EITC Modernization Act
This bill extends the earned income tax credit to taxpayers with certain dependents, including children and aged dependents, and to qualifying students. It also establishes a matching grant program for tax return preparation assistance for low-income taxpayers.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5421 Introduced in House (IH)]
<DOC>
118th CONGRESS
1st Session
H. R. 5421
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
September 12, 2023
Mrs. Watson Coleman (for herself, Mr. Carter of Louisiana, Ms. Lee of
California, and Ms. Adams) 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 dependents and to qualifying students,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``EITC Modernization Act''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The Federal earned income tax credit is a refundable
tax credit for lower- and middle-income working individuals and
families whose earnings are below an income threshold.
(2) Since its establishment in 1975, the credit has
increased family income, reduced child poverty, and promoted
employment by supplementing the earnings of low-wage workers,
including military families.
(3) The credit has a positive impact on the education and
health of children living in poverty.
(4) The credit has a positive economic impact on local
economies and businesses because it puts more money in the
hands of low- and middle-income working people who spend the
money on immediate needs, such as groceries, school supplies,
car repairs, rent, and health care.
(5) The widening gap between the incomes of the wealthiest
Americans and those of middle- and lower-income Americans is
alarming.
(6) There is an urgent need to address that gap, including
through measures like this legislation and by raising the
Federal minimum wage which together increase the wages of
working Americans, widen the path to income stability, and
narrow income inequality.
SEC. 3. MODIFICATIONS OF THE EARNED INCOME TAX CREDIT.
(a) Inclusion of Individuals With Qualifying Dependents.--
(1) In general.--Section 32(c)(1) of the Internal Revenue
Code of 1986 is amended--
(A) in subparagraph (A), by striking ``qualifying
child'' each place such term appears and inserting
``qualifying dependent'', and
(B) by striking subparagraphs (B) and (F) and by
redesignating subparagraphs (C), (D), and (E) as
subparagraphs (B), (C), and (D), respectively.
(2) Qualifying dependent defined.--Section 32(c) of such
Code is amended by redesignating paragraphs (3) and (4) as
paragraphs (5) and (6), and by inserting after paragraph (2)
the following new paragraphs:
``(3) Qualifying dependent.--
``(A) In general.--The term `qualifying dependent'
means, with respect to a taxable year--
``(i) a qualifying child,
``(ii) an aged dependent, or
``(iii) a qualifying individual described
in subparagraph (B) or (C) of section 21(b)(1).
``(B) Identification requirements.--No credit shall
be allowed under this section with respect to a
qualifying dependent unless the taxpayer includes the
name, age, and TIN of the individual on the return of
tax for the taxable year.
``(C) Place of abode.--The term `qualifying
dependent' shall not include an individual unless such
individual has a principal place of abode in the United
States for more than one-half of such taxable year.
``(4) Aged dependent.--The term `aged dependent' means a
dependent for whom a deduction is allowable under section 151
who has attained the age of 65 before the close of the taxable
year.''.
(3) Conforming amendments.--
(A) The tables in paragraphs (1) and (2) of section
32(b) of such Code are each amended--
(i) by striking ``qualifying child'' each
place it appears and inserting ``qualifying
dependent'', and
(ii) by striking ``qualifying children''
each place it appears and inserting
``qualifying dependents''.
(B) Section 32(c)(5) of such Code, as redesignated
by this Act, is amended by striking subparagraphs (C)
and (D).
(C) Section 32(m) of such Code is amended by
striking ``(c)(3)(D)'' and inserting ``(c)(3)(B)''.
(b) Inclusion of Qualifying Students.--
(1) In general.--Section 32(c)(1)(A) of such Code is
amended by striking ``or'' at the end of clause (i), by
striking the period at the end of clause (ii)(III) and
inserting ``, or'', and by inserting after clause (ii)(III) the
following new clause:
``(iii) any individual who is a qualifying
student.''.
(2) Qualifying student defined.--Section 32(c)(1) of such
Code, as amended by subsection (a), is further amended by
adding at the end the following new subparagraph:
``(E) Qualifying student.--The term `qualifying
student' means, with respect to a taxable year, an
individual who is an eligible student (as defined in
section 25A(b)(3)) with respect to an institution of
higher education (as defined in section 101 of the
Higher Education Act of 1965) who--
``(i) is not a dependent for whom a
deduction is allowable under section 151 to
another taxpayer for any taxable year beginning
in the same calendar year as such taxable year,
and
``(ii) either--
``(I) is qualified for a Federal
Pell Grant with respect to the academic
year beginning in such taxable year, or
``(II) has modified adjusted gross
income of less than 250 percent of the
poverty line for the size of the family
involved for the taxable year.
``(F) Definitions.--For purposes of this
subparagraph:
``(i) Modified adjusted gross income.--The
term `modified adjusted gross income' means the
adjusted gross income of the taxpayer for the
taxable year increased by any amount excluded
from gross income under section 911, 931, or
933.
``(ii) Poverty line.--
``(I) In general.--The term
`poverty line' has the meaning given
such term in section 673(2) of the
Community Services Block Grant Act (42
U.S.C. 9902(2)), including any revision
required by such section.
