Division F — Revenue provisions
F Revenue provisions
I Economic Stimulus
A Additional recovery rebates to individuals
Sec. 101 Additional recovery rebates to individuals
In general— Subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by inserting after section 6428 the following new section:
“6428A. Additional recovery rebates to individuals
“(a) In general—In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2020 an amount equal to the additional rebate amount determined for such taxable year.
“(b) Additional rebate amount—For purposes of this section, the term additional rebate amount means, with respect to any taxpayer for any taxable year, the sum of—
“(1) $1,200 ($2,400 in the case of a joint return), plus
“(2) $500 multiplied by the number of dependents of the taxpayer for such taxable year.
“(c) Eligible individual—For purposes of this section, the term eligible individual means any individual other than—
“(1) any nonresident alien individual,
“(2) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, and
“(3) an estate or trust.
“(d) Limitation based on modified adjusted gross income—The amount of the credit allowed by subsection (a) (determined without regard to this subsection and subsection (f)) shall be reduced (but not below zero) by 5 percent of so much of the taxpayer’s modified adjusted gross income as exceeds—
“(1) $150,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)),
“(2) $112,500 in the case of a head of household (as defined in section 2(b)), and
“(3) $75,000 in any other case.
“(e) Definitions and special rules
“(1) Modified adjusted gross income—For purposes of this subsection (other than this paragraph), the term modified adjusted gross income means adjusted gross income determined without regard to sections 911, 931, and 933.
“(2) Dependent defined—For purposes of this section, the term dependent has the meaning given such term by section 152.
“(3) Credit treated as refundable—The credit allowed by subsection (a) shall be treated as allowed by subpart C of part IV of subchapter A of chapter 1.
“(4) Identification number requirement
“(A) In general—The $1,200 amount in subsection (b)(1) shall be treated as being zero unless the taxpayer includes the TIN of the taxpayer on the return of tax for the taxable year.
“(B) Joint returns—In the case of a joint return, the $2,400 amount in subsection (b)(1) shall be treated as being—
“(i) zero if the TIN of neither spouse is included on the return of tax for the taxable year, and
“(ii) $1,200 if the TIN of only one spouse is so included.
“(C) Dependents—A dependent shall not be taken into account under subsection (b)(2) unless the TIN of such dependent is included on the return of tax for the taxable year.
“(D) Coordination with certain advance payments—In the case of any payment made pursuant to subsection (g)(5)(A)(ii), a TIN shall be treated for purposes of this paragraph as included on the taxpayer’s return of tax if such TIN is provided pursuant to such subsection.
“(f) Coordination with advance refunds of credit
“(1) Reduction of refundable credit—The amount of the credit which would (but for this paragraph) be allowable under subsection (a) shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer (or any dependent of the taxpayer) under subsection (g). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
“(2) Joint returns—In the case of a refund or credit made or allowed under subsection (g) with respect to a joint return, half of such refund or credit shall be treated as having been made or allowed to each individual filing such return.
“(g) Advance refunds and credits
“(1) In general—Subject to paragraph (5), each individual who was an eligible individual for such individual’s first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.
“(2) Advance refund amount—For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such taxable year if this section (other than subsection (f) and this subsection) had applied to such taxable year.
“(3) Timing and manner of payments
“(A) Timing—The Secretary shall, subject to the provisions of this title, refund or credit any overpayment attributable to this section as rapidly as possible. No refund or credit shall be made or allowed under this subsection after December 31, 2020.
“(B) Delivery of payments—Notwithstanding any other provision of law, the Secretary may certify and disburse refunds payable under this subsection electronically to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes under this title or of a Federal payment (as defined in section 3332 of title 31, United States Code).
“(C) Waiver of certain rules—Notwithstanding section 3325 of title 31, United States Code, or any other provision of law, with respect to any payment of a refund under this subsection, a disbursing official in the executive branch of the United States Government may modify payment information received from an officer or employee described in section 3325(a)(1)(B) of such title for the purpose of facilitating the accurate and efficient delivery of such payment. Except in cases of fraud or reckless neglect, no liability under sections 3325, 3527, 3528, or 3529 of title 31, United States Code, shall be imposed with respect to payments made under this subparagraph.
“(4) No interest—No interest shall be allowed on any overpayment attributable to this section.
“(5) Application to individuals who do not file a return of tax for 2019
“(A) In general—In the case of an individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary shall—
“(i) apply paragraph (1) by substituting “2018” for “2019”, and
“(ii) in the case of a specified individual who has not filed a tax return for such individual’s first taxable year beginning in 2018, determine the advance refund amount with respect to such individual without regard to subsections (d) and on the basis of information with respect to such individual which is provided by—
“(I) in the case of a specified social security beneficiary or a specified supplemental security income recipient, the Commissioner of Social Security,
“(II) in the case of a specified railroad retirement beneficiary, the Railroad Retirement Board, and
“(III) in the case of a specified veterans beneficiary, the Secretary of Veterans Affairs (in coordination with, and with the assistance of, the Commissioner of Social Security if appropriate).
“(B) Specified individual—For purposes of this paragraph, the term specified individual means any individual who is—
“(i) a specified social security beneficiary,
“(ii) a specified supplemental security income recipient,
“(iii) a specified railroad retirement beneficiary, or
“(iv) a specified veterans beneficiary.
“(C) Specified social security beneficiary—For purposes of this paragraph—
“(i) In general—The term specified social security beneficiary means any individual who, for the last month that ends prior to the date of enactment of this section, is entitled to any monthly insurance benefit payable under title II of the Social Security Act (42 U.S.C. 401 et seq.), including payments made pursuant to sections 202(d), 223(g), and 223(i)(7) of such Act.
“(ii) Exception—Such term shall not include any individual if such benefit is not payable for such month by reason of section 202(x) of the Social Security Act (42 U.S.C. 402(x)) or section 1129A of such Act (42 U.S.C. 1320a–8a).
“(D) Specified supplemental security income recipient—For purposes of this paragraph—
“(i) In general—The term specified supplemental security income recipient means any individual who, for the last month that ends prior to the date of enactment of this section, is eligible for a monthly benefit payable under title XVI of the Social Security Act (42 U.S.C. 1381 et seq.) (other than a benefit to an individual described in section 1611(e)(1)(B) of such Act (42 U.S.C. 1382(e)(1)(B)), including—
“(I) payments made pursuant to section 1614(a)(3)(C) of such Act (42 U.S.C. 1382c(a)(3)(C)),
“(II) payments made pursuant to section 1619(a) (42 U.S.C. 1382h) or subsections (a)(4), (a)(7), or (p)(7) of section 1631 (42 U.S.C. 1383) of such Act, and
“(III) State supplementary payments of the type referred to in section 1616(a) of such Act (42 U.S.C. 1382e(a)) (or payments of the type described in section 212(a) of Public Law 93–66) which are paid by the Commissioner under an agreement referred to in such section 1616(a) (or section 212(a) of Public Law 93–66).
“(ii) Exception—Such term shall not include any individual if such monthly benefit is not payable for such month by reason of subsection (e)(1)(A) or (e)(4) of section 1611 (42 U.S.C. 1382) or section 1129A of such Act (42 U.S.C. 1320a–8a).
“(E) Specified railroad retirement beneficiary—For purposes of this paragraph, the term specified railroad retirement beneficiary means any individual who, for the last month that ends prior to the date of enactment of this section, is entitled to a monthly annuity or pension payment payable (without regard to section 5(a)(ii) of the Railroad Retirement Act of 1974 (45 U.S.C. 231d(a)(ii))) under—
“(i) section 2(a)(1) of such Act (45 U.S.C. 231a(a)(1)),
“(ii) section 2(c) of such Act (45 U.S.C. 231a(c)),
“(iii) section 2(d)(1) of such Act (45 U.S.C. 231a(d)(1)), or
“(iv) section 7(b)(2) of such Act (45 U.S.C. 231f(b)(2)) with respect to any of the benefit payments described in subparagraph (C)(i).
