119-hr905

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 905 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 905

To amend the Internal Revenue Code of 1986 to extend the earned income 
tax credit to all taxpayers with dependents and to qualifying students, 
 and for other purposes.

_______________________________________________________________________

 IN THE HOUSE OF REPRESENTATIVES

 January 31, 2025

Mrs. Watson Coleman (for herself, Mrs. Hayes, Mrs. McIver, Ms. Norton, 
 Mr. Bishop, Mr. Johnson of Georgia, Mr. Thompson of Mississippi, Ms. 
Clarke of New York, Mrs. Cherfilus-McCormick, Ms. Ansari, Ms. McDonald 
 Rivet, Ms. Wilson of Florida, Ms. Kamlager-Dove, Mr. Mfume, Mrs. 
 Foushee, Ms. Brown, and Ms. McClellan) introduced the following bill; 
 which was referred to the Committee on Ways and Means

_______________________________________________________________________

 A BILL

To amend the Internal Revenue Code of 1986 to extend the earned income 
tax credit to all taxpayers with dependents and to qualifying students, 
 and for other purposes.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``EITC Modernization Act''.

SEC. 2. FINDINGS.

 Congress finds the following:

    (1) The Federal earned income tax credit is a refundable 
 tax credit for lower- and middle-income working individuals and 
 families whose earnings are below an income threshold.

    (2) Since its establishment in 1975, the credit has 
 increased family income, reduced child poverty, and promoted 
 employment by supplementing the earnings of low-wage workers, 
 including military families.

    (3) The credit has a positive impact on the education and 
 health of children living in poverty.

    (4) The credit has a positive economic impact on local 
 economies and businesses because it puts more money in the 
 hands of low- and middle-income working people who spend the 
 money on immediate needs, such as groceries, school supplies, 
 car repairs, rent, and health care.

    (5) The widening gap between the incomes of the wealthiest 
 Americans and those of middle- and lower-income Americans is 
 alarming.

    (6) There is an urgent need to address that gap, including 
 through measures like this legislation and by raising the 
 Federal minimum wage which together increase the wages of 
 working Americans, widen the path to income stability, and 
 narrow income inequality.

SEC. 3. MODIFICATIONS OF THE EARNED INCOME TAX CREDIT.

    (a) Inclusion of Individuals With Qualifying Dependents.--

    (1) In general.--

Section 32
            (c) (1) of the Internal Revenue 
 Code of 1986 is amended--
        (A) in subparagraph
        (A) , by striking ``qualifying 
 child'' each place such term appears and inserting 
 ``qualifying dependent'', and
        (B) by striking subparagraphs
        (B) and
        (F) and by 
 redesignating subparagraphs
            (C) ,
            (D) , and
        (E) as 
 subparagraphs
        (B) ,
            (C) , and
            (D) , respectively.

    (2) Qualifying dependent defined.--

Section 32
            (c) of such 
 Code is amended by redesignating paragraphs

    (3) and

    (4) as 
 paragraphs

    (5) and

    (6) , and by inserting after paragraph

    (2) the following new paragraphs:
 ``

    (3) Qualifying dependent.--
 ``
        (A) In general.--The term `qualifying dependent' 
 means, with respect to a taxable year--
 ``
            (i) a qualifying child,
 ``
            (ii) an aged dependent, or
 ``
            (iii) a qualifying individual described 
 in subparagraph
        (B) or
            (C) of 

section 21

    (b)

    (1) .
 ``
        (B) Identification requirements.--No credit shall 
 be allowed under this section with respect to a 
 qualifying dependent unless the taxpayer includes the 
 name, age, and TIN of the individual on the return of 
 tax for the taxable year.
 ``
            (C) Place of abode.--The term `qualifying 
 dependent' shall not include an individual unless such 
 individual has a principal place of abode in the United 
 States for more than one-half of such taxable year.
 ``

    (4) Aged dependent.--The term `aged dependent' means a 
 dependent for whom a deduction is allowable under 

section 151 
 who has attained the age of 65 before the close of the taxable 
 year.''.

    (3) Conforming amendments.--
        (A) The tables in paragraphs

    (1) and

    (2) of 

section 32

    (b) of such Code are each amended--
            (i) by striking ``qualifying child'' each 
 place it appears and inserting ``qualifying 
 dependent'', and
            (ii) by striking ``qualifying children'' 
 each place it appears and inserting 
 ``qualifying dependents''.
        (B) Section 32
            (c) (5) of such Code, as redesignated 
 by this Act, is amended by striking subparagraphs
            (C) and
            (D) .
            (C) Section 32
            (m) of such Code is amended by 
 striking ``
            (c) (3)
            (D) '' and inserting ``
            (c) (3)
        (B) ''.