``(II) Family size.--For purposes
of determining the poverty line
applicable to the taxpayer, the family
size with respect to any taxpayer shall
be equal to the number of individuals
for whom the taxpayer is allowed a
deduction under section 151 (relating
to allowance of deduction for personal
exemptions) for the taxable year.''.
(3) Conforming amendment.--Section 32(c)(1)(A)(ii) of such
Code is amended by inserting ``(other than a qualifying
student)'' after ``any other individual''.
(c) Minimum Credit for Students and for Individuals With Certain
Qualifying Dependents.--Section 32(a) of such Code is amended by adding
at the end the following new paragraph:
``(3) Minimum credit for students and for individuals with
certain qualifying dependents.--
``(A) In general.--In the case of a qualifying
student, or an eligible individual who has a specified
dependent for the taxable year, the amount determined
under paragraph (1) (before the application of
paragraph (2)) and the amount determined under
paragraph (2)(A) shall not be less than $1,200.
``(B) Specified dependent.--For purposes of this
paragraph, the term `specified dependent' means any
qualifying dependent (other than a qualifying child who
has attained the age of 7 before the close of the
taxable year).''.
(d) Monthly Payment.--Section 32 of such Code, as amended by this
Act, is further amended by adding at the end the following new
subsection:
``(n) Monthly Payment.--
``(1) In general.--In the case of an individual who is
entitled to a refund relating to an overpayment of tax imposed
by this subtitle that exceeds $240 (but only to the extent such
refund does not exceed the credit allowed under this section)
such individual may elect to have the Secretary, in lieu of
such refund, make a payment equal to--
``(A) \2/13\ of such refund (with interest) during
the earlier of the first practicable month or the
second month that begins after the date the return was
filed, and
``(B) \1/13\ of such refund (with interest) during
each of the 11 months subsequent to the month
determined under subparagraph (A).
``(2) Method of payment.--A payment made under this
subsection shall be made by direct deposit or by general-use
prepaid card, or by such other method (other than by check) as
the Secretary may prescribe and the taxpayer may elect.
``(3) One-time increase.--The first time an individual
receives a payment under this subsection, paragraph (1)(A)
shall be applied by substituting `\4/13\' for `\2/13\'.''.
(e) Special Rule for New Low-Income Parents.--Section 32 of such
Code, as amended by this Act, is further amended by adding at the end
the following new subsection:
``(o) Special Rule for New Low-Income Parents.--
``(1) In general.--In the case of an individual who--
``(A) is eligible for payments under subsection
(o)(1) with respect to a refund for a taxable year, and
``(B) has a qualifying child who is born or adopted
during the following taxable year and not later than
the penultimate month for which the taxpayer is
eligible for such payments,
the amount of any such payments made after such birth or
adoption shall be adjusted to the amount such payments would be
if such qualifying child were a qualifying child of the
taxpayer under this section for the taxable year to which such
payments relate.
``(2) Qualifying child determination.--For purposes of
determining if a child is a qualifying child for purposes of
this subsection, subsection (m) shall be applied by inserting
`or, in the case of an adoption, such other identifying
information as specified by the Secretary' before the period at
the end.''.
(f) Age of Eligible Individuals Without Dependents.--Section
32(c)(1)(A)(ii)(II) of such Code is amended by striking ``age 25 but
not attained age 65'' and inserting ``age 18''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 4. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.
(a) In General.--Chapter 77 of such Code is amended by inserting
after section 7526A the following new section:
``SEC. 7526B. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.
``(a) Establishment of Volunteer Income Tax Assistance Matching
Grant Program.--The Secretary, through the Internal Revenue Service,
shall establish a Community Volunteer Income Tax Assistance Matching
Grant Program under which the Secretary may, subject to the
availability of appropriated funds, make grants to provide matching
funds for the development, expansion, or continuation of qualified
return preparation programs assisting low-income taxpayers and members
of underserved populations.
``(b) Use of Funds.--
``(1) In general.--Qualified return preparation programs
may use grants received under this section for--
``(A) ordinary and necessary costs associated with
program operation in accordance with cost principles
under the applicable Office of Management and Budget
circular, including--
``(i) wages or salaries of persons
coordinating the activities of the program,
``(ii) developing training materials,
conducting training, and performing quality
reviews of the returns prepared under the
program,
``(iii) equipment purchases, and
``(iv) vehicle-related expenses associated
with remote or rural tax preparation services,
``(B) outreach and educational activities described
in subsection (c)(2)(B), and
``(C) services related to financial education and
capability, asset development, and the establishment of
savings accounts in connection with tax return
preparation.
``(2) Use of grants for overhead expenses prohibited.--No
grant received under this section may be used for overhead
expenses that are not directly related to a qualified return
preparation program.
``(c) Application.--
``(1) In general.--Each applicant for a grant under this
section shall submit an application to the Secretary at such
time, in such manner, and containing such information as the
Secretary may reasonably require.
