H.R. 4935, Child Tax Credit Improvement Act of 2014

H.R. 4935

Child Tax Credit Improvement Act of 2014

Committee
Ways and Means

Date
July 25, 2014 (113th Congress, 2nd Session)

Staff Contact
David Smentek

Floor Situation

On Friday, July 25, 2014, the House will consider H.R. 4935, the Child Tax Credit Improvement Act of 2014, under a rule.  H.R. 4935 was introduced on June 23, 2014 by Rep. Lynn Jenkins (R-KS) and referred to the Committee on Ways and Means, which ordered the bill favorably reported, as amended, by a vote of 22-15.[1]

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[1] See Committee Report 113-527, at 5.

Bill Summary

H.R. 4935 makes the current child tax credit more accessible and equitable by increasing the phase-out threshold for the credit for couples filing joint tax returns from $110,000 to $150,000 ($75,000 for individual and married taxpayers filing separately).  The bill also indexes for inflation the phase-out threshold for the $1,000 credit beginning in calendar year 2015 as well as indexes the credit for inflation to the nearest multiple of $50.  The bill also requires filers to include their social security number on their tax returns in order to access the refundable portion of the child tax credit (sometimes referred to as the Additional Child Tax Credit (ACTC)).

Background

Under current law, an individual may claim a tax credit of $1,000 for each qualifying child under the age of 17.[2]  However, the credit amount that may be claimed is phased out for individuals with modified adjusted gross income (MAGI) over a certain amount.[3]  The credit is reduced by $50 for each $1,000 of MAGI over the threshold ($75,000 for unmarried individuals; $110,000 for married individuals filing joint returns; and $55,000 for married individuals filing separate returns).[4]  Neither the MAGI nor the $1,000 credit amount thresholds are indexed for inflation.  This is problematic, as the cost of raising a child has increased by approximately 4.4% per year since 1960 according to the Department of Agriculture.  Changing the MAGI threshold phase-out for married couples filing jointly eliminates the marriage penalty embedded in the current child tax credit structure.

By eliminating the marriage penalty in the child tax credit (i.e. increasing the income phase-out threshold) and indexing the income phase-out and credit amount for inflation, H.R. 4935 provides equitable treatment to married couples and ensures that the credit is not eroded by inflation.[5]

Moreover, the bill brings parity to the requirements that tax filers must meet.  Currently, individuals who are ineligible to work in the U.S. (and thus are ineligible for a SSN) can obtain an Individual Taxpayer Identification Number (ITIN) for tax purposes.  Although Congress enacted legislation making individuals without SSNs ineligible to receive the Earned Income Tax Credit (EITC), it did not institute the same limitations on the ACTC.  The Treasury Department has since taken the position that it lacks the statutory authority to limit the ACTC to only those who have SSNs.  Thus, individuals ineligible to work in the U.S. may receive the refundable portion of the child tax credit, resulting in  approximately 2.3 million filers without SSNs receiving $4.2 billion in benefits under the ACTC in 2010 alone, according to the Treasury Inspector General for Tax Administration.[6]

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[2] Note: “A child who is not a citizen, national, or resident of the United States cannot be a qualifying child.”  See Committee Report 113-527, at 3.
[3] Id. at 3.
[4] Id. at 3.
[5] Id. at 2.
[6] http://www.treasury.gov/tigta/auditreports/2011reports/201141061fr.pdf

Cost

The Joint Committee on Taxation (JCT) estimates that enacting this legislation would reduce revenue by about $93.9 billion and decrease outlays by $3.5 billion over the 2014-2024 period.[7]

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[7] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4935.pdf.  Note: The original bill scored as increasing direct spending by $21.0 billion over the 2014-2024 period.  However, the provision requiring individuals to submit a Social Security Number was scored as reducing outlays by $24.5 billion over the 2014-2024 period, resulting in a net decrease in outlays.

Additional Information

For questions or further information contact the GOP Conference at 5-5107.

Additional Views

STATEMENT OF ADMINISTRATION POLICY
H.R. 4935 – Child Tax Credit Improvement Act of 2014
(Rep. Jenkins, R-Kansas, and 3 cosponsors)

The Administration opposes H.R. 4935, which would add nearly $100 billion to deficits over 10 years to expand the Child Tax Credit, including by increasing eligibility for higher income households, while at the same time reducing or eliminating the credit for millions of working parents.

After 2017, H.R. 4935 would effectively eliminate the Child Tax Credit for 5 million families, while cutting it for 6 million more.  A single parent with two children working full-time at minimum wage would lose her entire tax credit of $1,725.  Meanwhile, a couple with two children with income of $150,000 would receive a Child Tax Credit $2,200 larger than today.  In addition, H.R. 4935 would immediately eliminate the Child Tax Credit for millions of American children whose parents immigrated to this country, including U.S. citizen children and “Dreamers,” and would push many of these children into or deeper into poverty.

The Administration strongly supports tax relief for working and middle-class families.  H.R. 4935, however, would raise taxes for millions of struggling working families while enacting expensive new tax cuts without offsetting their costs, reflecting fundamentally misplaced priorities.  If Republicans want to show they are serious about helping working families through the Child Tax Credit, they should start by extending current provisions past 2017.

If the President were presented with H.R. 4935, his senior advisers would recommend that he veto the bill.