    (b) Inclusion of Qualifying Students.--

    (1) In general.--

Section 32
            (c) (1)
        (A) of such Code is 
 amended by striking ``or'' at the end of clause
            (i) , by 
 striking the period at the end of clause
            (ii) 
            (III) and 
 inserting ``, or'', and by inserting after clause
            (ii) 
            (III) the 
 following new clause:
 ``
            (iii) any individual who is a qualifying 
 student.''.

    (2) Qualifying student defined.--

Section 32
            (c) (1) of such 
 Code, as amended by subsection

    (a) , is further amended by 
 adding at the end the following new subparagraph:
 ``
        (E) Qualifying student.--The term `qualifying 
 student' means, with respect to a taxable year, an 
 individual who is an eligible student (as defined in 
 

section 25A

    (b)

    (3) ) with respect to an institution of 
 higher education (as defined in 

section 101 of the 
 Higher Education Act of 1965) who--
 ``
            (i) is not a dependent for whom a 
 deduction is allowable under 

section 151 to 
 another taxpayer for any taxable year beginning 
 in the same calendar year as such taxable year, 
 and
 ``
            (ii) either--
 ``
            (I) is qualified for a Federal 
 Pell Grant with respect to the academic 
 year beginning in such taxable year, or
 ``
            (II) has modified adjusted gross 
 income of less than 250 percent of the 
 poverty line for the size of the family 
 involved for the taxable year.
 ``
        (F) === Definitions. ===
-For purposes of this 
 subparagraph:
 ``
            (i) Modified adjusted gross income.--The 
 term `modified adjusted gross income' means the 
 adjusted gross income of the taxpayer for the 
 taxable year increased by any amount excluded 
 from gross income under 

section 911, 931, or 
 933.
 ``
            (ii) Poverty line.--
 ``
            (I) In general.--The term 
 `poverty line' has the meaning given 
 such term in 

section 673

    (2) of the 
 Community Services Block Grant Act (42 
 U.S.C. 9902

    (2) ), including any revision 
 required by such section.
 ``
            (II) Family size.--For purposes 
 of determining the poverty line 
 applicable to the taxpayer, the family 
 size with respect to any taxpayer shall 
 be equal to the number of individuals 
 for whom the taxpayer is allowed a 
 deduction under 

section 151 (relating 
 to allowance of deduction for personal 
 exemptions) for the taxable year.''.

    (3) Conforming amendment.--

Section 32
            (c) (1)
        (A)
            (ii) of such 
 Code is amended by inserting ``(other than a qualifying 
 student)'' after ``any other individual''.
            (c) Minimum Credit for Students and for Individuals With Certain 
Qualifying Dependents.--

Section 32

    (a) of such Code is amended by adding 
at the end the following new paragraph:
 ``

    (3) Minimum credit for students and for individuals with 
 certain qualifying dependents.--
 ``
        (A) In general.--In the case of a qualifying 
 student, or an eligible individual who has a specified 
 dependent for the taxable year, the amount determined 
 under paragraph

    (1) (before the application of 
 paragraph

    (2) ) and the amount determined under 
 paragraph

    (2)
        (A) shall not be less than $1,200.
 ``
        (B) Specified dependent.--For purposes of this 
 paragraph, the term `specified dependent' means any 
 qualifying dependent (other than a qualifying child who 
 has attained the age of 7 before the close of the 
 taxable year).''.
            (d) Monthly Payment.--

Section 32 of such Code, as amended by this 
Act, is further amended by adding at the end the following new 
subsection:
 ``

    (n) Monthly Payment.--
 ``

    (1) In general.--In the case of an individual who is 
 entitled to a refund relating to an overpayment of tax imposed 
 by this subtitle that exceeds $240 (but only to the extent such 
 refund does not exceed the credit allowed under this section) 
 such individual may elect to have the Secretary, in lieu of 
 such refund, make a payment equal to--
 ``
        (A) \2/13\ of such refund (with interest) during 
 the earlier of the first practicable month or the 
 second month that begins after the date the return was 
 filed, and
 ``
        (B) \1/13\ of such refund (with interest) during 
 each of the 11 months subsequent to the month 
 determined under subparagraph
        (A) .
 ``

    (2) Method of payment.--A payment made under this 
 subsection shall be made by direct deposit or by general-use 
 prepaid card, or by such other method (other than by check) as 
 the Secretary may prescribe and the taxpayer may elect.
 ``

    (3) One-time increase.--The first time an individual 
 receives a payment under this subsection, paragraph

    (1)
        (A) shall be applied by substituting `\4/13\' for `\2/13\'.''.

