(2) WITHHOLDING AMENDMENTS.-The amendments made by subsection (e) shall apply to remuneration paid after December 31, 1978.

SEC. 102. PERSONAL EXEMPTIONS INCREASED TO $1,000.

(a) GENERAL RULE.-Section 151 (relating to allowance of deductions for personal exemptions) is amended by striking out "$750" each place it appears and inserting in lieu thereof "$1,000".

(b) FILING REQUIREMENTS.

(1) Paragraph (1) of section 6012(a) (relating to persons required to make returns of income) as amended by section 101(c) of this Act, is amended by striking out "$750", "$3,050", "$4,150", and "$4,900" each place they appear and inserting in lieu thereof "$1,000", "$3,300", "$4,400", and "$5,400", respectively.

(2) Subparagraph (A) of section 6013(b)(3) (relating to assessment and collection in the case of certain returns of husband and wife) is amended by striking out "$750" and "$1,500" each place they appear and inserting in lieu thereof "$1,000" and "$2,000", respectively.

(c) WITHHOLDING REQUIREMENTS.—

(1) Paragraph (1) of section 3402(b) (relating to percentage method of withholding income tax at source) is amended by striking out the table and inserting in lieu thereof the following:

"Percentage Method Withholding Table

(2) Paragraph (1) of section 3402(m) (relating to withholding allowances based on itemized deductions) is amended by striking out "$750" and inserting in lieu thereof "$1,000". (d) EFFECTIVE DATES.

(1) IN GENERAL.-The amendments made by subsections (a) and (b) shall apply to taxable years beginning after December 31, 1978.

(2) WITHHOLDING AMENDMENTS.-The amendments made by subsection (c) shall apply with respect to remuneration paid after December 31, 1978.

SEC. 103. EARNED INCOME CREDIT MADE PERMANENT.

(a) GENERAL RULE.-Subsection (b) of section 209 of the Tax Reduction Act of 1975 is amended by striking out ", and before January 1, 1979".

(b) TECHNICAL AMENDMENT.-The second sentence of section 401(e) of the Tax Reform Act of 1976 (as added by section 103 of the Tax Reduction and Simplification Act of 1977) is amended by striking out ", and shall cease to apply to taxable years beginning after December 31, 1978".

SEC. 104. INCREASE IN AND SIMPLIFICATION OF THE EARNED INCOME TAX CREDIT.

(a) INCREASE IN CREDIT.-Subsection (a) of section 43 (relating to earned income credit) is amended

(1) by striking out "chapter" and inserting in lieu thereof "subtitle", and

(2) by striking out "$4,000" and inserting in lieu thereof "$5,000".

(b) REVISION OF THE LIMITATION.-Subsection (b) of section 43 is amended to read as follows:

"(b) LIMITATION.-The amount of the credit allowable to a taxpayer under subsection (a) for any taxable year shall not exceed the excess (if any) of

"(1) $500, over

"(2) 12.5 percent of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds $6,000.".

(c) AMOUNT OF CREDIT TO BE DETERMINED UNDER TABLES.-Section 43 is amended by adding at the end thereof the following new subsection:

"(f) AMOUNT OF CREDIT TO BE DETERMINED UNDER TABLES.“(1) IN GENERAL.-The amount of the credit allowed by this section shall be determined under tables prescribed by the Secretary.

"(2) REQUIREMENTS FOR TABLES.-The tables prescribed under paragraph (1) shall reflect the provisions of subsections (a) and (b) and shall have income brackets of not greater than $50 each"(A) for earned income between $0 and $10,000, and "(B) for adjusted gross income between $6,000 and $10,000.".

(d) EXCLUDABLE EARNED INCOME TAKEN INTO ACCOUNT.-Subparagraph (B) of section 43(c)(2) (defining earned income) is amended by striking out clause (i) and by redesignating clauses (ii), (iii), and (iv) as clauses (i), (ii), and (iii), respectively.

(e) DEFINITION OF ELIGIBLE INDIVIDUAL.-Paragraph (1) of section 43(c) (defining eligible individual) is amended to read as follows: "(1) ELIGIBLE INDIVIDUAL.

