’’; 12 (2) by striking ‘‘$250’’ and inserting ‘‘$1,000’’; 13 and 14 (3) in subparagraph (B), by striking ‘‘2014’’ 15 and inserting ‘‘2018’’. 16 (c) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to taxable years beginning after 18 December 31, 2018. 19 SEC. 5. ABOVE-THE-LINE DEDUCTION ALLOWED FOR CER- 20 TAIN EXPENSES OF FIRST RESPONDERS. 21 (a) IN GENERAL.—Section 62(a)(2) of the Internal 22 Revenue Code of 1986 is amended by adding at the end 23 the following new subparagraph: 24 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 3178 IS ‘‘(F) CERTAIN EXPENSES OF FIRST RE- 1 SPONDERS.—The deductions allowed by section 2 162 which consist of expenses, not in excess of 3 $1,000, paid or incurred by a first responder— 4 ‘‘(i) as tuition or fees for the partici- 5 pation of the first responder in profes- 6 sional development courses related to serv- 7 ice as a first responder; or 8 ‘‘(ii) for uniforms used by the first re- 9 sponder in service as a first responder.’’. 10 (b) FIRST RESPONDER DEFINED.—Section 62(d) of 11 the Internal Revenue Code of 1986 is amended by adding 12 at the end the following new paragraph: 13 ‘‘(4) FIRST RESPONDER.—For purposes of sub- 14 section (a)(2)(F), the term ‘first responder’ means, 15 with respect to any taxable year, any individual who 16 is employed as a law enforcement officer, firefighter, 17 paramedic, or emergency medical technician for at 18 least 1,000 hours during such taxable year.’’. 19 (c) INFLATION ADJUSTMENT.—Section 62(d)(3) of 20 the Internal Revenue Code of 1986, as amended by section 21 4, is further amended by striking ‘‘the $1,000 amount in 22 subsection (a)(2)(D)’’ and inserting ‘‘the $1,000 amount 23 in each of subparagraphs (D) and (F) of subsection 24 (a)(2)’’. 25 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 3178 IS (d) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to taxable years beginning after 2 December 31, 2019. 3 SEC. 6. INCREASE OF TOP MARGINAL INDIVIDUAL INCOME 4 TAX RATE UNDER TEMPORARY RULES. 5 (a) IN GENERAL.—The tables contained in subpara- 6 graphs (A), (B), (C), (D), and (E) of section 1(j)(2) of 7 the Internal Revenue Code of 1986 are each amended by 8 striking ‘‘37%’’ and inserting ‘‘39.6%’’ and— 9 (1) in subparagraph (A)— 10 (A) by striking ‘‘$600,000’’ each place 11 such term appears and inserting ‘‘$479,000’’; 12 and 13 (B) by striking ‘‘$161,379’’ and inserting 14 ‘‘$119,029’’; 15 (2) in subparagraph (B)— 16 (A) by striking ‘‘$500,000’’ each place 17 such term appears and inserting ‘‘$452,400’’; 18 and 19 (B) by striking ‘‘$149,298’’ and inserting 20 ‘‘$132,638’’; 21 (3) in subparagraph (C)— 22 (A) by striking ‘‘$500,000’’ each place 23 such term appears and inserting ‘‘$425,800’’; 24 and 25 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 3178 IS (B) by striking ‘‘$150,689.50’’ and insert- 1 ing ‘‘$124,719.50’’; and 2 (4) in subparagraph (D)— 3 (A) by striking ‘‘$300,000’’ each place 4 such term appears and inserting ‘‘$239,500’’; 5 and 6 (B) by striking ‘‘$80,689.50’’ and insert- 7 ing ‘‘$59,514.50’’. 8 (b) CONFORMING AMENDMENTS.— 9 (1) Section 1(j)(4)(B)(iii) of the Internal Rev- 10 enue Code of 1986 is amended— 11 (A) in the matter preceding subclause (I), 12 by striking ‘‘37 percent’’ and inserting ‘‘39.6 13 percent’’; 14 (B) in subclause (II), by striking ‘‘37-per- 15 cent bracket’’ and inserting ‘‘39.6-percent 16 bracket’’; and 17 (C) in the heading, by striking ‘‘37-PER- 18 CENT BRACKET’’ and inserting ‘‘39.6-PERCENT 19 BRACKET’’. 20 (2) Section 1(j)(4)(C) of such Code is amend- 21 ed— 22 (A) in clause (i)(II), by striking ‘‘para- 23 graph (5)(B)(i)(IV)’’ and inserting ‘‘paragraph 24 (5)(B)(iv)’’; and 25 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 3178 IS (B) by amending clause (ii) to read as fol- 1 lows: 2 ‘‘(ii) the amount which would (without 3 regard to this paragraph) be taxed at a 4 rate below 39.6 percent shall not be more 5 than the sum of— 6 ‘‘(I) the earned taxable income of 7 such child, plus 8 ‘‘(II) the maximum dollar 9 amount for the 35-percent rate brack- 10 et for estates and trusts.’’. 11 (3) The heading of section 1(j)(5) of such Code 12 is amended to read as follows: ‘‘APPLICATION OF 13 ZERO PERCENT CAPITAL GAIN RATE BRACKETS’’. 14 (4) Subparagraphs (A) and (B) of section 15 1(j)(5) of such Code are amended to read as follows: 16 ‘‘(A) IN GENERAL.—Subsection 17 (h)(1)(B)(i) shall be applied by substituting 18 ‘below the maximum zero rate amount’ for 19 ‘which would (without regard to this paragraph) 20 be taxed at a rate below 25 percent’. 21 ‘‘(B) MAXIMUM ZERO RATE AMOUNT DE- 22 FINED.—For purposes of subparagraph (A), the 23 term ‘maximum zero rate amount’ means— 24 VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 3178 IS ‘‘(i) in the case of a joint return or 1 surviving spouse, $77,200; 2 ‘‘(ii) in the case of an individual who 3 is a head of household (as defined in sec- 4 tion 2(b)), $51,700; 5 ‘‘(iii) in the case of any other indi- 6 vidual (other than an estate or trust), an 7 amount equal to 1⁄2 of the amount in effect 8 for the taxable year under clause (i); and 9 ‘‘(iv) in the case of an estate or trust, 10 $2,600.’’. 11 (5) Section 1(j)(5)(C) of such Code is amended 12 by striking ‘‘clauses (i) and (ii) of’’. 13 (c) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to taxable years beginning after 15 December 31, 2019. 16 (d) SECTION 15 NOT TO APPLY.—Section 15 of the 17 Internal Revenue Code of 1986 shall not apply to any 18 change in a rate of tax by reason of any amendment made 19 by this section. 20 Æ VerDate Sep 11 2014 01:23 Jan 11, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S3178.IS S3178 pamtmann on DSKBC07HB2PROD with BILLS