(C) by redesignating paragraph (3) as paragraph (2). (5) Subsection (d) of section 144 is hereby repealed. 26 USC 144. (6) Section 1211(b) (3) (relating to computation of taxable 26 USC 1211. income for purposes of limitation on capital losses) is amended by striking out the last sentence thereof. (7) Section 1304 (b) (relating to certain provisions inapplicable 26 USC 1304. for income averaging) is amended by striking out paragraph (1) and by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (1), (2), (3), and (4), respectively. (8) Section 6014 (a) (relating to tax not computed by taxpayer) is amended-- (A) by striking out in the first sentence "entitled to elect to pay the tax imposed by section 3" and inserting in lieu Ante, p. 1558. (B) by striking out in the second sentence "pay the tax (9) Paragraph (5) of section 6014 (b) is amended to read as follows: "(5) to cases where the taxpayer does not elect the standard deduction or where the taxpayer elects the standard deduction but is subject to the provisions of section 141(e) (relating to limitations in case of certain dependent taxpayers)." (c) CLERICAL AMENDMENTS. (1) The table of sections for part I of subchapter A of chapter 1 is amended by striking out the items relating to sections 3 and 4 and inserting in lieu thereof: "Sec. 3. Tax tables for individuals having taxable income of less than $20,000." (2) The table of sections for part IV of subchapter A of chapter 1 is amended by striking out "paying optional tax or” in the item relating to section 36. SEC. 502. DEDUCTION FOR ALIMONY ALLOWED IN DETERMINING ADJUSTED GROSS INCOME. (a) IN GENERAL.-Section 62 (defining adjusted gross income) is 26 USC 62. amended by inserting after paragraph (12) the following new paragraph: (13) ALIMONY.-The deduction allowed by section 215." (b) CONFORMING AMENDMENT.-The first sentence of subparagraph (A) of section 3402 (m) (2) (relating to withholding allowances based 26 USC 3402. on itemized deductions) is amended by striking out "under section 62" and inserting in lieu thereof "under section 62 (other than paragraph (13) thereof)”. (c) EFFECTIVE DATE.-The amendments made by this section shall 26 USC 62 note. apply to taxable years beginning after December 31, 1976. SEC. 503. REVISION OF RETIREMENT INCOME CREDIT. (a) IN GENERAL.-Section 37 (relating to retirement income) is 26 USC 37. amended to read as follows: "SEC. 37. CREDIT FOR THE ELDERLY. "(a) GENERAL RULE.-In the case of an individual who has attained age 65 before the close of the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of such individual's section 37 amount for such taxable year. 42 USC 401. 26 USC 72. Post, p. 1926. 26 USC 1. "Joint return." "(b) SECTION 37 AMOUNT.-For purposes of subsection (a)— "(1) IN GENERAL.-An individual's section 37 amount for the taxable year is the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (c). "(2) INITIAL AMOUNT.-The initial amount is— "(A) $2,500 in the case of a single individual, "(B) $2,500 in the case of a joint return where only one spouse is eligible for the credit under subsection (a), "(C) $3,750 in the case of a joint return where both spouses are eligible for the credit under subsection (a), or "(D) $1,875 in the case of a married individual filing a separate return. "(3) REDUCTION.-The reduction under this paragraph is an amount equal to the sum of the amounts received by the individual (or, in the case of a joint return, by either spouse) as a pension or annuity or "(A) under title II of the Social Security Act, "(B) under the Railroad Retirement Act of 1935 or 1937, "(C) otherwise excluded from gross income. No reduction shall be made under this paragraph for any amount excluded from gross income under section 72 (relating to annuities), 101 (relating to life insurance proceeds), 104 (relating to compensation for injuries or sickness), 105 (relating to amounts received under accident and health plans), 120 (relating to amounts received under qualified group legal services plans), 402 (relating to taxability of beneficiary of employees' trust), 403 (relating to taxation of employee annuities), or 405 (relating to qualified bond purchase plans). "(c) LIMITATIONS.— "(1) ADJUSTED GROSS INCOME LIMITATION.-If the adjusted gross income of the taxpayer exceeds― "(A) $7,500 in the case of a single individual, "(B) $10,000 in the case of a joint return, or "(C) $5,000 in the case of a married individual filing a separate return, the section 37 amount shall be reduced by one-half of the excess of the adjusted gross income over $7,500, $10,000, or $5,000, as the case may be. "(2) LIMITATION BASED ON AMOUNT OF TAX.