“(F) Specified veterans beneficiary—For purposes of this paragraph—
“(i) In general—The term specified veterans beneficiary means any individual who, for the last month that ends prior to the date of enactment of this section, is entitled to a compensation or pension payment payable under—
“(I) section 1110, 1117, 1121, 1131, 1141, or 1151 of title 38, United States Code,
“(II) section 1310, 1312, 1313, 1315, 1316, or 1318 of title 38, United States Code,
“(III) section 1513, 1521, 1533, 1536, 1537, 1541, 1542, or 1562 of title 38, United States Code, or
“(IV) section 1805, 1815, or 1821 of title 38, United States Code,
“(ii) Exception—Such term shall not include any individual if such compensation or pension payment is not payable, or was reduced, for such month by reason of section 1505, 5313, or 5313B of title 38, United States Code.
“(G) Subsequent determinations and redeterminations not taken into account—For purposes of this section, any individual’s status as a specified social security beneficiary, a specified supplemental security income recipient, a specified railroad retirement beneficiary, or a specified veterans beneficiary shall be unaffected by any determination or redetermination of any entitlement to, or eligibility for, any benefit, payment, or compensation, if such determination or redetermination occurs after the last month that ends prior to the date of enactment of this section.
“(H) Payment to representative payees and fiduciaries
“(i) In general—If the benefit, payment, or compensation referred to in subparagraph (C)(i), (D)(i), (E), or (F)(i) with respect to any specified individual is paid to a representative payee or fiduciary, payment by the Secretary under paragraph (3) with respect to such specified individual shall be made to such individual’s representative payee or fiduciary and the entire payment shall be used only for the benefit of the individual who is entitled to the payment.
“(ii) Application of enforcement provisions
“(I) In the case of a payment described in clause (i) which is made with respect to a specified social security beneficiary or a specified supplemental security income recipient, section 1129(a)(3) of the Social Security Act (42 U.S.C. 1320a–8(a)(3)) shall apply to such payment in the same manner as such section applies to a payment under title II or XVI of such Act.
“(II) In the case of a payment described in clause (i) which is made with respect to a specified railroad retirement beneficiary, section 13 of the Railroad Retirement Act (45 U.S.C. 231l) shall apply to such payment in the same manner as such section applies to a payment under such Act.
“(III) In the case of a payment described in clause (i) which is made with respect to a specified veterans beneficiary, sections 5502, 6106, and 6108 of title 38, United States Code, shall apply to such payment in the same manner as such sections apply to a payment under such title.
“(6) Notice to taxpayer—Not later than 15 days after the date on which the Secretary distributed any payment to an eligible taxpayer pursuant to this subsection, notice shall be sent by mail to such taxpayer's last known address. Such notice shall indicate the method by which such payment was made, the amount of such payment, and a phone number for the appropriate point of contact at the Internal Revenue Service to report any error with respect to such payment.
“(h) Regulations—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including—
“(1) regulations or other guidance providing taxpayers the opportunity to provide the Secretary information sufficient to allow the Secretary to make payments to such taxpayers under subsection (g) (including the determination of the amount of such payment) if such information is not otherwise available to the Secretary, and
“(2) regulations or other guidance providing for the proper treatment of joint returns and taxpayers with dependents to ensure that an individual is not taken into account more than once in determining the amount of any credit under subsection (a) and any credit or refund under subsection (g).
“(i) Outreach—The Secretary shall carry out a robust and comprehensive outreach program to ensure that all taxpayers described in subsection (h)(1) learn of their eligibility for the advance refunds and credits under subsection (g); are advised of the opportunity to receive such advance refunds and credits as provided under subsection (h)(1); and are provided assistance in applying for such advance refunds and credits. In conducting such outreach program, the Secretary shall coordinate with other government, State, and local agencies; federal partners; and community-based nonprofit organizations that regularly interface with such taxpayers.”
Treatment of certain possessions—
Payments to possessions with mirror code tax systems— The Secretary of the Treasury shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the amendments made by this section. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.
Payments to other possessions— The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the amendments made by this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to its residents.
Coordination with credit allowed against united states income taxes— No credit shall be allowed against United States income taxes under section 6428A of the Internal Revenue Code of 1986 (as added by this section), nor shall any credit or refund be made or allowed under subsection (g) of such section, to any person—
to whom a credit is allowed against taxes imposed by the possession by reason of the amendments made by this section, or
who is eligible for a payment under a plan described in paragraph (2).
Mirror code tax system— For purposes of this subsection, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.
Administrative provisions—
Definition of deficiency— Section 6211(b)(4)(A) of the Internal Revenue Code of 1986 is amended by striking “and 6428” and inserting “6428, and 6428A”.
Mathematical or clerical error authority— Section 6213(g)(2) of such Code is amended—
by inserting “or section 6428A (relating to additional recovery rebates to individuals)” before the comma at the end of subparagraph (H), and
by striking “or 6428” in subparagraph (L) and inserting “6428, or 6428A”.
Exception from reduction or offset— Any credit or refund allowed or made to any individual by reason of section 6428A of the Internal Revenue Code of 1986 (as added by this section) or by reason of subsection (b) of this section shall not be—
subject to reduction or offset pursuant to section 3716 or 3720A of title 31, United States Code,
subject to reduction or offset pursuant to subsection (c), (d), (e), or (f) of section 6402 of the Internal Revenue Code of 1986, or
reduced or offset by other assessed Federal taxes that would otherwise be subject to levy or collection.
Assignment of benefits—
In general— The right of any person to any applicable payment shall not be transferable or assignable, at law or in equity, and no applicable payment shall be subject to, execution, levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law.
Encoding of payments— In the case of an applicable payment described in subparagraph (E)(iii)(I) that is paid electronically by direct deposit through the Automated Clearing House (ACH) network, the Secretary of the Treasury (or the Secretary's delegate) shall—
issue the payment using a unique identifier that is reasonably sufficient to allow a financial institution to identify the payment as an applicable payment, and
further encode the payment pursuant to the same specifications as required for a benefit payment defined in section 212.3 of title 31, Code of Federal Regulations.
Garnishment—
Encoded payments— In the case of a garnishment order that applies to an account that has received an applicable payment that is encoded as provided in subparagraph (B), a financial institution shall follow the requirements and procedures set forth in part 212 of title 31, Code of Federal Regulations, except—
notwithstanding section 212.4 of title 31, Code of Federal Regulations (and except as provided in subclause (II)), a financial institution shall not fail to follow the procedures of sections 212.5 and 212.6 of such title with respect to an garnishment order merely because such order has attached, or includes, a notice of right to garnish federal benefits issued by a State child support enforcement agency, and
a financial institution shall not, with regard to any applicable payment, be required to provide the notice referenced in sections 212.6 and 212.7 of title 31, Code of Federal Regulations.
Other payments— If a financial institution receives a garnishment order (other than an order that has been served by the United States), that has been received by a financial institution and that applies to an account into which an applicable payment that has not been encoded as provided in subparagraph (B) has been deposited electronically or by an applicable payment that has been deposited by check on any date in the lookback period, the financial institution, upon the request of the account holder, shall treat the amount of the funds in the account at the time of the request, up to the amount of the applicable payment (in addition to any amounts otherwise protected under part 212 of title 31, Code of Federal Regulations), as exempt from a garnishment order without requiring the consent of the party serving the garnishment order or the judgment creditor.
Liability— A financial institution that acts in good faith in reliance on clauses (i) or (ii) shall not be subject to liability or regulatory action under any Federal or State law, regulation, court or other order, or regulatory interpretation for actions concerning any applicable payments.