    (e) Special Rule for New Low-Income Parents.--

Section 32 of such 
Code, as amended by this Act, is further amended by adding at the end 
the following new subsection:
 ``

    (o) Special Rule for New Low-Income Parents.--
 ``

    (1) In general.--In the case of an individual who--
 ``
        (A) is eligible for payments under subsection

    (o)

    (1) with respect to a refund for a taxable year, and
 ``
        (B) has a qualifying child who is born or adopted 
 during the following taxable year and not later than 
 the penultimate month for which the taxpayer is 
 eligible for such payments,
 the amount of any such payments made after such birth or 
 adoption shall be adjusted to the amount such payments would be 
 if such qualifying child were a qualifying child of the 
 taxpayer under this section for the taxable year to which such 
 payments relate.
 ``

    (2) Qualifying child determination.--For purposes of 
 determining if a child is a qualifying child for purposes of 
 this subsection, subsection
            (m) shall be applied by inserting 
 `or, in the case of an adoption, such other identifying 
 information as specified by the Secretary' before the period at 
 the end.''.

    (f) Age of Eligible Individuals Without Dependents.--

Section 32
            (c) (1)
        (A)
            (ii) 
            (II) of such Code is amended by striking ``age 25 but 
not attained age 65'' and inserting ``age 18''.

    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 4. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.

    (a) In General.--Chapter 77 of such Code is amended by inserting 
after 

section 7526A the following new section:

``

SEC. 7526B. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.

 ``

    (a) Establishment of Volunteer Income Tax Assistance Matching 
Grant Program.--The Secretary, through the Internal Revenue Service, 
shall establish a Community Volunteer Income Tax Assistance Matching 
Grant Program under which the Secretary may, subject to the 
availability of appropriated funds, make grants to provide matching 
funds for the development, expansion, or continuation of qualified 
return preparation programs assisting low-income taxpayers and members 
of underserved populations.
 ``

    (b) Use of Funds.--
 ``

    (1) In general.--Qualified return preparation programs 
 may use grants received under this section for--
 ``
        (A) ordinary and necessary costs associated with 
 program operation in accordance with cost principles 
 under the applicable Office of Management and Budget 
 circular, including--
 ``
            (i) wages or salaries of persons 
 coordinating the activities of the program,
 ``
            (ii) developing training materials, 
 conducting training, and performing quality 
 reviews of the returns prepared under the 
 program,
 ``
            (iii) equipment purchases, and
 ``
            (iv) vehicle-related expenses associated 
 with remote or rural tax preparation services,
 ``
        (B) outreach and educational activities described 
 in subsection
            (c) (2)
        (B) , and
 ``
            (C) services related to financial education and 
 capability, asset development, and the establishment of 
 savings accounts in connection with tax return 
 preparation.
 ``

    (2) Use of grants for overhead expenses prohibited.--No 
 grant received under this section may be used for overhead 
 expenses that are not directly related to a qualified return 
 preparation program.
 ``
            (c) Application.--
 ``

    (1) In general.--Each applicant for a grant under this 
 section shall submit an application to the Secretary at such 
 time, in such manner, and containing such information as the 
 Secretary may reasonably require.
 ``

    (2) Priority.--In awarding grants under this section, the 
 Secretary shall give priority to applications which 
 demonstrate--
 ``
        (A) assistance to low-income taxpayers, with 
 emphasis on outreach to, and services for, such 
 taxpayers,
 ``
        (B) taxpayer outreach and educational activities 
 relating to eligibility and availability of income 
 supports available through the Internal Revenue Code of 
 1986, including the earned income tax credit, and
 ``
            (C) specific outreach and focus on one or more 
 underserved populations.
 ``

    (3) Amounts taken into account.--In determining matching 
 grants under this section, the Secretary shall only take into 
 account amounts provided by the qualified return preparation 
 program for expenses described in subsection

    (b) .
 ``
            (d) Accuracy Reviews.--
 ``

    (1) In general.--The Secretary shall establish procedures 
 for, and shall conduct, periodic site visits of qualified 
 return preparation programs operating under a grant under this 
 section--
 ``
        (A) to ensure such programs are carrying out the 
 purposes of this section, and
 ``
        (B) to determine the return preparation accuracy 
 rate of the program.
 ``

    (2) Additional requirements for grant recipients not 
 meeting minimum standards.--In the case of any qualified return 
 preparation program which--
 ``
        (A) is awarded a grant under this section, and
 ``
        (B) is subsequently determined--
 ``
            (i) to have a less than 90 percent 
 average accuracy rate for preparation of tax 
 returns, or
 ``
            (ii) not to be otherwise carrying out the 
 purposes of this section,
 such program shall not be eligible for any additional 
 grants under this section unless such program provides 
 sufficient documentation of corrective measures 
 established to address any such deficiencies 
 determined.
 ``

