Sec. 1103. Modification of earned income tax credit

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Section 32 is amended to read as follows: In the case of an individual who is an eligible individual for any taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to the taxpayer’s employment-related taxes for such taxable year. The credit allowed under subsection

(a)shall not exceed— in the case of a taxpayer with 2 or more qualifying children, $3,000 ($4,000 in the case of a joint return), and in the case of a taxpayer with 1 qualifying child, $2,400. The credit allowed under subsection

(a)(determined after application of paragraph (1)) shall be reduced (but not below zero) by the sum of— 19 percent of so much of the taxpayer’s adjusted gross income (reduced by the amount of any excess described in subparagraph (B)) as exceeds $20,000 ($27,000 in the case of a joint return), plus so much of the taxpayer’s investment income for the taxable year as exceeds $3,300. For purposes of this section— The term eligible individual means any individual who has a qualifying child for the taxable year. If an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall not be treated as an eligible individual for any taxable year of such individual beginning in such calendar year. The term eligible individual does not include any individual who claims the benefits of section 911 (relating to citizens or residents living abroad) for the taxable year. The term eligible individual shall not include any individual who is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the United States for purposes of this chapter by reason of an election under subsection

(g)or

(h)of section 6013. The term employment-related taxes means, with respect to any taxpayer for any taxable year, the sum of— any tax imposed under sections 3101 or 3111 on the wages (as defined in section 3121(a)) received by the taxpayer during the calendar year in which the taxable year begins, any tax imposed under sections 3201(a), 3211(a), or 3221(a) on the compensation (as defined in section 3231(e)) received by the taxpayer during the calendar year in which the taxable year begins, and any tax imposed under section 1401 on the self-employment income of the taxpayer for the taxable year. The term qualifying child means a qualifying child of the taxpayer (within the meaning of section 7705, determined without regard to subsections (c)(1)(D) and

(e)thereof). For purposes of subparagraph (A), the requirements of section 7705(c)(1)(B) shall be met only if the principal place of abode is in the United States. For purposes of subparagraph (B), the principal place of abode of a member of the Armed Forces of the United States shall be treated as in the United States during any period during which such member is stationed outside the United States while serving on extended active duty with the Armed Forces of the United States. For purposes of the preceding sentence, the term extended active duty means any period of active duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period. For purposes of paragraph (1), the term investment income means— interest or dividends to the extent includible in gross income for the taxable year, interest received or accrued during the taxable year which is exempt from tax imposed by this chapter, the excess (if any) of— gross income from rents or royalties not derived in the ordinary course of a trade or business, over the sum of— the deductions (other than interest) which are clearly and directly allocable to such gross income, plus interest deductions properly allocable to such gross income, the capital gain net income (as defined in section 1222) of the taxpayer for such taxable year, and the excess (if any) of— the aggregate income from all passive activities for the taxable year (determined without regard to any amount with respect to which a tax described in subsection (c)(2) is imposed or an amount described in a preceding subparagraph), over the aggregate losses from all passive activities for the taxable year (as so determined). For purposes of subparagraph (E), the term passive activity has the meaning given such term by section 469. No credit shall be allowed under this section unless the taxpayer includes on the return of tax for the taxable year— the taxpayer’s Social Security number, and the name, age, and Social Security number of each qualifying child taken into account under subsection (b)(1). In the case of a joint return, the requirement of paragraph (1)(A) shall be treated as met if the Social Security number of either spouse is included on such return. The Secretary may prescribe other methods for providing the information described in paragraph (1)(B). No credit shall be allowed under this section for any taxable year in the disallowance period. For purposes of paragraph (1), the disallowance period is— the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to fraud, and the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud). In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit. For purposes of this section— In the case of an individual who is married (within the meaning of section 7703), this section shall apply only if a joint return is filed for the taxable year under section 6013. Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months. For purposes of— the United States Housing Act of 1937, title V of the Housing Act of 1949, section 101 of the Housing and Urban Development Act of 1965, sections 221(d)(3), 235, and 236 of the National Housing Act, and the Food and Nutrition Act of 2008, any refund made to an individual (or the spouse of an individual) by reason of this section, and any payment made to such individual (or such spouse) by an employer under section 3507, shall not be treated as income (and shall not be taken into account in determining resources for the month of its receipt and the following month). The credit allowed under subsection

(a)with respect to any taxpayer for any taxable year shall be reduced by the sum of the credits allowed under sections 3103 and 3203 with respect to such taxpayer for such taxable year. For purposes of this section and sections 3103 and 3203— In the case of an individual described in paragraph (2)— such individual shall be treated as an eligible individual, notwithstanding subsection (i), the dollar limitation applicable to such individual under subsection (b)(1) shall be $100 (twice such amount in the case of a joint return), subsection (b)(2)(A) shall be applied by substituting $8,000 ($13,000 for $20,000 ($27,000 , and subsection (i)(1) shall not apply and the employment-related taxes with respect to such individual for any taxable year shall not exceed the sum of— any tax imposed under section 3101 on the wages (as defined in section 3121(a)) received by the taxpayer during the calendar year in which the taxable year begins, any tax imposed under sections 3201(a) (and so much of the tax imposed by section 3211(a) as is attributable to the rates of tax under subsections