Preservation of reclamation rights— This paragraph shall not alter the status of applicable payments as tax refunds or other nonbenefit payments for purpose of any reclamation rights of the Department of the Treasury or the Internal Revenue Service as per part 210 of title 31, Code of Federal Regulations.
Definitions— For purposes of this paragraph—
Account holder— The term account holder means a natural person whose name appears in a financial institution’s records as the direct or beneficial owner of an account.
Account review— The term account review means the process of examining deposits in an account to determine if an applicable payment has been deposited into the account during the lookback period. The financial institution shall perform the account review following the procedures outlined in section 212.5 of title 31, Code of Federal Regulations and in accordance with the requirements of section 212.6 of title 31, Code of Federal Regulations.
Applicable payment— The term applicable payment means—
any advance refund amount paid pursuant to subsection (g) of section 6428A of the Internal Revenue Code of 1986 (as so added),
any payment made by a possession of the United States with a mirror code tax system (as defined in subsection (c) of section 2201 of the CARES Act (Public Law 116–136)) pursuant to such subsection which corresponds to a payment described in subclause (I), and
any payment made by a possession of the United States without a mirror code tax system (as so defined) pursuant to section 2201(c) of such Act.
Garnishment— The term garnishment means execution, levy, attachment, garnishment, or other legal process.
Garnishment order— The term garnishment order means a writ, order, notice, summons, judgment, levy, or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account, to effect a garnishment against a debtor.
Lookback period— The term lookback period means the two month period that begins on the date preceding the date of account review and ends on the corresponding date of the month two months earlier, or on the last date of the month two months earlier if the corresponding date does not exist.
Treatment of credit and advance payments— For purposes of section 1324 of title 31, United States Code, any credit under section 6428A(a) of the Internal Revenue Code of 1986, any credit or refund under section 6428A(g) of such Code, and any payment under subsection (b) of this section, shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section 1324.
Agency information sharing and assistance— The Commissioner of Social Security, the Railroad Retirement Board, and the Secretary of Veterans Affairs shall each provide the Secretary of the Treasury (or the Secretary’s delegate) such information and assistance as the Secretary of the Treasury (or the Secretary’s delegate) may require for purposes of making payments under section 6428A(g) of the Internal Revenue Code of 1986 to individuals described in paragraph (5)(A)(ii) thereof.
Clerical amendment— The table of sections for subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 6428 the following new item:
Certain requirements related to recovery rebates and additional recovery rebates—
Signatures on checks and notices, etc., by the Department of the Treasury— Any check issued to an individual by the Department of the Treasury pursuant to section 6428 or 6428A of the Internal Revenue Code of 1986, and any notice issued pursuant to section 6428(f)(6) or section 6428A(g)(6) of such Code, may not be signed by or otherwise bear the name, signature, image or likeness of the President, the Vice President or any elected official or cabinet level officer of the United States, or any individual who, with respect to any of the aforementioned individuals, bears any relationship described in subparagraphs (A) through (G) of section 152(d)(2) of the Internal Revenue Code of 1986.
Effective date— Paragraph (1) shall apply to checks and notices issued after the date of the enactment of this Act.
Reports to Congress— Each week beginning after the date of the enactment of this Act and beginning before December 31, 2020, on Friday of such week, not later than 3 p.m. Eastern Time, the Secretary of the Treasury shall provide a written report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate. Such report shall include the following information with respect to payments made pursuant to each of sections 6428 and 6428A of the Internal Revenue Code of 1986:
The number of scheduled payments sent to the Bureau of Fiscal Service for payment by direct deposit or paper check for the following week (stated separately for direct deposit and paper check).
The total dollar amount of the scheduled payments described in paragraph (1).
The number of direct deposit payments returned to the Department of the Treasury and the total dollar value of such payments, for the week ending on the day prior to the day on which the report is provided.
The total number of letters related to payments under section 6428 or 6428A of such Code mailed to taxpayers during the week ending on the day prior to the day on which the report is provided.
B Earned income tax credit
Sec. 111 Strengthening the earned income tax credit for individuals with no qualifying children
Special rules for 2020— Section 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(n) Special rules for individuals without qualifying children—In the case of any taxable year beginning after December 31, 2019, and before January 1, 2021—
“(1) Decrease in minimum age for credit
“(A) In general—Subsection (c)(1)(A)(ii)(II) shall be applied by substituting “the applicable minimum age” for “age 25”.
“(B) Applicable minimum age—For purposes of this paragraph, the term applicable minimum age means—
“(i) except as otherwise provided in this subparagraph, age 19,
“(ii) in the case of a full-time student (other than a qualified former foster youth or a qualified homeless youth), age 25, and
“(iii) in the case of a qualified former foster youth or a qualified homeless youth, age 18.
“(C) Full-time student—For purposes of this paragraph, the term full-time student means, with respect to any taxable year, an individual who is an eligible student (as defined in section 25A(b)(3)) during at least 5 calendar months during the taxable year.
“(D) Qualified former foster youth—For purposes of this paragraph, the term qualified former foster youth means an individual who—
“(i) on or after the date that such individual attained age 14, was in foster care provided under the supervision or administration of a State or tribal agency administering (or eligible to administer) a plan under part B or part E of the Social Security Act (without regard to whether Federal assistance was provided with respect to such child under such part E), and
“(ii) provides (in such manner as the Secretary may provide) consent for State and tribal agencies which administer a plan under part B or part E of the Social Security Act to disclose to the Secretary information related to the status of such individual as a qualified former foster youth.
“(E) Qualified homeless youth—For purposes of this paragraph, the term qualified homeless youth means, with respect to any taxable year, an individual who—
“(i) is certified by a local educational agency or a financial aid administrator during such taxable year as being either an unaccompanied youth who is a homeless child or youth, or as unaccompanied, at risk of homelessness, and self-supporting. Terms used in the preceding sentence which are also used in section 480(d)(1) of the Higher Education Act of 1965 shall have the same meaning as when used in such section, and
“(ii) provides (in such manner as the Secretary may provide) consent for local educational agencies and financial aid administrators to disclose to the Secretary information related to the status of such individual as a qualified homeless youth.
“(2) Increase in maximum age for credit—Subsection (c)(1)(A)(ii)(II) shall be applied by substituting “age 66” for “age 65”.
“(3) Increase in credit and phaseout percentages—The table contained in subsection (b)(1) shall be applied by substituting “15.3” for “7.65” each place it appears therein.
“(4) Increase in earned income and phaseout amounts
“(A) In general—The table contained in subsection (b)(2)(A) shall be applied—
“(i) by substituting “$9,720” for “$4,220”, and
“(ii) by substituting “$11,490” for “$5,280”.
“(B) Coordination with inflation adjustment—Subsection (j) shall not apply to any dollar amount specified in this paragraph.”
Information return matching— As soon as practicable, the Secretary of the Treasury (or the Secretary’s delegate) shall develop and implement procedures to use information returns under section 6050S (relating to returns relating to higher education tuition and related expenses) to check the status of individuals as full-time students for purposes of section 32(n)(1)(B)(ii) of the Internal Revenue Code of 1986 (as added by this section).
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2019.
Sec. 112 Taxpayer eligible for childless earned income credit in case of qualifying children who fail to meet certain identification requirements
In general— Section 32(c)(1) of the Internal Revenue Code of 1986 is amended by striking subparagraph (F).
Effective date— The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 113 Credit allowed in case of certain separated spouses
by striking “Married individuals.—In the case of” and inserting the following:
“(1) In general—In the case of”
by adding at the end the following new paragraph:
“(2) Determination of marital status—For purposes of this section—
“(A) In general—Except as provided in subparagraph (B), marital status shall be determined under section 7703(a).
