American Recovery and Reinvestment Act of 2009/Division B/Title I/Subtitle A

by United States Congress

PART I—GENERAL TAX RELIEF

SEC. 1001. MAKING WORK PAY CREDIT.

(a) In General.—

Subpart C of part IV of subchapter A of chapter 1 is amended by inserting after section 36 the following new section:

"SEC. 36A. MAKING WORK PAY CREDIT.

"(a) Allowance of Credit.—In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the lesser of—

"(1) 6.2 percent of earned income of the taxpayer, or

"(2) $400 ($800 in the case of a joint return).

"(b) Limitation Based on Modified Adjusted Gross Income.—

"(1) In general.—The amount allowable as a credit under subsection (a) (determined without regard to this paragraph and subsection (c)) for the taxable year shall be reduced (but not below zero) by 2 percent of so much of the taxpayer's modified adjusted gross income as exceeds $75,000 ($150,000 in the case of a joint return).

"(2) Modified adjusted gross income.—For purposes of subparagraph (A), 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.

"(c) Reduction for Certain Other Payments.—The credit allowed under subsection (a) for any taxable year shall be reduced by the amount of any payments received by the taxpayer during such taxable year under section 2201, and any credit allowed to the taxpayer under section 2202, of the American Recovery and Reinvestment Tax Act of 2009.

"(d) Definitions and Special Rules.—For purposes of this section—

"(1) Eligible individual.—

"(A) In general.—The term `eligible individual' means any individual other than—

"(i) any nonresident alien individual,

"(ii) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, and

"(iii) an estate or trust.

"(B) Identification number requirement.—Such term shall not include any individual who does not include on the return of tax for the taxable year—

"(i) such individual's social security account number, and

"(ii) in the case of a joint return, the social security account number of one of the taxpayers on such return.

"For purposes of the preceding sentence, the social security account number shall not include a TIN issued by the Internal Revenue Service.

"(2) Earned income.—The term `earned income' has the meaning given such term by section 32(c)(2), except that such term shall not include net earnings from self-employment which are not taken into account in computing taxable income. For purposes of the preceding sentence, any amount excluded from gross income by reason of section 112 shall be treated as earned income which is taken into account in computing taxable income for the taxable year.

"(e) Termination.—This section shall not apply to taxable years beginning after December 31, 2010.".

(b) Treatment of Possessions.—

(1) Payments to possessions.—

(A) Mirror code possession.—

The Secretary of the Treasury shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the amendments made by this section with respect to taxable years beginning in 2009 and 2010. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.

(B) Other possessions.—

The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of the amendments made by this section for taxable years beginning in 2009 and 2010 if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply with respect to any possession of the United States unless such possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to the residents of such possession.

(2) Coordination with credit allowed against united states income taxes.—

No credit shall be allowed against United States income taxes for any taxable year under section 36A of the Internal Revenue Code of 1986 (as added by this section) to any person—

(A) to whom a credit is allowed against taxes imposed by the possession by reason of the amendments made by this section for such taxable year, or

(B) who is eligible for a payment under a plan described in paragraph (1)(B) with respect to such taxable year.

(3) Definitions and special rules.—

(A) Possession of the united states.—

For purposes of this subsection, the term "possession of the United States" includes the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands.

(B) Mirror code tax system.—

For purposes of this subsection, the term "mirror code tax system" means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.

(C) Treatment of payments.—

For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from the credit allowed under section 36A of the Internal Revenue Code of 1986 (as added by this section).

(c) Refunds Disregarded in the Administration of Federal Programs and Federally Assisted Programs.—

Any credit or refund allowed or made to any individual by reason of section 36A of the Internal Revenue Code of 1986 (as added by this section) or by reason of subsection (b) of this section shall not be taken into account as income and shall not be taken into account as resources for the month of receipt and the following 2 months, for purposes of determining the eligibility of such individual or any other individual for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal program or under any State or local program financed in whole or in part with Federal funds.

(d) Authority Relating to Clerical Errors.—

Section 6213(g)(2) is amended by striking "and" at the end of subparagraph (L)(ii), by striking the period at the end of subparagraph (M) and inserting ", and", and by adding at the end the following new subparagraph:

"(N) an omission of the reduction required under section 36A(c) with respect to the credit allowed under section 36A or an omission of the correct social security account number required under section 36A(d)(1)(B).".