-The amount of the credit allowed by this section for the taxable year shall not exceed the amount of the tax imposed by this chapter for such taxable year. "(d) DEFINITIONS AND SPECIAL RULES.-For purposes of this section "(1) MARRIED COUPLE MUST FILE JOINT RETURN.-Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the credit provided by this section shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year. “(2) MARITAL STATUS.-Marital status shall be determined under section 143. (3) JOINT RETURN.-The term 'joint return' means the joint return of a husband and wife made under section 6013. "(e) ELECTION OF PRIOR LAW WITH RESPECT TO PUBLIC RETIREMENT SYSTEM INCOME. "(1) IN GENERAL-In the case of a taxpayer who has not attained age 65 before the close of the taxable year (other than a married individual whose spouse has attained age 65 before the close of the taxable year), his credit (if any) under this section shall be determined under this subsection. "(2) ONE SPOUSE AGE 65 OR OVER. In the case of a married individual who has not attained age 65 before the close of the taxable year but whose spouse has attained such age, this paragraph shall apply for the taxable year only if both spouses elect, at such time and in such manner as the Secretary shall by regulations prescribe, to have this paragraph apply. If this paragraph applies for the taxable year, the credit (if any) of each spouse under this section shall be determined under this subsection. "(3) COMPUTATION OF CREDIT.--In the case of an individual whose credit under this section for the taxable year is determined under this subsection, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of the amount received by such individual as retirement income (as defined in paragraph (4) and as limited by paragraph (5)). "(4) RETIREMENT INCOME. For purposes of this subsection, the "Retirement term 'retirement income' means "(A) in the case of an individual who has attained age 65 before the close of the taxable year, income from "(i) pensions and annuities (including, in the case of an individual who is, or has been, an employee within income." the meaning of section 401 (c) (1), distributions by a trust 26 USC 401. described in section 401(a) which is exempt from tax under section 501(a)), "(ii) interest, "(iv) dividends, "(v) bonds described in section 405 (b) (1) which are received under a qualified bond purchase plan described in section 405 (a) or in a distribution from a trust described in section 401 (a) which is exempt from tax under section 501 (a), or retirement bonds described in section 409, and "(vi) an individual retirement account described in section 408(a) or an individual retirement annuity described in section 408 (b), or "(B) in the case of an individual who has not attained age 65 before the close of the taxable year, income from pensions and annuities under a public retirement system (as defined in paragraph (8) (A)), to the extent included in gross income without reference to this subsection, but only to the extent such income does not represent compensation for personal services rendered during the taxable year. "(5) LIMITATION ON RETIREMENT INCOME.-For purposes of this subsection, the amount of retirement income shall not exceed $2,500 less "(A) the reduction provided by subsection (b) (3), and "(B) in the case of any individual who has not attained age 72 before the close of the taxable year 26 USC 904. Ante, p. 1559. 26 USC 6014. 26 USC 41, 42. Post, pp. 1580, 1790. "(i) if such individual has not attained age 62 before the close of the taxable year, any amount of earned income (as defined in paragraph (8)(B)) in excess of $900 received by such individual in the taxable year, or "(ii) if such individual has attained age 62 before the close of the taxable year, the sum of one-half the amount of earned income received by such individual in the taxable year in excess of $1,200 but not in excess of $1,700, and the amount of earned income so received in excess of $1,700. "(6) LIMITATION IN CASE OF MARRIED INDIVIDUALS.-In the case of a joint return, paragraph (5) shall be applied by substituting $3,750' for '$2,500'. The $3,750 provided by the preceding sentence shall be divided between the spouses in such amounts as may be agreed on by them, except that not more than $2,500 may be assigned to either spouse. "(7) LIMITATION IN THE CASE OF SEPARATE RETURNS.