“(B) Special rule for separated spouse—An individual shall not be treated as married if such individual—
“(i) is married (as determined under section 7703(a)) and does not file a joint return for the taxable year,
“(ii) lives with a qualifying child of the individual for more than one-half of such taxable year, and
“(iii)
“(I) during the last 6 months of such taxable year, does not have the same principal place of abode as the individual’s spouse, or
“(II) has a decree, instrument, or agreement (other than a decree of divorce) described in section 121(d)(3)(C) with respect to the individual’s spouse and is not a member of the same household with the individual’s spouse by the end of the taxable year.”
Conforming amendments—
Section 32(c)(1)(A) of such Code is amended by striking the last sentence.
Section 32(c)(1)(E)(ii) of such Code is amended by striking “(within the meaning of section 7703)”.
Section 32(d)(1) of such Code, as amended by subsection (a), is amended by striking “(within the meaning of section 7703)”.
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 114 Elimination of disqualified investment income test
In general— Section 32 of the Internal Revenue Code of 1986 is amended by striking subsection (i).
Conforming amendments—
Section 32(j)(1) of such Code is amended by striking “subsections (b)(2) and (i)(1)” and inserting “subsection (b)(2)”.
Section 32(j)(1)(B)(i) of such Code is amended by striking “subsections (b)(2)(A) and (i)(1)” and inserting “subsection (b)(2)(A)”.
Section 32(j)(2) of such Code is amended—
by striking subparagraph (B), and
by striking “Rounding.—” and all that follows through “If any dollar amount” and inserting the following: “Rounding.—If any dollar amount”.
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 115 Application of earned income tax credit in possessions of the United States
In general— Chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“7530. Application of earned income tax credit to possessions of the United States
“(a) Puerto Rico
“(1) In general—With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to Puerto Rico equal to—
“(A) the specified matching amount for such calendar year, plus
“(B) in the case of calendar years 2021 through 2025, the lesser of—
“(i) the expenditures made by Puerto Rico during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to the earned income tax credit, or
“(ii) $1,000,000.
“(2) Requirement to reform earned income tax credit—The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless Puerto Rico has in effect an earned income tax credit for taxable years beginning in or with such calendar year which (relative to the earned income tax credit which was in effect for taxable years beginning in or with calendar year 2019) increases the percentage of earned income which is allowed as a credit for each group of individuals with respect to which such percentage is separately stated or determined in a manner designed to substantially increase workforce participation.
“(3) Specified matching amount—For purposes of this subsection—
“(A) In general—The term specified matching amount means, with respect to any calendar year, the lesser of—
“(i) the excess (if any) of—
“(I) the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with such calendar year, over
“(II) the base amount for such calendar year, or
“(ii) the product of 3, multiplied by the base amount for such calendar year.
“(B) Base amount
“(i) Base amount for 2020—In the case of calendar year 2020, the term base amount means the greater of—
“(I) the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with calendar year 2019 (rounded to the nearest multiple of $1,000,000), or
“(II) $200,000,000.
“(ii) Inflation adjustment—In the case of any calendar year after 2021, the term base amount means the dollar amount determined under clause (i) increased by an amount equal to—
“(I) such dollar amount, multiplied by—
“(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting “calendar year 2020” for “calendar year 2016” in subparagraph (A)(ii) thereof.
“(4) Rules related to payments and reports
“(A) Timing of payments—The Secretary shall make payments under paragraph (1) for any calendar year—
“(i) after receipt of the report described in subparagraph (B) for such calendar year, and
“(ii) except as provided in clause (i), within a reasonable period of time before the due date for individual income tax returns (as determined under the laws of Puerto Rico) for taxable years which began on the first day of such calendar year.
“(B) Annual reports—With respect to calendar year 2021 and each calendar year thereafter, Puerto Rico shall provide to the Secretary a report which shall include—
“(i) an estimate of the costs described in paragraphs (1)(B)(i) and (3)(A)(i)(I) with respect to such calendar year, and
“(ii) a statement of such costs with respect to the preceding calendar year.
“(C) Adjustments
“(i) In general—In the event that any estimate of an amount is more or less than the actual amount as later determined and any payment under paragraph (1) was determined on the basis of such estimate, proper payment shall be made by, or to, the Secretary (as the case may be) as soon as practicable after the determination that such estimate was inaccurate. Proper adjustment shall be made in the amount of any subsequent payments made under paragraph (1) to the extent that proper payment is not made under the preceding sentence before such subsequent payments.
“(ii) Additional reports—The Secretary may require such additional periodic reports of the information described in subparagraph (B) as the Secretary determines appropriate to facilitate timely adjustments under clause (i).
“(D) Determination of cost of earned income tax credit—For purposes of this subsection, the cost to Puerto Rico of the earned income tax credit shall be determined by the Secretary on the basis of the laws of Puerto Rico and shall include reductions in revenues received by Puerto Rico by reason of such credit and refunds attributable to such credit, but shall not include any administrative costs with respect to such credit.
“(E) Prevention of manipulation of base amount—No payments shall be made under paragraph (1) if the earned income tax credit as in effect in Puerto Rico for taxable years beginning in or with calendar year 2019 is modified after the date of the enactment of this subsection.
“(b) Possessions with mirror code tax systems
“(1) In general—With respect to calendar year 2020 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands equal to—
“(A) 75 percent of the cost to such possession of the earned income tax credit for taxable years beginning in or with such calendar year, plus
“(B) in the case of calendar years 2020 through 2024, the lesser of—
“(i) the expenditures made by such possession during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or
“(ii) $50,000.
“(2) Application of certain rules—Rules similar to the rules of subparagraphs (A), (B), (C), and (D) of subsection (a)(4) shall apply for purposes of this subsection.
“(c) American Samoa
“(1) In general—With respect to calendar year 2020 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to American Samoa equal to—
“(A) the lesser of—
“(i) 75 percent of the cost to American Samoa of the earned income tax credit for taxable years beginning in or with such calendar year, or
“(ii) $12,000,000, plus
“(B) in the case of calendar years 2020 through 2024, the lesser of—
“(i) the expenditures made by American Samoa during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or
“(ii) $50,000.
“(2) Requirement to enact and maintain an earned income tax credit—The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless American Samoa has in effect an earned income tax credit for taxable years beginning in or with such calendar year which allows a refundable tax credit to individuals on the basis of the taxpayer’s earned income which is designed to substantially increase workforce participation.
“(3) Inflation adjustment—In the case of any calendar year after 2020, the $12,000,000 amount in paragraph (1)(A)(ii) shall be increased by an amount equal to—
“(A) such dollar amount, multiplied by—
“(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting “calendar year 2019” for “calendar year 2016” in subparagraph (A)(ii) thereof.
“(4) Application of certain rules—Rules similar to the rules of subparagraphs (A), (B), (C), and (D) of subsection (a)(4) shall apply for purposes of this subsection.
“(d) Treatment of payments—For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.”
Clerical amendment— The table of sections for chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
Sec. 116 Temporary special rule for determining earned income for purposes of earned income tax credit
In general— If the earned income of the taxpayer for the taxpayer’s first taxable year beginning in 2020 is less than the earned income of the taxpayer for the preceding taxable year, the credit allowed under section 32 of the Internal Revenue Code of 1986 may, at the election of the taxpayer, be determined by substituting-—
such earned income for the preceding taxable year, for
such earned income for the taxpayer’s first taxable year beginning in 2020.
Earned income—
In general— For purposes of this section, the term earned income has the meaning given such term under section 32(c) of the Internal Revenue Code of 1986.
Application to joint returns— For purposes of subsection (a), in the case of a joint return, the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for such preceding taxable year.
Special rules—
Errors treated as mathematical error— For purposes of section 6213 of the Internal Revenue Code of 1986, an incorrect use on a return of earned income pursuant to subsection (a) shall be treated as a mathematical or clerical error.