(e) Conforming Amendments.—

(1) Section 6211(b)(4)(A) is amended by inserting "36A," after "36,".

(2) Section 1324(b)(2) of title 31, United States Code, is amended by inserting "36A," after "36,".

(3) The table of sections for subpart C of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 36 the following new item:

"Sec. 36A. Making work pay credit.".

(f) Effective Date.—

This section, and the amendments made by this section, shall apply to taxable years beginning after December 31, 2008.

SEC. 1002. TEMPORARY INCREASE IN EARNED INCOME TAX CREDIT.

(a) In General.—

Subsection (b) of section 32 is amended by adding at the end the following new paragraph:

"(3) Special rules for 2009 and 2010.—In the case of any taxable year beginning in 2009 or 2010—

"(A) Increased credit percentage for 3 or more qualifying children.—In the case of a taxpayer with 3 or more qualifying children, the credit percentage is 45 percent.

"(B) Reduction of marriage penalty.—

"(i) In general.—The dollar amount in effect under paragraph (2)(B) shall be $5,000.

"(ii) Inflation adjustment.—In the case of any taxable year beginning in 2010, the $5,000 amount in clause (i) shall be increased by an amount equal to—

"(I) such dollar amount, multiplied by

"(II) 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 2008' for `calendar year 1992' in subparagraph (B) thereof.

"(iii) Rounding.—Subparagraph (A) of subsection (j)(2) shall apply after taking into account any increase under clause (ii).".

(b) Effective Date.—

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

SEC. 1003. TEMPORARY INCREASE OF REFUNDABLE PORTION OF CHILD CREDIT.

(a) In General.—

Paragraph (4) of section 24(d) is amended to read as follows:

"(4) Special rule for 2009 and 2010.—Notwithstanding paragraph (3), in the case of any taxable year beginning in 2009 or 2010, the dollar amount in effect for such taxable year under paragraph (1)(B)(i) shall be $3,000.".

(b) Effective Date.—

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

SEC. 1004. AMERICAN OPPORTUNITY TAX CREDIT.

(a) In General.—

Section 25A (relating to Hope scholarship credit) is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

"(i) American Opportunity Tax Credit.—In the case of any taxable year beginning in 2009 or 2010—

"(1) Increase in credit.—The Hope Scholarship Credit shall be an amount equal to the sum of—

"(A) 100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $2,000, plus

"(B) 25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000.

"(2) Credit allowed for first 4 years of post-secondary education.—Subparagraphs (A) and (C) of subsection (b)(2) shall be applied by substituting `4' for `2'.

"(3) Qualified tuition and related expenses to include required course materials.—Subsection (f)(1)(A) shall be applied by substituting `tuition, fees, and course materials' for `tuition and fees'.

"(4) Increase in agi limits for hope scholarship credit.—In lieu of applying subsection (d) with respect to the Hope Scholarship Credit, such credit (determined without regard to this paragraph) shall be reduced (but not below zero) by the amount which bears the same ratio to such credit (as so determined) as—

"(A) the excess of—

"(i) the taxpayer's modified adjusted gross income (as defined in subsection (d)(3)) for such taxable year, over

"(ii) $80,000 ($160,000 in the case of a joint return), bears to

"(B) $10,000 ($20,000 in the case of a joint return).

"(5) Credit allowed against alternative minimum tax.—In the case of a taxable year to which section 26(a)(2) does not apply, so much of the credit allowed under subsection (a) as is attributable to the Hope Scholarship Credit 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 subsection and sections 23, 25D, and 30D) and section 27 for the taxable year.

"Any reference in this section or section 24, 25, 26, 25B, 904, or 1400C to a credit allowable under this subsection shall be treated as a reference to so much of the credit allowable under subsection (a) as is attributable to the Hope Scholarship Credit.

"(6) Portion of credit made refundable.—40 percent of so much of the credit allowed under subsection (a) as is attributable to the Hope Scholarship Credit (determined after application of paragraph (4) and without regard to this paragraph and section 26(a)(2) or paragraph (5), as the case may be) shall be treated as a credit allowable under subpart C (and not allowed under subsection (a)). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom subsection (g) of section 1 applies for such taxable year.