-In the case of a married individual filing a separate return, paragraph (5) shall be applied by substituting '$1,875' for '$2,500'. "(8) DEFINITIONS.-For purposes of this subsection— "(A) PUBLIC RETIREMENT SYSTEM DEFINED.—The term 'public retirement system' means a pension, annuity, retirement, or similar fund or system established by the United States, a State, a possession of the United States, any political subdivision of any of the foregoing, or the District of Columbia. "(B) EARNED INCOME. The term 'earned income' has the meaning assigned to such term by section 911(b), except that such term does not include any amount received as a pension or annuity. "(f) NONRESIDENT ALIEN INELIGIBLE FOR CREDIT.-No credit shall be allowed under this section to any nonresident alien." (b) TECHNICAL AMENDMENTS. (1) Section 904 (relating to limitation on foreign tax credit), as amended by this Act, is amended by redesignating subsection (g) as subsection (h), and by inserting after subsection (f) the following new subsection: "(g) COORDINATION WITH CREDIT FOR THE ELDERLY.-In the case of an individual, for purposes of subsection (a) the tax against which the credit is taken is such tax reduced by the amount of the credit (if any) for the taxable year allowable under section 37 (relating to credit for the elderly)." (2) Section 6014(a) (relating to tax not computed by taxpayer) is amended by striking out the last sentence thereof. (3) Section 6014 (b) is amended (A) by striking out paragraph (4), (B) by redesignating paragraph (5) (as amended by section 501 (b) (9)) as paragraph (4), and (C) by inserting "or" at the end of paragraph (3). (4) Sections 41(b) (2), 42(b) (2), 46 (a) (3) (C), and 50A (a) (3) (C) are each amended by striking out "retirement income" and inserting in lieu thereof "credit for the elderly". (5) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking out the item relating to section 37 and inserting in lieu thereof the following: "Sec. 37. Credit for the elderly." SEC. 504. CREDIT FOR CHILD CARE EXPENSES. (a) ALLOWANCES OF CREDIT FOR CHILD CARE EXPENSES. (1) IN GENERAL.-Subpart A of part IV of subchapter A of chapter 1 (relating to credits allowable) is amended by inserting before section 45 the following new section: "SEC. 44A. EXPENSES FOR HOUSEHOLD AND DEPENDENT CARE SERV. 26 USC 44A. ICES NECESSARY FOR GAINFUL EMPLOYMENT. "(a) ALLOWANCE OF CREDIT.-In the case of an individual who maintains a household which includes as a member one or more qualifying individuals (as defined in subsection (c) (1)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 20 percent of the employment-related expenses (as defined in subsection (c) (2)) paid by such individual during the taxable year. "(b) APPLICATION WITH OTHER CREDITS.-The credit allowed by subsection (a) shall not exceed the amount of the tax imposed by this chapter for the taxable year reduced by the sum of the credits allowable under "(1) section 33 (relating to foreign tax credit), "(3) section 38 (relating to investment in certain depreciable "(4) section 40 (relating to expenses of work incentive programs), "(5) section 41 (relating to contributions to candidates for public office), "(6) section 42 (relating to general tax credit), and "(7) section 44 (relating to purchase of new principal residence). "(c) DEFINITIONS OF QUALIFYING INDIVIDUAL AND EMPLOYMENTRELATED EXPENSES.-For purposes of this section "(1) QUALIFYING INDIVIDUAL.--The term 'qualifying individual' means "(A) a dependent of the taxpayer who is under the age of 15 and with respect to whom the taxpayer is entitled to a deduction under section 151 (e), "(B) a dependent of the taxpayer who is physically or mentally incapable of caring for himself, or "(C) the spouse of the taxpayer, if he is physically or mentally incapable of caring for himself. "(2) EMPLOYMENT-RELATED EXPENSES.— "(A) IN GENERAL.-The term 'employment-related expenses' means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer: "(i) expenses for household services, and "(ii) expenses for the care of a qualifying individual. "(B) EXCEPTION.-Employment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer's household shall be taken into account only if incurred for the care of a qualifying individual described in paragraph (1)(A). "(d) DOLLAR LIMIT ON AMOUNT Creditable.—The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed— Post, p. 1643. |