No effect on determination of gross income, etc— Except as otherwise provided in this subsection, the Internal Revenue Code of 1986 shall be applied without regard to any substitution under subsection (a).
Treatment of certain possessions—
Payments to possessions with mirror code tax systems— The Secretary of the Treasury shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of the provisions of this section (other than this subsection) with respect to section 32 of the Internal Revenue Code of 1986. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.
Payments to other possessions— The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the provisions of this section (other than this subsection) with respect to section 32 of the Internal Revenue Code of 1986 if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to its residents.
Mirror code tax system— For purposes of this section, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.
Treatment of payments— For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.
C Child tax credit
Sec. 121 Child tax credit improvements for 2020
In general— Section 24 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(i) Special rule for refundable credit—In the case of any taxable year beginning in 2020, subsection (h)(5) shall not apply and the increase determined under the first sentence of subsection (d)(1) shall be the amount determined under subsection (d)(1)(A) (determined without regard to subsection (h)(4)).”
Advance payment of credit—
In general— Chapter 77 of such Code is amended by inserting after section 7527 the following new section:
“7527A. Advance payment of child tax credit
“(a) In general—As soon as practicable after the date of the enactment of this Act, the Secretary shall establish a program for making advance payments of the credit allowed under subsection (a) of section 24 on a monthly basis (determined without regard to subsection (i)(2)) of such section), or as frequently as the Secretary determines to be administratively feasible, to taxpayers determined to be eligible for advance payment of such credit.
“(b) Limitation
“(1) In general—The Secretary may make payments under subsection (a) only to the extent that the total amount of such payments made to any taxpayer during the taxable year does not exceed an amount equal to the excess, if any, of—
“(A) subject to paragraph (2), the amount determined under subsection (a) of section 24 with respect to such taxpayer (determined without regard to subsection (i)(2)) of such section) for such taxable year, over
“(B) the estimated tax imposed by subtitle A, as reduced by the credits allowable under subparts A and C (other than section 24) of such part IV, with respect to such taxpayer for such taxable year, as determined in such manner as the Secretary deems appropriate.
“(2) Application of threshold amount limitation—The program described in subsection (a) shall make reasonable efforts to apply the limitation of section 24(b) with respect to payments made under such program.
“(c) Application—The advance payments described in this section shall only be made with respect to credits allowed under section 24 for taxable years beginning during 2020.”
Reconciliation of credit and advance credit— Section 24(i) of such Code, as amended by subsection (a), is amended—
by striking “in the case of any taxable year”, and inserting the following:
“(1) In general—“In the case of any taxable year””
by adding at the end the following new paragraph:
“(2) Reconciliation of credit and advance credit
“(A) In general—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.
“(B) Excess advance payments—If the aggregate amount of advance payments under section 7527A for the taxable year exceeds the amount of the credit allowed under this section for such taxable year (determined without regard to subparagraph (A)), the tax imposed by this chapter for such taxable year shall be increased by the amount of such excess.”
Clerical amendment— The table of sections for chapter 77 of such Code is amended by inserting after the item relating to section 7527 the following new item:
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2019.
Sec. 122 Application of child tax credit in possessions
In general— Section 24 of the Internal Revenue Code of 1986, as amended by the preceding provisions of this Act, is amended by adding at the end the following new subsection:
“(j) Application of credit in possessions
“(1) Mirror code possessions
“(A) In general—The Secretary shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the application of this section (determined without regard to this subsection) with respect to taxable years beginning after 2019. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.
“(B) Coordination with credit allowed against United States income taxes—No credit shall be allowed under this section for any taxable year to any individual to whom a credit is allowable against taxes imposed by a possession with a mirror code tax system by reason of the application of this section in such possession for such taxable year.
“(C) Mirror code tax system—For purposes of this paragraph, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.
“(2) Puerto Rico—In the case of any bona fide resident of Puerto Rico (within the meaning of section 937(a))—
“(A) the credit determined under this section shall be allowable to such resident,
“(B) in the case of any taxable year beginning during 2020, the increase determined under the first sentence of subsection (d)(1) shall be the amount determined under subsection (d)(1)(A) (determined without regard to subsection (h)(4)),
“(C) in the case of any taxable year beginning after December 31, 2020, and before January 1, 2026, the increase determined under the first sentence of subsection (d)(1) shall be the lesser of—
“(i) the amount determined under subsection (d)(1)(A) (determined without regard to subsection (h)(4)), or
“(ii) the dollar amount in effect under subsection (h)(5), and
“(D) in the case of any taxable year after December 31, 2025, the increase determined under the first sentence of subsection (d)(1) shall be the amount determined under subsection (d)(1)(A).
“(3) American Samoa
“(A) In general—The Secretary shall pay to American Samoa amounts estimated by the Secretary as being equal to the aggregate benefits that would have been provided to residents of American Samoa by reason of the application of this section for taxable years beginning after 2019 if the provisions of this section had been in effect in American Samoa.
“(B) Distribution requirement—Subparagraph (A) shall not apply unless American Samoa has a plan, which has been approved by the Secretary, under which American Samoa will promptly distribute such payments to the residents of American Samoa in a manner which replicates to the greatest degree practicable the benefits that would have been so provided to each such resident.
“(C) Coordination with credit allowed against United States income taxes
“(i) In general—In the case of a taxable year with respect to which a plan is approved under subparagraph (B), this section (other than this subsection) shall not apply to any individual eligible for a distribution under such plan.
“(ii) Application of section in event of absence of approved plan—In the case of a taxable year with respect to which a plan is not approved under subparagraph (B), rules similar to the rules of paragraph (2) shall apply with respect to bona fide residents of American Samoa (within the meaning of section 937(a)).
“(4) Treatment of payments—The payments made under this subsection shall be treated in the same manner for purposes of section 1324(b)(2) of title 31, United States Code, as refunds due from the credit allowed under this section.”
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2019.
D Dependent care assistance
Sec. 131 Refundability and enhancement of child and dependent care tax credit
In general— Section 21 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(g) Special rules for 2020—In the case of any taxable year beginning after December 31, 2019, and before January 1, 2021—
“(1) Credit made refundable—In the case of an individual other than a nonresident alien, the credit allowed under subsection (a) shall be treated as a credit allowed under subpart C (and not allowed under this subpart).
“(2) Increase in applicable percentage—Subsection (a)(2) shall be applied—
“(A) by substituting “50 percent” for “35 percent ”, and
“(B) by substituting “$120,000” for “$15,000”.
“(3) Increase in dollar limit on amount creditable—Subsection (c) shall be applied—
“(A) by substituting “$6,000” for “$3,000” in paragraph (1) thereof, and
“(B) by substituting “twice the amount in effect under paragraph (1)” for “$6,000” in paragraph (2) thereof.”
Conforming amendment— Section 1324(b)(2) of title 31, United States Code, is amended by inserting “21 (by reason of subsection (g) thereof),” before “25A”.
Coordination with possession tax systems— Section 21(g)(1) of the Internal Revenue Code of 1986 (as added by this section) shall not apply to any person—
to whom a credit is allowed against taxes imposed by a possession with a mirror code tax system by reason of the application of section 21 of such Code in such possession for such taxable year, or
to whom a credit would be allowed against taxes imposed by a possession which does not have a mirror code tax system if the provisions of section 21 of such Code had been in effect in such possession for such taxable year.
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2019.
Sec. 132 Increase in exclusion for employer-provided dependent care assistance
In general— Section 129(a)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(D) Special rule for 2020—In the case of any taxable year beginning during 2020, subparagraph (A) shall be applied be substituting “$10,500 (half such dollar amount” for “$5,000 ($2,500”.”
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2019.
