Section 1 Short title
This Act may be cited as the “Youth Tax Fairness Act of 2019”.
Youth Tax Fairness Act of 2019
A BILL
To amend the Internal Revenue Code of 1986 to modify the taxation of unearned income of certain children.
Sec. 2 Modification of taxation of unearned income of certain children
Certain income treated as earned income for purposes of kiddie tax— Section 1(g)(4)(C) of the Internal Revenue Code of 1986 is amended to read as follows:
“(C) Treatment of certain amounts as earned income—For purposes of this subsection, each of following amounts shall be treated as earned income of the child referred to in paragraph (1) to the extent included in the gross income of such child:
“(i) Distributions from qualified disability trusts—Any amount included in the gross income of such child under section 652 or 662 by reason of being a beneficiary of a qualified disability trust (as defined in section 642(b)(2)(C)(ii)).
“(ii) Certain military survivor benefits—Any benefit under laws administered by the Secretary of Defense or the Secretary of Veterans Affairs which is received by such child by reason of the child being the survivor of a deceased member of the Armed Forces or of a deceased veteran.
“(iii) Certain first responder survivor benefits—Any payment made by Federal, State, or local government to such child if such payment is made by reason of the death of the parent of such child during such parent’s service as a law enforcement officer, firefighter, paramedic, or emergency medical technician.
“(iv) Certain Indian tribal payments—Any payment made by an Indian tribal government (as defined in section 139E(c)(1)), or from a trust of which the Indian tribal government is treated as the owner under subpart E of part I of subchapter J, to such child if—
“(I) such child is an enrolled member of the tribe with respect to such Indian tribal government, and
“(II) such payment is received by such child by reason of such enrollment.
“(v) Certain scholarships or fellowship grants—Any scholarship or fellowship grant which is received by such child if—
“(I) such child is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii), and
“(II) such scholarship or grant supports such candidacy.
“(vi) Alaska Permanent Fund dividends—Any Alaska Permanent Fund dividend.
“(vii) Social security benefits—Any social security benefit (as defined in section 86(d)).”
Repeal of temporary rule for taxation of unearned income of certain children— Section 1(j) of such Code is amended by striking paragraph (4).
Application to alternative minimum tax—
In general— Section 59(j)(1)(A) of such Code is amended by inserting “and including amounts treated as earned income under section 1(g)(4)(C)” after “section 911(d)(2)”.
Suspension of kiddie tax limitation on alternative minimum tax exemption during period of increased exemption— Section 55(d)(4)(A) of such Code is amended by striking “and” at the end of clause (i)(II), by striking the period at the end of clause (ii)(III) and inserting “, and”, and by adding at the end the following new clause:
“(iii) subsection (j) of section 59 shall not apply.”
Effective dates—
In general— Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.
Repeal of temporary rule for taxation of unearned income of certain children—
In general— Except as provided in subparagraph (B), the amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2018.
Elective retroactive application— In the case of a taxpayer who elects the application of this subparagraph (at such time and in such manner as the Secretary of the Treasury (or the Secretary’s designee) may provide), the amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2017.