"(A) IN GENERAL.-The term 'eligible individual' means an individual who, for the taxable year

"(i) is married (within the meaning of section 143) and is entitled to a deduction under section 151 for a child (within the meaning of section 151(e)(3)),

"(ii) is a surviving spouse (as determined under section 2(a)), or

"(iii) is a head of a household (as determined under subsection (b) of section 2 without regard to subparagraphs (A)(ii) and (B) of paragraph (1) of such subsection).

"(B) CHILD MUST RESIDE WITH TAXPAYER IN THE UNITED STATES.-An individual shall be treated as satisfying clause (i) of subparagraph (A) only if the child has the same principal place of abode as the individual and such abode is in the United States. An individual shall be treated as satisfying clause (ii) or (iii) of subparagraph (A) only if the household in question is in the United States.

"(C) INDIVIDUAL ENTITLED TO EXCLUDE INCOME UNDER SECTION 911 NOT ELIGIBLE INDIVIDUAL.-The term 'eligible indi

vidual' does not include an individual who, for the taxable year, is entitled to exclude any amount from gross income under section 911 (relating to earned income from sources without the United States) or section 931 (relating to income from sources within the possessions of the United States).". (f) EFFECTIVE DATE.-The amendments made by this section shall apply to taxable years beginning after December 31, 1978.

SEC. 105. ADVANCE PAYMENT OF EARNED INCOME CREDIT.

(a) COORDINATION OF CREDIT WITH ADVANCE PAYMENTS.-Section 43 (relating to earned income credit) is amended by adding at the end thereof the following new subsection:

"(h) COORDINATION WITH ADVANCE PAYMENTS OF EARNED INCOME CREDIT.

"(1) RECAPTURE OF EXCESS ADVANCE PAYMENTS.-If any payment is made to the individual by an employer under section 3507 during any calendar year, then the tax imposed by this chapter for the individual's last taxable year beginning in such calendar year shall be increased by the aggregate amount of such payments.

"(2) RECONCILIATION OF PAYMENTS ADVANCED AND CREDIT ALLOWED.-Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit (other than the credit allowed by subsection (a)) allowable under this subpart.".

(b) ADVANCE PAYMENT OF EARNED INCOME CREDIT.

(1) IN GENERAL.-Chapter 25 (general provisions relating to employment taxes) is amended by adding at the end thereof the following new section:

"SEC. 3507. ADVANCE PAYMENT OF EARNED INCOME CREDIT.

“(a) GENERAL RULE.-Except as otherwise provided in this section, every employer making payment of wages to an employee with respect to whom an earned income eligibility certificate is in effect shall, at the time of paying such wages, make an additional payment to such employee equal to such employee's earned income advance

amount.

"(b) EARNED INCOME ELIGIBILITY CERTIFICATE.-For purposes of this title, an earned income eligibility certificate is a statement furnished by an employee to the employer which

"(1) certifies that the employee will be eligible to receive the credit provided by section 43 for the taxable year,

"(2) certifies that the employee does not have an earned income eligibility certificate in effect for the calendar year with respect to the payment of wages by another employer, and

"(3) states whether or not the employee's spouse has an earned income eligibility certificate in effect.

For purposes of this section, a certificate shall be treated as being in effect with respect to a spouse if such a certificate will be in effect on the first status determination date following the date on which the employee furnishes the statement in question.

"(c) EARNED INCOME ADVANCE AMOUNT.

"(1) IN GENERAL.-For purposes of this title, the term 'earned income advance amount' means, with respect to any payroll period, the amount determined

"(A) on the basis of the employee's wages from the employer for such period, and

"(B) in accordance with tables prescribed by the Secretary.

"(2) ADVANCE AMOUNT TABLES.-The tables referred to in paragraph (1)(B)—

"(A) shall be similar in form to the tables prescribed under section 3402 and, to the maximum extent feasible, shall be coordinated with such tables, and

"(B) if the employee is not married, or if no earned income eligibility certificate is in effect with respect to the spouse of the employee, shall treat the credit provided by section 43 as if it were a credit

"(i) of not more than 10 percent of the first $5,000 of earned income, which

"(ii) phases out between $6,000 and $10,000 of earned income, or

"(C) if an earned income eligibility certificate is in effect with respect to the spouse of the employee, shall treat the credit provided by section 43 as if it were a credit

"(i) of not more than 10 percent of the first $2,500 of earned income, which

"(ii) phases out between $3,000 and $5,000 of earned income.