Retroactive plan amendments— A plan or other arrangement that otherwise satisfies all applicable requirements of sections 106, 125, and 129 of the Internal Revenue Code of 1986 (including any rules or regulations thereunder) shall not fail to be treated as a cafeteria plan or dependent care flexible spending arrangement merely because such plan or arrangement is amended pursuant to a provision under this section and such amendment is retroactive, if—
such amendment is adopted no later than the last day of the plan year in which the amendment is effective, and
the plan or arrangement is operated consistent with the terms of such amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted.
E Credits for paid sick and family leave
Sec. 141 Extension of credits
In general— Sections 7001(g), 7002(e), 7003(g), and 7004(e) of the Families First Coronavirus Response Act are each amended by striking “December 31, 2020” and inserting “February 28, 2021”.
Effective date— The amendments made by this section shall take effect as if included in the provisions of the Families First Coronavirus Response Act to which they relate.
Sec. 142 Repeal of reduced rate of credit for certain leave
Payroll credit— Section 7001(b) of the Families First Coronavirus Response Act is amended by inserting “(as in effect immediately before the date of the enactment of the COVID–19 Tax Relief Act of 2020) or any day on or after the date of the enactment of the COVID–19 Tax Relief Act of 2020” after “in the case of any day any portion of which is paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the Emergency Paid Sick Leave Act”.
Self-Employed credit—
In general— Clauses (i) and (ii) of section 7002(c)(1)(B) of the Families First Coronavirus Response Act are each amended by inserting “(as in effect immediately before the date of the enactment of the COVID–19 Tax Relief Act of 2020) or any day on or after the date of the enactment of the COVID–19 Tax Relief Act of 2020” after “in the case of any day any portion of which is paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the Emergency Paid Sick Leave Act”.
Conforming amendment— Section 7002(d)(3) of the Families First Coronavirus Response Act is amended by inserting “(as in effect immediately before the date of the enactment of the COVID–19 Tax Relief Act of 2020) or any day on or after the date of the enactment of the COVID–19 Tax Relief Act of 2020” after “in the case of any day any portion of which is paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the Emergency Paid Sick Leave Act”.
Effective date— The amendments made by this section shall apply to days on or after the date of the enactment of this Act.
Sec. 143 Increase in limitations on credits for paid family leave
Increase in overall limitation on qualified family leave wages—
In general— Section 7003(b)(1)(B) of the Families First Coronavirus Response Act is amended by striking “$10,000” and inserting “$12,000”.
Conforming amendment— Section 7004(d)(3) of the Families First Coronavirus Response Act is amended by striking “$10,000” and inserting “$12,000”.
Increase in qualified family leave equivalent amount for self-employed individuals— Section 7004(c)(1)(A) of the Families First Coronavirus Response Act is amended by striking “50” and inserting “60”.
Effective date— The amendments made by this section shall take effect as if included in the provisions of the Families First Coronavirus Response Act to which they relate.
Sec. 144 Election to use prior year net earnings from self-employment in determining average daily self-employment income
Credit for sick leave— Section 7002(c) of the Families First Coronavirus Response Act is amended by adding at the end the following new paragraph:
“(4) Election to use prior year net earnings from self-employment income—In the case of an individual who elects (at such time and in such manner as the Secretary, or the Secretary’s delegate, may provide) the application of this paragraph, paragraph (2)(A) shall be applied by substituting “the prior taxable year” for “the taxable year”.”
Credit for family leave— Section 7004(c) of the Families First Coronavirus Response Act is amended by adding at the end the following new paragraph:
“(4) Election to use prior year net earnings from self-employment income—In the case of an individual who elects (at such time and in such manner as the Secretary, or the Secretary’s delegate, may provide) the application of this paragraph, paragraph (2)(A) shall be applied by substituting “the prior taxable year” for “the taxable year”.”
Effective date— The amendments made by this section shall take effect as if included in the provisions of the Families First Coronavirus Response Act to which they relate.
Sec. 145 Federal, State, and local governments allowed tax credits for paid sick and paid family and medical leave
In general— Sections 7001(e) and 7003(e) of the Families First Coronavirus Response Act are each amended by striking paragraph (4).
Coordination with application of certain definitions—
In general— Sections 7001(c) and 7003(c) of the Families First Coronavirus Response Act are each amended—
by inserting “, determined without regard to paragraphs (1) through (22) of section 3121(b) of such Code ” after “as defined in section 3121(a) of the Internal Revenue Code of 1986”, and
by inserting “, determined without regard to the sentence in paragraph (1) thereof which begins “Such term does include remuneration”” after “as defined in section 3231(e) of the Internal Revenue Code”.
Conforming amendments— Sections 7001(e)(3) and 7003(e)(3) of the Families First Coronavirus Response Act are each amended by striking “Any term” and inserting “Except as otherwise provided in this section, any term”.
Effective date— The amendments made by this section shall take effect as if included in the provisions of the Families First Coronavirus Response Act to which they relate.
Sec. 146 Certain technical improvements
Coordination with exclusion from employment taxes— Sections 7001(c) and 7003(c) of the Families First Coronavirus Response Act, as amended by the preceding provisions of this Act, are each amended—
by inserting “and section 7005(a) of this Act,” after “determined without regard to paragraphs (1) through (22) of section 3121(b) of such Code”, and
by inserting “and without regard to section 7005(a) of this Act” after “which begins “Such term does not include remuneration””.
Clarification of applicable railroad retirement tax for paid leave credits— Sections 7001(e) and 7003(e) of the Families First Coronavirus Response Act, as amended by the preceding provisions of this Act, are each amended by adding at the end the following new paragraph:
“(4) References to railroad retirement tax—Any reference in this section to the tax imposed by section 3221(a) of the Internal Revenue Code of 1986 shall be treated as a reference to so much of such tax as is attributable to the rate in effect under section 3111(a) of such Code.”
Clarification of treatment of paid leave for applicable railroad retirement tax— Section 7005(a) of the Families First Coronavirus Response Act is amended by adding the following sentence at the end of such subsection: “Any reference in this subsection to the tax imposed by section 3221(a) of such Code shall be treated as a reference to so much of the tax as is attributable to the rate in effect under section 3111(a) of such Code.”
Clarification of applicable railroad retirement tax for hospital insurance tax credit— Section 7005(b)(1) of the Families First Coronavirus Response Act is amended to read as follows:
“(1) In General—The credit allowed by section 7001 and the credit allowed by section 7003 shall each be increased by the amount of the tax imposed by section 3111(b) of the Internal Revenue Code of 1986 and so much of the taxes imposed under section 3221(a) of such Code as are attributable to the rate in effect under section 3111(b) of such Code on qualified sick leave wages, or qualified family leave wages, for which credit is allowed under such section 7001 or 7003 (respectively).”
Effective date— The amendments made by this section shall take effect as if included in the provisions of the Families First Coronavirus Response Act to which they relate.
Sec. 147 Credits not allowed to certain large employers
Credit for required paid sick leave—
In general— Section 7001(a) of the Families First Coronavirus Response Act is amended by striking “In the case of an employer” and inserting “In the case of an eligible employer”.
Eligible employer— Section 7001(c) of the Families First Coronavirus Response Act, as amended by the preceding provisions of this Act, is amended by striking “For purposes of this section, the term” and all that precedes it and inserting the following:
“(c) Definitions—For purposes of this section—
“(1) Eligible employer—The term eligible employer means any employer other than an applicable large employer (as defined in section 4980H(c)(2), determined by substituting “500” for “50” each place it appears in subparagraphs (A) and (B) thereof and without regard to subparagraphs (D) and (F) thereof). For purposes of the preceding sentence, the Government of the United States, the government of any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing shall not be treated as an applicable large employer.