"(7) Coordination with midwestern disaster area benefits.—In the case of a taxpayer with respect to whom section 702(a)(1)(B) of the Heartland Disaster Tax Relief Act of 2008 applies for any taxable year, such taxpayer may elect to waive the application of this subsection to such taxpayer for such taxable year.".

(b) Conforming Amendments.—

(1) Section 24(b)(3)(B) is amended by inserting "25A(i)," after "23,".

(2) Section 25(e)(1)(C)(ii) is amended by inserting "25A(i)," after "24,".

(3) Section 26(a)(1) is amended by inserting "25A(i)," after "24,".

(4) Section 25B(g)(2) is amended by inserting "25A(i)," after "23,".

(5) Section 904(i) is amended by inserting "25A(i)," after "24,".

(6) Section 1400C(d)(2) is amended by inserting "25A(i)," after "24,".

(7) Section 6211(b)(4)(A) is amended by inserting "25A by reason of subsection (i)(6) thereof," after "24(d),".

(8) Section 1324(b)(2) of title 31, United States Code, is amended by inserting "25A," before "35".

(c) Treatment of Possessions.—

(1) Payments to possessions.—

(A) Mirror code possession.—

The Secretary of the Treasury shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the application of section 25A(i)(6) of the Internal Revenue Code of 1986 (as added by this section) with respect to taxable years beginning in 2009 and 2010. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.

(B) Other possessions.—

The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of the application of section 25A(i)(6) of such Code (as so added) for taxable years beginning in 2009 and 2010 if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply with respect to any possession of the United States unless such possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to the residents of such possession.

(2) Coordination with credit allowed against united states income taxes.—

Section 25A(i)(6) of such Code (as added by this section) shall not apply to a bona fide resident of any possession of the United States.

(3) Definitions and special rules.—

(A) Possession of the united states.—

For purposes of this subsection, the term "possession of the United States" includes the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands.

(B) Mirror code tax system.—

For purposes of this subsection, the term "mirror code tax system" means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.

(C) Treatment of payments.—

For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from the credit allowed under section 25A of the Internal Revenue Code of 1986 by reason of subsection (i)(6) of such section (as added by this section).

(d) Effective Date.—

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

(e) Application of EGTRRA Sunset.—

The amendment made by subsection (b)(1) shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the same manner as the provision of such Act to which such amendment relates.

(f) Treasury Studies Regarding Education Incentives.—

(1) Study regarding coordination with non-tax student financial assistance.—

The Secretary of the Treasury and the Secretary of Education, or their delegates, shall—

(A) study how to coordinate the credit allowed under section 25A of the Internal Revenue Code of 1986 with the Federal Pell Grant program under section 401 of the Higher Education Act of 1965 to maximize their effectiveness at promoting college affordability, and

(B) examine ways to expedite the delivery of the tax credit.

(2) Study regarding inclusion of community service requirements.—

The Secretary of the Treasury and the Secretary of Education, or their delegates, shall study the feasibility of requiring including community service as a condition of taking their tuition and related expenses into account under section 25A of the Internal Revenue Code of 1986.

(3) Report.—

Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury, or the Secretary's delegate, shall report to Congress on the results of the studies conducted under this paragraph.

SEC. 1005. COMPUTER TECHNOLOGY AND EQUIPMENT ALLOWED AS A QUALIFIED HIGHER EDUCATION EXPENSE FOR SECTION 529 ACCOUNTS IN 2009 AND 2010.

(a) In General.—

Section 529(e)(3)(A) is amended by striking "and" at the end of clause (i), by striking the period at the end of clause (ii), and by adding at the end the following:

"(iii) expenses paid or incurred in 2009 or 2010 for the purchase of any computer technology or equipment (as defined in section 170(e)(6)(F)(i)) or Internet access and related services, if such technology, equipment, or services are to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution.

"Clause (iii) shall not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature.".

(b) Effective Date.—

The amendments made by this section shall apply to expenses paid or incurred after December 31, 2008.