"(d) PAYMENTS TO BE TREATED AS PAYMENTS OF WITHHOLDING AND FICA TAXES.—

“(1) IN GENERAL.-For purposes of this title, payments made by an employer under subsection (a) to his employees for any payroll period

"(A) shall not be treated as the payment of compensation, and

"(B) shall be treated as made out of—

"(i) amounts required to be deducted and withheld for the payroll period under section 3401 (relating to wage withholding), and

“(ii) amounts required to be deducted for the payroll period under section 3102 (relating to FICA employee taxes), and

"(iii) amounts of the taxes imposed for the payroll period under section 3111 (relating to FICA employer taxes),

as if the employer had paid to the Secretary, on the day on which the wages are paid to the employees, an amount equal to such payments.

"(2) ADVANCE PAYMENTS EXCEED TAXES DUE.-In the case of any employer, if for any payroll period the aggregate amount of earned income advance payments exceeds the sum of the amounts referred to in paragraph (1)(B), each such advance payment shall be reduced by an amount which bears the same ratio to such excess as such advance payment bears to the aggregate amount of all such advance payments.

"(3) EMPLOYER MAY MAKE FULL ADVANCE PAYMENTS.—The Secretary shall prescribe regulations under which an employer may elect (in lieu of any application of paragraph (2))—

"(A) to pay in full all earned income advance amounts, and "(B) to have additional amounts paid by reason of this paragraph treated as the advance payment of taxes imposed by this title.

"(4) FAILURE TO MAKE ADVANCE PAYMENTS.-For purposes of this title (including penalties), failure to make any advance payment under this section at the time provided therefor shall be

treated as the failure at such time to deduct and withhold under chapter 24 an amount equal to the amount of such advance payment.

"(e) FURNISHING AND TAKING EFFECT OF CERTIFICATES.-For purposes of this section

“(1) WHEN CERTIFICATE TAKES EFFECT.—

"(A) FIRST CERTIFICATE FURNISHED.-An earned income eligibility certificate furnished the employer in cases in which no previous such certificate had been in effect for the calendar year shall take effect as of the beginning of the first payroll period ending, or the first payment of wages made without regard to a payroll period, on or after the date on which such certificate is so furnished (or if later, the first day of the calendar year for which furnished).

"(B) LATER CERTIFICATE.-An earned income eligibility certificate furnished the employer in cases in which a previous such certificate had been in effect for the calendar year shall take effect with respect to the first payment of wages made on or after the first status determination date which occurs at least 30 days after the date on which such certificate is so furnished, except that at the election of the employer such certificate may be made effective with respect to any payment of wages made on or after the date on which such certificate is so furnished. For purposes of this section, the term 'status determination date' means January 1, May 1, July 1, and October 1 of each year.

“(2) PERIOD DURING WHICH CERTIFICATE REMAINS IN EFFECT.— An earned income eligibility certificate which takes effect under this section for any calendar year shall continue in effect with respect to the employee during such calendar year until revoked by the employee or until another such certificate takes effect under this section.

"(3) CHANGE OF STATUS.—

"(A) REQUIREMENT TO REVOKE OR FURNISH NEW CERTIFICATE.-If, after an employee has furnished an earned income eligibility certificate under this section, there has been a change of circumstances which has the effect of

"(i) making the employee ineligible for the credit provided by section 43 for the taxable year, or

"(ii) causing an earned income eligibility certificate to be in effect with respect to the spouse of the employee, the employee shall, within 10 days after such change in circumstances, furnish the employer with a revocation of such certificate or with a new certificate (as the case may be). Such a revocation (or such a new certificate) shall take effect under the rules provided by paragraph (1)(B) for a later certificate and shall be made in such form as the Secretary shall by regulations prescribe.

"(B) CERTIFICATE NO LONGER IN EFFECT.-If, after an employee has furnished an earned income eligibility certificate under this section which certifies that such a certificate is in effect with respect to the spouse of the employee, such a certificate is no longer in effect with respect to such spouse, then the employee may furnish the employer with a new earned income eligibility certificate.