“(2) Qualified sick leave wages—The term”
Credit for required paid family leave—
In general— Section 7003(a) of the Families First Coronavirus Response Act is amended by striking “In the case of an employer” and inserting “In the case of an eligible employer”.
Eligible employer— Section 7003(c) of the Families First Coronavirus Response Act, as amended by the preceding provisions of this Act, is amended by striking “For purposes of this section, the term” and all that precedes it and inserting the following:
“(c) Definitions—For purposes of this section—
“(1) Eligible employer—The term eligible employer means any employer other than an applicable large employer (as defined in section 4980H(c)(2), determined by substituting “500” for “50” each place it appears in subparagraphs (A) and (B) thereof and without regard to subparagraphs (D) and (F) thereof). For purposes of the preceding sentence, the Government of the United States, the government of any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing, shall not be treated as an applicable large employer.
“(2) Qualified family leave wages—The term”
Effective date— The amendments made by this section shall apply to wages paid after the date of the enactment of this Act.
F Deduction of State and local taxes
Sec. 151 Elimination for 2020 limitation on deduction of State and local taxes
In general— Section 164(b)(6)(B) of the Internal Revenue Code of 1986 is amended by inserting “in the case of a taxable year beginning before January 1, 2020, or after December 31, 2020,” before “the aggregate amount of taxes”.
by striking “For purposes of subparagraph (B)” and inserting “For purposes of this section”,
by striking “January 1, 2018” and inserting “January 1, 2021”,
by striking “December 31, 2017, shall” and inserting “December 31, 2020, shall”, and
by adding at the end the following: “For purposes of this section, in the case of State or local taxes with respect to any real or personal property paid during a taxable year beginning in 2020, the Secretary shall prescribe rules which treat all or a portion of such taxes as paid in a taxable year or years other than the taxable year in which actually paid as necessary or appropriate to prevent the avoidance of the limitations of this subsection.”.
Effective date— The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after December 31, 2019.
II Provisions to Prevent Business Interruption
Sec. 201 Improvements to employee retention and rehiring credit
Employee retention credit renamed— Section 2301 of the CARES Act is amended in the heading by striking “employee retention credit” and inserting “employee retention and rehiring credit”.
Increase in credit percentage— Section 2301(a) of the CARES Act is amended by striking “50 percent” and inserting “80 percent”.
Increase in per employee limitation— Section 2301(b)(1) of the CARES Act is amended by striking “for all calendar quarters shall not exceed $10,000.” and inserting
“(A) $15,000 in any calendar quarter, and
“(B) $45,000 in the aggregate for all calendar quarters.”
Modification of threshold for treatment as a large employer—
In general— Section 2301(c)(3)(A) of the CARES Act is amended—
by striking “for which the average number of full-time employees (within the meaning of section 4980H of the Internal Revenue Code of 1986) employed by such eligible employer during 2019 was greater than 100” in clause (i) and inserting “which is a large employer”, and
by striking “for which the average number of full-time employees (within the meaning of section 4980H of the Internal Revenue Code of 1986) employed by such eligible employer during 2019 was not greater than 100” in clause (ii) and inserting “which is not a large employer”.
Large employer defined— Section 2301(c) of the CARES Act is amended by redesignating paragraph (6) as paragraph (7) and by inserting after paragraph (5) the following new paragraph:
“(6) Large employer—The term large employer means any eligible employer if—
“(A) the average number of full-time employees (as determined for purposes of determining whether an employer is an applicable large employer for purposes of section 4980H(c)(2) of the Internal Revenue Code of 1986) employed by such eligible employer during calendar year 2019 was greater than 1,500, and
“(B) the gross receipts (within the meaning of section 448(c) of the Internal Revenue Code of 1986) of such eligible employer during calendar year 2019 was greater than $41,500,000.”
Phase-in of eligibility based on reduction in gross receipts—
Decrease of reduction in gross receipts necessary to qualify for credit— Section 2301(c)(2)(B) of the CARES Act is amended—
by striking “50 percent” in clause (i) and inserting “90 percent”, and
by striking “80 percent” in clause (ii) and inserting “90 percent”.
Phase-in of credit if reduction in gross receipts is less than 50 percent— Section 2301(c)(2) of the CARES Act is amended by adding at the end the following new subparagraph:
“(D) Phase-in of credit where business not suspended and reduction in gross receipts less than 50 percent
“(i) In general—In the case of any calendar quarter with respect to which an eligible employer would not be an eligible employer if subparagraph (B)(i) were applied by substituting “50 percent” for “90 percent”, the amount of the credit allowed under subsection (a) shall be reduced by the amount which bears the same ratio to the amount of such credit (determined without regard to this subparagraph) as—
“(I) the excess gross receipts percentage point amount, bears to
“(II) 40 percentage points.
“(ii) Excess gross receipts percentage point amount—For purposes of this subparagraph, the term excess gross receipts percentage point amount means, with respect to any calendar quarter, the excess of—
“(I) the lowest of the gross receipts percentage point amounts determined with respect to any calendar quarter during the period ending with such calendar quarter and beginning with the first calendar quarter during the period described in subparagraph (B), over
“(II) 50 percentage points.
“(iii) Gross receipts percentage point amounts—For purposes of this subparagraph, the term gross receipts percentage point amount means, with respect to any calendar quarter, the percentage (expressed as a number of percentage points) obtained by dividing—
“(I) the gross receipts (within the meaning of subparagraph (B)) for such calendar quarter, by
“(II) the gross receipts for the same calendar quarter in calendar year 2019.”
Gross receipts of tax-exempt organizations— Section 2301(c)(2)(C) of the CARES Act is amended—
by striking “of such Code, clauses (i) and (ii)(I)” and inserting
“(i) clauses (i) and (ii)(I)”
by striking the period at the end and inserting “, and”, and
by adding at the end the following new clause:
“(ii) any reference in this section to gross receipts shall be treated as a reference to gross receipts within the meaning of section 6033 of such Code.”
Modification of treatment of health plan expenses—
In general— Section 2301(c)(5) of the CARES Act is amended to read as follows:
“(5) Wages
“(A) In general—The term wages means wages (as defined in section 3121(a) of the Internal Revenue Code of 1986) and compensation (as defined in section 3231(e) of such Code).
“(B) Allowance for certain health plan expenses
“(i) In general—Such term shall include amounts paid or incurred by the eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Internal Revenue Code of 1986), but only to the extent that such amounts are excluded from the gross income of employees by reason of section 106(a) of such Code.
“(ii) Allocation rules—For purposes of this section, amounts treated as wages under clause (i) shall be treated as paid with respect to any employee (and with respect to any period) to the extent that such amounts are properly allocable to such employee (and to such period) in such manner as the Secretary may prescribe. Except as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among periods of coverage.”
Conforming amendment— Section 2301(c)(3) of the CARES Act is amended by striking subparagraph (C).
Qualified wages permitted to include amounts for tip replacement— Section 2301(c)(3)(B) of the CARES Act is amended by inserting “(including tips which would have been deemed to be paid by the employer under section 3121(q))” after “would have been paid”.
Certain governmental employers eligible for credit—
In general— Section 2301(f) of the CARES Act is amended to read as follows:
“(f) Certain governmental employers
“(1) In general—The credit under this section shall not be allowed to the Federal Government or any agency or instrumentality thereof.
“(2) Exception—Paragraph (1) shall not apply to any organization described in section 501(c)(1) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code.
“(3) Special rules—In the case of any State government, Indian tribal government, or any agency, instrumentality, or political subdivision of the foregoing—
“(A) clauses (i) and (ii)(I) of subsection (c)(2)(A) shall apply to all operations of such entity, and
“(B) subclause (II) of subsection (c)(2)(A)(ii) shall not apply.”
