26 USC 3402. 26 USC 1 note. Applicability. (8) Section 3402(q)(1) is amended by striking “equal to 28 percent of such payment" and inserting "equal to the product of the third lowest rate of tax applicable under section 1(c) and such payment". (9) Section 3402(r)(3) is amended by striking “31 percent" and inserting "the fourth lowest rate of tax applicable under section 1(c)". (10) Section 3406(a)(1) is amended by striking "equal to 31 percent of such payment" and inserting "equal to the product of the fourth lowest rate of tax applicable under section 1(c) and such payment". (11) Section 13273 of the Revenue Reconciliation Act of 1993 is amended by striking "28 percent" and inserting "the third lowest rate of tax applicable under section 1(c) of the Internal Revenue Code of 1986". (d) EFFECTIVE DATES. (1) IN GENERAL.-Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2000. (2) AMENDMENTS TO WITHHOLDING PROVISIONS.-The amendments made by paragraphs (6), (7), (8), (9), (10), and (11) of subsection (c) shall apply to amounts paid after the 60th day after the date of the enactment of this Act. References to income brackets and rates of tax in such paragraphs shall be applied without regard to section 1(i)(1)(D) of the Internal Revenue Code of 1986. SEC. 102. REPEAL OF PHASEOUT OF PERSONAL EXEMPTIONS. (a) IN GENERAL.-Paragraph (3) of section 151(d) (relating to exemption amount) is amended by adding at the end the following new subparagraphs: "(E) REDUCTION OF PHASEOUT.— “(i) IN GENERAL.-In the case of taxable years beginning after December 31, 2005, and before January 1, 2010, the reduction under subparagraph (A) shall be equal to the applicable fraction of the amount which would (but for this subparagraph) be the amount of such reduction. “(ii) APPLICABLE FRACTION.-For purposes of clause (i), the applicable fraction shall be determined in accordance with the following table: "For taxable years beginning in calendar year 2006 and 2007 2008 and 2009 The applicable fraction is 2/3 1/3. “(F) TERMINATION.-This paragraph shall not apply to any taxable year beginning after December 31, 2009.". (b) EFFECTIVE DATE.-The amendment made by this section shall apply to taxable years beginning after December 31, 2005. SEC. 103. PHASEOUT OF OVERALL LIMITATION ON ITEMIZED DEDUC TIONS. (a) IN GENERAL.-Section 68 is amended by adding at the end the following new subsections: "(f) PHASEOUT OF LIMITATION.— "(1) IN GENERAL.-In the case of taxable years beginning after December 31, 2005, and before January 1, 2010, the reduction under subsection (a) shall be equal to the applicable fraction of the amount which would (but for this subsection) be the amount of such reduction. "(2) APPLICABLE FRACTION.-For purposes of paragraph (1), the applicable fraction shall be determined in accordance with the following table: "For taxable years beginning in calendar year 2006 and 2007 2008 and 2009 The applicable fraction is— 2/3 1/3. "(g) TERMINATION.-This section shall not apply to any taxable year beginning after December 31, 2009.". (b) EFFECTIVE DATE.-The amendment made by this section Applicability. shall apply to taxable years beginning after December 31, 2005. 26 USC 68 note. TITLE II-TAX BENEFITS RELATING TO SEC. 201. MODIFICATIONS TO CHILD TAX CREDIT. (a) INCREASE IN PER CHILD AMOUNT.-Subsection (a) of section 24 (relating to child tax credit) is amended to read as follows: "(a) ALLOWANCE OF CREDIT.— "(1) IN GENERAL.-There shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to each qualifying child of the taxpayer an amount equal to the per child amount. "(2) PER CHILD AMOUNT.-For purposes of paragraph (1), the per child amount shall be determined as follows: "In the case of any taxable year beginning in The per child amount is 26 USC 24. 2001, 2002, 2003, or 2004 2005, 2006, 2007, or 2008 2009 2010 or thereafter $ 600 700 800 1,000.". (b) CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.— (1) IN GENERAL.-Subsection (b) of section 24 (relating to child tax credit) is amended by adding at the end the following new paragraph: (3) LIMITATION BASED ON AMOUNT OF TAX.-The credit allowed under subsection (a) for any taxable year shall not exceed the excess of "(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over "(B) the sum of the credits allowable under this subpart (other than this section) and section 27 for the taxable year.". (2) CONFORMING AMENDMENTS.— (A) The heading for section 24(b) is amended to read as follows: "LIMITATIONS.—". (B) The heading for section 24(b)(1) is amended to read as follows: "LIMITATION BASED ON ADJUSTED GROSS INCOME.-". (C) Section 24(d), as amended by subsection (c), is amended (i) by striking "section 26(a)" each place it appears and inserting "subsection (b)(3)”, and 26 USC 26. (ii) in paragraph (1)(B) by striking "aggregate amount of credits allowed by this subpart" and inserting "amount of credit allowed by this section". (D) Paragraph (1) of section 26(a) is amended by inserting "(other than section 24)" after "this subpart". (E) Subsection (c) of section 23 is amended by striking "and section 1400C" and inserting "and sections 24 and 1400C". (F) Subparagraph (C) of section 25(e)(1) is amended by inserting", 24," after "sections 23". (G) Section 904(h) is amended by inserting "(other than section 24)" after "chapter". (H) Subsection (d) of section 1400C is amended by inserting "and section 24" after "this section". (c) REFUNDABLE CHILD CREDIT. (1) IN GENERAL. So much of section 24(d) (relating to additional credit for families with 3 or more children) as precedes paragraph (2) is amended to read as follows: "(d) PORTION OF CREDIT REFUNDABLE.— “(1) IN GENERAL.