IN THE SENATE OF THE UNITED STATES
December 5, 2018
Ms. Harris introduced the following bill; which was read twice and referred to the Committee on Finance
To amend the Internal Revenue Code of 1986 to establish a refundable tax credit to increase the take-home pay of American workers and enhance their financial stability, and for other purposes.
This Act may be cited as the
LIFT (Livable Incomes for Families Today) the Middle Class Act.
Establishment of middle class tax credit
Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 36 the following new section:
Middle class tax credit
Allowance of credit
In the case of an eligible individual, for any taxable year beginning after December 31, 2018, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to so much of the taxpayer's earned income for the preceding taxable year as does not exceed $3,000.
Phaseout of credit
The amount of the credit allowable to the taxpayer under paragraph (1) for the taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount of the credit determined under such paragraph as—
the amount (not less than zero) equal to the adjusted gross income (or, if greater, the earned income) of the taxpayer for the preceding taxable year minus $30,000, bears to
For purposes of determining the amount of the credit allowed under this section for any taxable year, if a joint return was filed for the preceding taxable year by an eligible individual and such individual's spouse, each of the dollar amounts under paragraphs (1) and (2) shall be doubled.
For purposes of determining the amount of the credit allowed under this section for any taxable year, if an individual was married during the preceding taxable year (within the meaning of section 7703), this section shall apply only if a joint return was filed for the preceding taxable year under section 6013.
Head of household
For purposes of determining the amount of the credit allowed under this section for any taxable year, if a taxpayer filed a return as a head of household for the preceding taxable year, the reduction of the credit allowable to the taxpayer under paragraph (1) shall be determined under paragraph (2) by substituting
$30,000 in subparagraph (A) thereof.
In the case of any taxable year after 2019, each of the dollar amounts under paragraphs (1), (2), and (4) shall be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting
calendar year 2018 for
calendar year 2016 in subparagraph (A)(ii) thereof.
If any increase determined under subparagraph (A) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.
For purposes of determining the credit allowed under this section for any taxable year—
The term eligible individual means an individual—
who attained 18 years of age before the close of the preceding taxable year,
whose principal place of abode was in the United States for more than one-half of the preceding taxable year,
who was 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 the preceding taxable year, and
who did not claim the benefits of section 911 for the preceding taxable year.
Limitation on eligibility of nonresident aliens
The term eligible individual shall not include any individual who is a nonresident alien individual for any portion of the preceding 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.
Identification number requirement
No credit shall be allowed under this section to an eligible individual who does not include on the return of tax for the taxable year—
such individual's taxpayer identification number, and
if the individual was married during the preceding taxable year (within the meaning of section 7703), the taxpayer identification number of such individual's spouse.
Treatment of military personnel stationed outside of the United States
For purposes of subparagraph (A)(ii), 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.
The term earned income has the same meaning given such term under section 32(c)(2), except that such term shall include any amounts received by the taxpayer as a Federal Pell Grant under section 401 of the Higher Education Act of 1965.
Taxable year must be full taxable year
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.
Restrictions on taxpayer who improperly claimed credit in prior year
Rules similar to subsection (k) of section 32 shall apply for purposes of this section.
Amount of credit To be determined under tables
The amount of the credit allowed by this section shall be determined under tables prescribed by the Secretary.
Requirements for tables
The tables prescribed under paragraph (1) shall reflect the provisions of subsection (a) and shall have income brackets of not greater than $50 each—
for earned income between $0 and the amount of earned income at which the credit is phased out under subsection (a)(2), and
for adjusted gross income between the dollar amount at which the phaseout begins under subsection (a)(2) and the amount of adjusted gross income at which the credit is phased out under such subsection.
Reconciliation of credit and advance payments
The amount of the credit allowed under this section for any taxable year shall be reduced (but not below zero) by the aggregate amount of any advance payments of such credit under section 7527A for such taxable year.
Advance payment of middle class tax credit
Chapter 77 of the Internal Revenue Code of 1986 is amended by inserting after section 7527 the following new section:
Advance payment of middle class tax credit
Not later than 6 months after the date of the enactment of the LIFT (Livable Incomes for Families Today) the Middle Class Act, the Secretary shall establish a program for making advance payments of the credit allowed under section 36A on a monthly basis (determined without regard to subsection (f) of such section) to any taxpayer who—
the Secretary has determined will be allowed such credit for the taxable year, and
has made an election under subsection (c).
Amount of advance payment
For purposes of subsection (a), the amount of the monthly advance payment of the credit provided to a taxpayer during the applicable period shall be equal to the lesser of—
an amount equal to—
the amount of the credit which the Secretary has determined will be allowed to such taxpayer under section 36A for the taxable year ending in such applicable period, divided by
such other amount as is elected by the taxpayer.
For purposes of this section, the term applicable period means the 12-month period from the month of July of the taxable year through the month of June of the subsequent taxable year.
Election of advance payment
A taxpayer may elect to receive an advance payment of the credit allowed under section 36A for any taxable year by including such election on a timely filed return for the preceding taxable year.
Internal Revenue Service notification
The Internal Revenue Service shall take such steps as may be appropriate to ensure that taxpayers who are eligible to receive the credit under section 36A are aware of the availability of the advance payment of such credit under this section.
The Secretary may prescribe such regulations or other guidance as may be appropriate or necessary for the purposes of carrying out this section.
Any credit or refund allowed or made to any individual by reason of section 36A of the Internal Revenue Code of 1986 (as added by this section) shall not be taken into account as income and shall not be taken into account as resources for purposes of determining the eligibility of such individual or any other individual for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal program or under any State or local program financed in whole or in part with Federal funds.