Coordination with application of certain definitions—
In general— Section 2301(c)(5)(A) of the CARES Act, as amended by the preceding provisions of this Act, is amended by adding at the end the following: “For purposes of the preceding sentence (other than for purposes of subsection (b)(2)), wages as defined in section 3121(a) of the Internal Revenue Code of 1986 shall be determined without regard to paragraphs (1), (5), (6), (7), (8), (10), (13), (18), (19), and (22) of section 3212(b) of such Code (except with respect to services performed in a penal institution by an inmate thereof).”.
Conforming amendments— Sections 2301(c)(6) of the CARES Act is amended by striking “Any term” and inserting “Except as otherwise provided in this section, any term”.
Coordination with income tax credits— Section 2301(h) of the CARES Act, as amended by preceding provisions of this Act, is amended—
by striking paragraphs (1) and (2) and inserting the following:
“(1) Coordination with income tax credits—Any wages taken into account in determining the credit allowed under this section shall not be taken into account as wages for purposes of sections 41, 45A, 45B, 45P, 45S, 51, and 1396 of the Internal Revenue 23 Code of 1986.”
by redesignating paragraph (3) as paragraph (2).
Application of credit to employers of domestic workers—
In general— Section 2301(c)(2) of the CARES Act, as amended by the preceding provisions of this Act, is amended by adding at the end the following new subparagraph:
“(E) Employers of domestic workers—In the case of an employer with one or more employees who perform domestic service (within the meaning of section 3121(a)(7) of such Code) in the private home of such employer, with respect to such employees—
“(i) subparagraph (A) shall be applied—
“(I) by substituting “employing an employee who performs domestic service in the private home of such employer” for “carrying on a trade or business” in clause (i) thereof, and
“(II) by substituting “such employment” for “the operation of the trade or business” in clause (ii)(I) thereof.
“(ii) subclause (II) of subparagraph (A)(ii) shall not apply, and
“(iii) such employer shall be treated as a large employer.”
Denial of double benefit— Section 2301(h)(1) of the CARES Act, as amended by the preceding provisions of this Act, is further amended—
by striking “shall not be taken into account as wages” and inserting
“(A) wages”
by striking the period at the end and inserting “, and”, and
by adding at the end the following:
“(B) if such wages are paid for domestic service described in subsection (c)(2)(E), as employment-related expenses for purposes of section 21 of such Code.”
Coordination with government grants— Section 2301(h) of the CARES Act, as amended by the preceding provisions of this Act, is further amended by adding at the end the following new paragraph:
“(3) Coordination with government grants—Qualified wages shall not be taken into account under this section to the extent that grants (or similar amounts) are provided by the Federal government for purposes of paying or reimbursing expenses for such wages.”
Effective date— The amendments made by this section shall take effect as if included in section 2301 of the CARES Act.
Sec. 202 Certain loan forgiveness and other business financial assistance under CARES Act not includible in gross income
United States Treasury program management authority— For purposes of the Internal Revenue Code of 1986, no amount shall be included in gross income by reason of loan forgiveness described in section 1109(d)(2)(D) of the CARES Act.
Emergency EIDL grants— For purposes of the Internal Revenue Code of 1986, any advance described in section 1110(e) of the CARES Act shall not be included in the gross income of the person that receives such advance.
Subsidy for certain loan payments— For purposes of the Internal Revenue Code of 1986, any payment described in section 1112(c) of the CARES Act shall not be included in the gross income of the person on whose behalf such payment is made.
RESTAURANTS Grants— For purposes of the Internal Revenue Code of 1986, any grants (or similar amounts) made to an eligible entity under the RESTAURANTS Act of 2020 shall not be included in the gross income of such entity.
Effective date—
Subsections (a), (b), and (c) shall apply to taxable years ending after the date of the enactment of the CARES Act.
Restaurants grants— Subsection (d) shall apply to taxable years ending after the date of the enactment of the RESTAURANTS Act of 2020.
Sec. 203 Clarification of treatment of expenses paid or incurred with proceeds from certain grants and loans
In general— For purposes of the Internal Revenue Code of 1986 and notwithstanding any other provision of law, any deduction and the basis of any property shall be determined without regard to whether any amount is excluded from gross income under section 202 of this Act or section 1106(i) of the CARES Act.
Clarification of exclusion of loan forgiveness— Section 1106(i) of the CARES Act is amended to read as follows:
“(i) Taxability—For purposes of the Internal Revenue Code of 1986, no amount shall be included in the gross income of the eligible recipient by reason of forgiveness of indebtedness described in subsection (b).”
Effective date— Subsection (a) and the amendment made by subsection (b) shall apply to taxable years ending after the date of the enactment of the CARES Act.
III Net Operating Losses
Sec. 301 Limitation on excess business losses of non-corporate taxpayers restored and made permanent
In general— Section 461(l)(1) of the Internal Revenue Code of 1986 is amended to read as follows:
“(1) Limitation—In the case of a taxpayer other than a corporation, any excess business loss of the taxpayer shall not be allowed.”
Farming losses— Section 461 of such Code is amended by striking subsection (j).
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
Sec. 302 Certain taxpayers allowed carryback of net operating losses arising in 2019 and 2020
Carryback of losses arising in 2019 and 2020—
In general— Section 172(b)(1)(D)(i) of the Internal Revenue Code of 1986 is amended to read as follows:
“(i) In general—In the case of any net operating loss arising in a taxable year beginning after December 31, 2018, and before January 1, 2021, and to which subparagraphs (B) and (C)(i) do not apply, such loss shall be a net operating loss carryback to each taxable year preceding the taxable year of such loss, but not to any taxable year beginning before January 1, 2018.”
Conforming amendments—
The heading for section 172(b)(1)(D) of such Code is amended by striking “2018, 2019, and” and inserting “2019 and”.
Section 172(b)(1)(D) of such Code is amended by striking clause (iii) and by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively.
Section 172(b)(1)(D)(iii) of such Code, as so redesignated, is amended by striking “(i)(I)” and inserting “(i)”.
Section 172(b)(1)(D)(iv) of such Code, as so redesignated, is amended—
by striking “If the 5-year carryback period under clause (i)(I)” in subclause (I) and inserting “If the carryback period under clause (i)”, and
by striking “2018 or” in subclause (II).
Disallowed for certain taxpayers— Section 172(b)(1)(D) of such Code, as amended by the preceding provisions of this Act, is amended by adding at the end the following new clauses:
“(v) Carryback disallowed for certain taxpayers—Clause (i) shall not apply with respect to any loss arising in a taxable year in which—
“(I) the taxpayer (or any related person) is not allowed a deduction under this chapter for the taxable year by reason of section 162(m) or section 280G, or
“(II) the taxpayer (or any related person) is a specified corporation for the taxable year.
“(vi) Specified corporation—For purposes of clause (v)—
“(I) In general—The term specified corporation means, with respect to any taxable year, a corporation the fair market value of the aggregate distributions (including redemptions), measured as of the date of each such distribution, of which during all taxable years ending after December 31, 2017, exceed the sum of applicable stock issued of such corporation and 5 percent of the fair market value of the stock of such corporation as of the last day of the taxable year.
“(II) Applicable stock issued—The term applicable stock issued means, with respect to any corporation, the aggregate fair market value of stock (as of the issue date of such stock) issued by the corporation during all taxable years ending after December 31, 2017, in exchange for money or property other than stock in such corporation.
“(III) Certain preferred stock disregarded—For purposes of subclause (I), stock described in section 1504(a)(4), and distributions (including redemptions) with respect to such stock, shall be disregarded.
“(vii) Related person—For purposes of clause (v), a person is a related person to a taxpayer if the related person bears a relationship to the taxpayer specified in section 267(b) or section 707(b)(1).”
Effective date— The amendments made by this section shall take effect as if included in the enactment of section 2303(b) of the Coronavirus Aid, Relief, and Economic Security Act.