-The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of— "(A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a), or "(B) the amount by which the amount of credit allowed by this section (determined without regard to this subsection) would increase if the limitation imposed by section 26(a) were increased by the greater of— "(i) 15 percent (10 percent in the case of taxable years beginning before January 1, 2005) of so much of the taxpayer's earned income (within the meaning of section 32) which is taken into account in computing taxable income for the taxable year as exceeds $10,000, or "(ii) in the case of a taxpayer with 3 or more qualifying children, the excess (if any) of— "(I) the taxpayer's social security taxes for the taxable year, over "(II) the credit allowed under section 32 for the taxable year. The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a).". (2) INFLATION ADJUSTMENT.-Subsection (d) of section 24 is amended by adding at the end the following new paragraph: "(4) INFLATION ADJUSTMENT.-In the case of any taxable year beginning in a calendar year after 2001, the $10,000 amount contained in paragraph (1)(B) 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 the calendar year in which the taxable year begins, determined by substituting 'calendar year 2000' for 'calendar year 1992' in subparagraph (B) thereof. Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.". (3) CONFORMING AMENDMENT.-Section 32 is amended by 26 USC 32. striking subsection (n). (d) ELIMINATION OF REDUCTION OF CREDIT TO TAXPAYER SUBJECT TO ALTERNATIVE MINIMUM TAX PROVISION.-Section 24(d) is amended (1) by striking paragraph (2), and (2) by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively. (e) EFFECTIVE DATES. (1) IN GENERAL.-Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2000. (2) SUBSECTION (b).-The amendments made by subsection (b) shall apply to taxable years beginning after December 31, 2001. SEC. 202. EXPANSION OF ADOPTION CREDIT AND ADOPTION ASSIST- (a) IN GENERAL.— (1) ADOPTION CREDIT.-Section 23(a)(1) (relating to allowance of credit) is amended to read as follows: "(1) IN GENERAL.-In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter"(A) in the case of an adoption of a child other than a child with special needs, the amount of the qualified adoption expenses paid or incurred by the taxpayer, and "(B) in the case of an adoption of a child with special needs, $10,000.". (2) ADOPTION ASSISTANCE PROGRAMS.-Section 137(a) (relating to adoption assistance programs) is amended to read as follows: "(a) IN GENERAL.-Gross income of an employee does not include amounts paid or expenses incurred by the employer for adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program. The amount of the exclusion shall be “(1) in the case of an adoption of a child other than a child with special needs, the amount of the qualified adoption expenses paid or incurred by the taxpayer, and "(2) in the case of an adoption of a child with special needs, $10,000.". (b) DOLLAR LIMITATIONS.— (1) DOLLAR AMOUNT OF ALLOWED EXPENSES. (A) ADOPTION EXPENSES.-Section 23(b)(1) (relating to allowance of credit) is amended (i) by striking "$5,000" and inserting "$10,000", (ii) by striking "($6,000, in the case of a child with special needs)", and (iii) by striking "subsection (a)" and inserting “subsection (a)(1)(A)”. (B) ADOPTION ASSISTANCE PROGRAMS.-Section 137(b)(1) (relating to dollar limitations for adoption assistance programs) is amended (i) by striking "$5,000" and inserting "$10,000", and (ii) by striking "$6,000, in the case of a child with special needs)", and Applicability. 26 USC 23. (iii) by striking "subsection (a)" and inserting “subsection (a)(1)". (2) PHASE-OUT LIMITATION. (A) ADOPTION EXPENSES.-Clause (i) of section 23(b)(2)(A) (relating to income limitation) is amended by striking "$75,000" and inserting "$150,000". (B) ADOPTION ASSISTANCE PROGRAMS.-Section 137(b)(2)(A) (relating to income limitation) is amended by striking "$75,000" and inserting "$150,000". (c) YEAR CREDIT ALLOWED.-Section 23(a)(2) (relating to year credit allowed) is amended by adding at the end the following new flush sentence: "In the case of the adoption of a child with special needs, (1) CHILDREN WITHOUT SPECIAL NEEDS.-Paragraph (2) of section 23(d) (relating to definition of eligible child) is amended to read as follows: "(2) ELIGIBLE CHILD.-The term 'eligible child' means any individual who "(A) has not attained age 18, or "(B) is physically or mentally incapable of caring for himself.". (2) ADOPTION ASSISTANCE PROGRAMS.-Section 137 (relating to adoption assistance programs) is amended by striking subsection (f). (e) ADJUSTMENT OF DOLLAR AND INCOME LIMITATIONS FOR INFLATION. (1) ADOPTION CREDIT.-Section 23 (relating to adoption expenses) is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection: "(h) ADJUSTMENTS FOR INFLATION.-In the case of a taxable year beginning after December 31, 2002, each of the dollar amounts in subsection (a)(1)(B) and paragraphs (1) and (2)(A)(i) of subsection (b) shall be increased by an amount equal to "(1) such dollar amount, multiplied by "(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2001' for 'calendar year 1992' in subparagraph (B) thereof.". (2) ADOPTION ASSISTANCE PROGRAMS.-Section 137 (relating to adoption assistance programs), as amended by subsection (d), is amended by adding at the end the following new subsection: "(f) ADJUSTMENTS FOR INFLATION.-In the case of a taxable year beginning after December 31, 2002, each of the dollar amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of subsection (b) shall be increased by an amount equal to "(1) such dollar amount, multiplied by "(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2001' for 'calendar year 1992' in subparagraph (B) thereof.". (f) CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM TAX. |