(a)and

(b)of section 3101) on the compensation (as defined in section 3231(e)) received by the taxpayer during the calendar year in which the taxable year begins, and 50 percent of any tax imposed under section 1401 on the self-employment income of the taxpayer for the taxable year. An individual is described in this paragraph for any taxable year if— such individual does not have a qualifying child for the taxable year, such individual’s principal place of abode is in the United States for more than one-half of such taxable year, such individual (or, if the individual is married (within the meaning of section 7703), either the individual or the individual’s spouse) has attained age 25 but not attained age 65 before the close of the taxable year, and such individual is not a dependent of another taxpayer for any taxable year beginning in the same calendar year as such taxable year. In the case of any taxable year beginning after 2014, both dollar amounts in subsection (b)(1)(A), the dollar amount in subsection (b)(1)(B), both dollar amounts in subsection (b)(2)(A), the dollar amount in subsection (b)(2)(B), the $100 amount in subsection (g)(1)(B), the $8,000 and $13,000 amounts in subsection (g)(1)(C), the $4,000 amount in subsection (i)(2), and the $3,000 amount in subsection (i)(3), shall each be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins. If any increase determined under the preceding sentence is not a multiple of $100 ($10 in the case of the $100 amount in subsection (g)(1)(B)), such increase shall be rounded to the next lowest multiple of $100 ($10 in the case of the $100 amount in subsection (g)(1)(B)). In the case of any taxable year beginning before January 1, 2018— subsection

(a)shall be applied by substituting 200 percent of the taxpayer’s employment-related taxes for the taxpayer’s employment-related taxes , subsection (b)(1)(A) shall be applied by substituting $4,000 for $3,000 ($4,000 in the case of a joint return) , and subsection (b)(1)(B) shall be applied by substituting $3,000 for $2,400 . . Subchapter A of chapter 21 is amended by adding at the end the following new section: In the case of an individual who is allowed a credit under section 32 (determined without regard to subsection (f)(4) thereof) for a taxable year, there shall be allowed as a credit against the tax imposed by section 3101 with respect to wages received by such individual during the calendar year ending with or within such taxable year the lesser of— the amount of tax so imposed, or the amount of the credit allowed under section 32 (as so determined) for such taxable year. The credit determined under subsection

(a)and

(b)of section 3101) with respect to compensation received by such individual during the calendar year ending with or within such taxable year the lesser of— the amount of tax so imposed, or the excess of— the amount of the credit allowed under section 32 (as so determined) for such taxable year, over the amount of the credit allowed under section 3103. The credit determined under subsection

(a)shall be taken into account under this title in the same manner as a credit or refund to which the taxpayer is entitled under section 6413(c)(1). Such credit shall not be taken into account for purposes of determining any amount deducted and withheld under section 3202. . Section 86(f)(2) is amended by striking section 32(c)(2) and inserting section 24(d)(2) . Section 129(e)(2) is amended by striking section 32(c)(2) and inserting section 24(d)(2) Section 6051(a)(10) is amended by striking for purposes of section 32 (relating to earned income credit) and inserting under section 24(d)(2) . Section 6211(b)(4)(A) is amended by inserting (determined without regard to subsection (f)(4) thereof) after 32 . Section 6213(g)(2)(F) is amended by striking taxpayer identification number and inserting Social Security number . Section 6213(g)(2)(G) is amended by striking with respect to and all that follows and inserting with respect to the tax imposed under section 1401 (relating to self-employment tax) to the extent such tax has not been paid, . Section 6213(g)(2)(K) is amended by striking section 32(k)(2) and inserting section 32(e)(2) . Section 7705(f)(6)(B), as redesignated by this Act, is amended by striking clause (iv), by striking , and at the end of clause

(iii)and inserting a period, and by inserting and at the end of clause (ii). The table of sections for subchapter A of chapter 21 is amended by adding at the end the following new item: Sec. 3103. Credit against tax. . The table of sections for subchapter A of chapter 22 is amended by adding at the end the following new item: Sec. 3203. Credit against tax. . The amendments made by this section shall apply to taxable years beginning after December 31, 2014. A claim of credit under section 32 of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) shall not fail to be taken into account under subsection

(e)of such section (as amended by this section) merely because such claim is for a taxable year beginning before January 1, 2015. Not later than the date which is 180 days after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary’s designee) shall submit a report to Congress making recommendations regarding the best method for providing for advance payment of the credits established by the amendments made by this section. The recommendations in such report shall seek to— provide for the payment of such credits to taxpayers as promptly as is feasible, including on a weekly, biweekly, or monthly basis, and minimize any administrative burdens on employers and the Internal Revenue Service.