    (e) 

=== Definitions. ===
-For purposes of this section--
 ``

    (1) Qualified return preparation program.--The term 
 `qualified return preparation program' means any program--
 ``
        (A) which provides assistance to individuals, not 
 less than 90 percent of whom are low-income taxpayers, 
 in preparing and filing Federal income tax returns,
 ``
        (B) which is administered by a qualified entity,
 ``
            (C) in which all volunteers who assist in the 
 preparation of Federal income tax returns meet the 
 training requirements prescribed by the Secretary, and
 ``
            (D) which uses a quality review process which 
 reviews 100 percent of all returns.
 ``

    (2) Qualified entity.--
 ``
        (A) In general.--The term `qualified entity' 
 means any entity which--
 ``
            (i) is an eligible organization,
 ``
            (ii) is in compliance with Federal tax 
 filing and payment requirements,
 ``
            (iii) is not debarred or suspended from 
 Federal contracts, grants, or cooperative 
 agreements, and
 ``
            (iv) agrees to provide documentation to 
 substantiate any matching funds provided 
 pursuant to the grant program under this 
 section.
 ``
        (B) Eligible organization.--The term `eligible 
 organization' means--
 ``
            (i) an institution of higher education 
 which is described in 

section 102 (other than 
 subsection

    (a)

    (1)
            (C) thereof) of the Higher 
 Education Act of 1965 (20 U.S.C. 1002), as in 
 effect on the date of the enactment of this 
 section, and which has not been disqualified 
 from participating in a program under title IV 
 of such Act,
 ``
            (ii) an organization described in 

section 501
            (c) and exempt from tax under 

section 501

    (a) ,
 ``
            (iii) a local government agency, 
 including--
 ``
            (I) a county or municipal 
 government agency, and
 ``
            (II) an Indian tribe, as defined 
 in 

section 4

    (13) of the Native American 
 Housing Assistance and Self-
 Determination Act of 1996 (25 U.S.C. 
 4103

    (13) ), including any tribally 
 designated housing entity (as defined 
 in 

section 4

    (22) of such Act (25 U.S.C. 
 4103

    (22) )), tribal subsidiary, 
 subdivision, or other wholly owned 
 tribal entity,
 ``
            (iv) a local, State, regional, or 
 national coalition (with one lead organization 
 which meets the eligibility requirements of 
 clause
            (i) ,
            (ii) , or
            (iii) acting as the 
 applicant organization), or
 ``
            (v) in the case of a targeted population 
 or community with respect to which no 
 organizations described in the preceding 
 clauses are available--
 ``
            (I) a State government agency, or
 ``
            (II) an office providing 
 Cooperative Extension services (as 
 established at the land-grant colleges 
 and universities under the Smith-Lever 
 Act of May 8, 1914).
 ``

    (3) Low-income taxpayers.--The term `low-income taxpayer' 
 means a taxpayer whose income for the taxable year does not 
 exceed an amount equal to the completed phaseout amount under 
 

section 32

    (b) for a married couple filing a joint return with 3 
 or more qualifying children, as determined in a revenue 
 procedure or other published guidance.
 ``

    (4) Underserved population.--The term `underserved 
 population' includes populations of persons with disabilities, 
 persons with limited English proficiency, Native Americans, 
 individuals living in rural areas, members of the Armed Forces 
 and their spouses, and the elderly.
 ``

    (f) Special Rules and Limitations.--
 ``

    (1) Duration of grants.--Upon application of a qualified 
 return preparation program, the Secretary is authorized to 
 award a multi-year grant not to exceed 3 years.
 ``

    (2) Aggregate limitation.--Unless otherwise provided by 
 specific appropriation, the Secretary shall not allocate more 
 than $30,000,000 per fiscal year (exclusive of costs of 
 administering the program) to grants under this section.
 ``

    (g) Promotion and Referral.--
 ``

    (1) Promotion.--The Secretary shall promote tax 
 preparation through qualified return preparation programs 
 through the use of mass communications, referrals, and other 
 means.
 ``

    (2) Internal revenue service referrals.--The Secretary 
 may refer taxpayers to qualified return preparation programs 
 receiving grants under this section.
 ``

    (3) Vita grantee referral.--Qualified return preparation 
 programs receiving a grant under this section are encouraged to 
 refer, as appropriate, to local or regional Low-Income Taxpayer 
 Clinics individuals who are eligible for such clinics.''.

    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by inserting after the item relating to 

section 7526A the 
following new item:

``7526B. Return preparation programs for low-income taxpayers.''.
            (c) Effective Date.--The amendments made by this section shall 
apply with respect to taxable years beginning after the date of 
enactment of this Act.
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