Section 6211(b)(4)(A) of the Internal Revenue Code of 1986 is amended by inserting
Section 6213(g)(2) of such Code is amended—
in subparagraph (F), by inserting
or section 36A after
in subparagraph (G), by inserting
or 36A after
by striking subparagraph (K) and inserting the following:
an omission of information required by section 32(k)(2) or 36(e) or an entry on the return claiming—
the credit under section 32 for a taxable year for which the credit is disallowed under subsection (k)(1) thereof, or
the credit under section 36A for a taxable year for which the credit is disallowed under subsection (d) thereof,
in subparagraph (L), by striking
or 32 and inserting
32, or 36A.
The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 36 the following new item:
Sec. 36A. Middle class tax credit.
The table of sections for chapter 77 of such Code is amended by inserting after the item relating to section 7527 the following:
Sec. 7527A. Advance payment of middle class tax credit.
The amendments made by this section shall apply to earned income received after December 31, 2017.
Return preparation programs for low-income taxpayers
Chapter 77 of the Internal Revenue Code of 1986 is amended by inserting after section 7526 the following new section:
Return preparation programs for low-income taxpayers
Volunteer Income Tax Assistance Matching Grant Program
Establishment of Program
The Secretary, through the Internal Revenue Service, shall establish a Community Volunteer Income Tax Assistance Matching Grant Program (hereinafter in this section referred to as the
VITA grant program). Except as otherwise provided in this section, the VITA grant program shall be administered in a manner which is substantially similar to the Community Volunteer Income Tax Assistance matching grants demonstration program established under title I of division D of the Consolidated Appropriations Act, 2008.
The Secretary may, subject to the availability of appropriated funds, make available grants under the VITA grant program to provide matching funds for the development, expansion, or continuation of qualified return preparation programs assisting low-income taxpayers and members of underserved populations.
Subject to clause (ii), in order to be eligible for a grant under this section, a qualified return preparation program shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may reasonably require.
In the case of any qualified return preparation program which was awarded a grant under this section and was subsequently subject to a field site visit by the Internal Revenue Service (including through the Stakeholder Partnerships, Education, and Communication office) in which it was determined that the average accuracy rate for preparation of tax returns through such program was less than 90 percent, such program shall not be eligible for any additional grants under this section unless such program provides, as part of their application, sufficient documentation regarding the corrective measures established by such program to address the deficiencies identified following the field site visit.
In awarding grants under this section, the Secretary shall give priority to applications—
demonstrating assistance to low-income taxpayers, with emphasis on outreach to and services for such taxpayers,
demonstrating taxpayer outreach and educational activities relating to eligibility and availability of income supports available through the Internal Revenue Code of 1986, such as the earned income tax credit, and
demonstrating specific outreach and focus on one or more underserved populations.
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.
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 carry out the purposes of this section.
Use of funds
Qualified return preparation programs receiving a grant under this section may use the grant for—
ordinary and necessary costs associated with program operation in accordance with Cost Principles Circulars as set forth by the Office of Management and Budget, including—
for wages or salaries of persons coordinating the activities of the program,
to develop training materials, conduct training, and perform quality reviews of the returns for which assistance has been provided under the program, and
for equipment purchases and vehicle-related expenses associated with remote or rural tax preparation services,
outreach and educational activities described in subsection (a)(2)(C)(ii), and
services related to financial education and capability, asset development, and the establishment of savings accounts in connection with tax return preparation.
Use of grants for overhead expenses prohibited
No grant made under this section may be used for overhead expenses that are not directly related to any qualified return preparation program.
Promotion and referral
The Secretary shall promote the benefits of, and encourage the use of, tax preparation through qualified return preparation programs through the use of mass communications, referrals, and other means.
Internal revenue service referrals
The Secretary may refer taxpayers to qualified return preparation programs receiving funding under this section.
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 to receive services at such clinics.
For purposes of this section—
Qualified return preparation program
The term qualified return preparation program means any program—
which provides assistance to individuals, not less than 90 percent of whom are low-income taxpayers, in preparing and filing Federal income tax returns,
which is administered by a qualified entity,
in which all of the volunteers who assist in the preparation of Federal income tax returns meet the training requirements prescribed by the Secretary, and
which uses a quality review process which reviews 100 percent of all returns.
The term qualified entity means any entity which—
is an eligible organization (as described in subparagraph (B)),
is in compliance with Federal tax filing and payment requirements,
is not debarred or suspended from Federal contracts, grants, or cooperative agreements, and
agrees to provide documentation to substantiate any matching funds provided under the VITA grant program.
Subject to clause (ii), the term eligible organization means—
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. 1088), 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,
an organization described in section 501(c) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code,
a local government agency, including—
a county or municipal government agency, and
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, or
a local, State, regional, or national coalition (with one lead organization which meets the eligibility requirements of subclause (I), (II), or (III) acting as the applicant organization).
Alternative eligible organization
If no eligible organization described in clause (i) is available to assist the targeted population or community, the term eligible organization shall include—
a State government agency, and
a Cooperative Extension Service office.
The term low-income taxpayer means a taxpayer who has income for the taxable year which does not exceed an amount equal to the completed phaseout amount under section 32(b) for a married couple filing a joint return with three or more qualifying children, as determined in a revenue procedure or other published guidance.
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.
The table of sections for chapter 77 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 7526 the following new item:
7526A. Return preparation programs for low-income taxpayers.
Sense of the Senate
It is the sense of the Senate that the costs of carrying out this Act and the amendments made by this Act should be fully offset through—
the repeal of Public Law 115–97, with the exception of any provisions or amendments under such Public Law that provide relief to taxpayers with less than $100,000 in annual income, and
a fee, in such amount as is determined appropriate by the Secretary of the Treasury for purposes of offsetting the costs of carrying out this Act and the amendments made by this Act, to be assessed on any financial institution that has total consolidated assets of more than $50,000,000,000.