``(2) Priority.--In awarding grants under this section, the
Secretary shall give priority to applications which
demonstrate--
``(A) assistance to low-income taxpayers, with
emphasis on outreach to, and services for, such
taxpayers,
``(B) taxpayer outreach and educational activities
relating to eligibility and availability of income
supports available through the Internal Revenue Code of
1986, including the earned income tax credit, and
``(C) specific outreach and focus on one or more
underserved populations.
``(3) Amounts taken into account.--In determining matching
grants under this section, the Secretary shall only take into
account amounts provided by the qualified return preparation
program for expenses described in subsection (b).
``(d) Accuracy Reviews.--
``(1) In general.--The Secretary shall establish procedures
for, and shall conduct, periodic site visits of qualified
return preparation programs operating under a grant under this
section--
``(A) to ensure such programs are carrying out the
purposes of this section, and
``(B) to determine the return preparation accuracy
rate of the program.
``(2) Additional requirements for grant recipients not
meeting minimum standards.--In the case of any qualified return
preparation program which--
``(A) is awarded a grant under this section, and
``(B) is subsequently determined--
``(i) to have a less than 90 percent
average accuracy rate for preparation of tax
returns, or
``(ii) not to be otherwise carrying out the
purposes of this section,
such program shall not be eligible for any additional
grants under this section unless such program provides
sufficient documentation of corrective measures
established to address any such deficiencies
determined.
``(e) Definitions.--For purposes of this section--
``(1) Qualified return preparation program.--The term
`qualified return preparation program' means any program--
``(A) which provides assistance to individuals, not
less than 90 percent of whom are low-income taxpayers,
in preparing and filing Federal income tax returns,
``(B) which is administered by a qualified entity,
``(C) in which all volunteers who assist in the
preparation of Federal income tax returns meet the
training requirements prescribed by the Secretary, and
``(D) which uses a quality review process which
reviews 100 percent of all returns.
``(2) Qualified entity.--
``(A) In general.--The term `qualified entity'
means any entity which--
``(i) is an eligible organization,
``(ii) is in compliance with Federal tax
filing and payment requirements,
``(iii) is not debarred or suspended from
Federal contracts, grants, or cooperative
agreements, and
``(iv) agrees to provide documentation to
substantiate any matching funds provided
pursuant to the grant program under this
section.
``(B) Eligible organization.--The term `eligible
organization' means--
``(i) an institution of higher education
which is described in section 102 (other than
subsection (a)(1)(C) thereof) of the Higher
Education Act of 1965 (20 U.S.C. 1002), as in
effect on the date of the enactment of this
section, and which has not been disqualified
from participating in a program under title IV
of such Act,
``(ii) an organization described in section
501(c) and exempt from tax under section
501(a),
``(iii) a local government agency,
including--
``(I) a county or municipal
government agency, and
``(II) an Indian tribe, as defined
in section 4(13) of the Native American
Housing Assistance and Self-
Determination Act of 1996 (25 U.S.C.
4103(13)), including any tribally
designated housing entity (as defined
in section 4(22) of such Act (25 U.S.C.
4103(22))), tribal subsidiary,
subdivision, or other wholly owned
tribal entity,
``(iv) a local, State, regional, or
national coalition (with one lead organization
which meets the eligibility requirements of
clause (i), (ii), or (iii) acting as the
applicant organization), or
``(v) in the case of a targeted population
or community with respect to which no
organizations described in the preceding
clauses are available--
``(I) a State government agency, or
``(II) an office providing
Cooperative Extension services (as
established at the land-grant colleges
and universities under the Smith-Lever
Act of May 8, 1914).
``(3) Low-income taxpayers.--The term `low-income taxpayer'
means a taxpayer whose income for the taxable year does not
exceed an amount equal to the completed phaseout amount under
section 32(b) for a married couple filing a joint return with 3
or more qualifying children, as determined in a revenue
procedure or other published guidance.
``(4) Underserved population.--The term `underserved
population' includes populations of persons with disabilities,
persons with limited English proficiency, Native Americans,
individuals living in rural areas, members of the Armed Forces
and their spouses, and the elderly.
``(f) Special Rules and Limitations.--
``(1) Duration of grants.--Upon application of a qualified
return preparation program, the Secretary is authorized to
award a multi-year grant not to exceed 3 years.
``(2) Aggregate limitation.--Unless otherwise provided by
specific appropriation, the Secretary shall not allocate more
than $30,000,000 per fiscal year (exclusive of costs of
administering the program) to grants under this section.
``(g) Promotion and Referral.--
``(1) Promotion.--The Secretary shall promote tax
preparation through qualified return preparation programs
through the use of mass communications, referrals, and other
means.
``(2) Internal revenue service referrals.--The Secretary
may refer taxpayers to qualified return preparation programs
receiving grants under this section.
``(3) Vita grantee referral.--Qualified return preparation
programs receiving a grant under this section are encouraged to
refer, as appropriate, to local or regional Low-Income Taxpayer
Clinics individuals who are eligible for such clinics.''.
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by inserting after the item relating to section 7526A the
following new item:
``7526B. Return preparation programs for low-income taxpayers.''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to taxable years beginning after the date of
enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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