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.