SEC. 1006. EXTENSION OF AND INCREASE IN FIRST-TIME HOMEBUYER CREDIT; WAIVER OF REQUIREMENT TO REPAY.

(a) Extension.—

(1) In general.—

Section 36(h) is amended by striking "July 1, 2009" and inserting "December 1, 2009".

(2) Conforming amendment.—

Section 36(g) is amended by striking "July 1, 2009" and inserting "December 1, 2009".

(b) Increase.—

(1) In general.—

Section 36(b) is amended by striking "$7,500" each place it appears and inserting "$8,000".

(2) Conforming amendment.—

Section 36(b)(1)(B) is amended by striking "$3,750" and inserting "$4,000".

(c) Waiver of Recapture.—

(1) In general.—

Paragraph (4) of section 36(f) is amended by adding at the end the following new subparagraph:

"(D) Waiver of recapture for purchases in 2009.—In the case of any credit allowed with respect to the purchase of a principal residence after December 31, 2008, and before December 1, 2009—

"(i) paragraph (1) shall not apply, and

"(ii) paragraph (2) shall apply only if the disposition or cessation described in paragraph (2) with respect to such residence occurs during the 36-month period beginning on the date of the purchase of such residence by the taxpayer.".

(2) Conforming amendment.—

Subsection (g) of section 36 is amended by striking "subsection (c)" and inserting "subsections (c) and (f)(4)(D)".

(d) Coordination With First-Time Homebuyer Credit for District of Columbia.—

(1) In general.—

Subsection (e) of section 1400C is amended by adding at the end the following new paragraph:

"(4) Coordination with national first-time homebuyers credit.—No credit shall be allowed under this section to any taxpayer with respect to the purchase of a residence after December 31, 2008, and before December 1, 2009, if a credit under section 36 is allowable to such taxpayer (or the taxpayer's spouse) with respect to such purchase.".

(2) Conforming amendment.—

Section 36(d) is amended by striking paragraph (1).

(e) Removal of Prohibition on Financing by Mortgage Revenue Bonds.—

Section 36(d), as amended by subsection (c)(2), is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (1) and (2), respectively.

(f) Effective Date.—

The amendments made by this section shall apply to residences purchased after December 31, 2008.

SEC. 1007. SUSPENSION OF TAX ON PORTION OF UNEMPLOYMENT COMPENSATION.

(a) In General.—

Section 85 of the Internal Revenue Code of 1986 (relating to unemployment compensation) is amended by adding at the end the following new subsection:

"(c) Special Rule for 2009.—In the case of any taxable year beginning in 2009, gross income shall not include so much of the unemployment compensation received by an individual as does not exceed $2,400.".

(b) Effective Date.—

The amendment made by this section shall apply to taxable years beginning after December 31, 2008.

SEC. 1008. ADDITIONAL DEDUCTION FOR STATE SALES TAX AND EXCISE TAX ON THE PURCHASE OF CERTAIN MOTOR VEHICLES.

(a) In General.—

Subsection (a) of section 164 is amended by inserting after paragraph (5) the following new paragraph:

"(6) Qualified motor vehicle taxes.".

(b) Qualified Motor Vehicle Taxes.—

Subsection (b) of section 164 is amended by adding at the end the following new paragraph:

"(6) Qualified motor vehicle taxes.—

"(A) In general.—For purposes of this section, the term `qualified motor vehicle taxes' means any State or local sales or excise tax imposed on the purchase of a qualified motor vehicle.

"(B) Limitation based on vehicle price.—The amount of any State or local sales or excise tax imposed on the purchase of a qualified motor vehicle taken into account under subparagraph (A) shall not exceed the portion of such tax attributable to so much of the purchase price as does not exceed $49,500.

"(C) Income limitation.—The amount otherwise taken into account under subparagraph (A) (after the application of subparagraph (B)) for any taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so treated as—

"(i) the excess (if any) of—

"(I) the taxpayer's modified adjusted gross income for such taxable year, over

"(II) $125,000 ($250,000 in the case of a joint return), bears to

"(ii) $10,000.

"For purposes of the preceding sentence, the term `modified adjusted gross income' means the adjusted gross income of the taxpayer for the taxable year (determined without regard to sections 911, 931, and 933).

"(D) Qualified motor vehicle.—For purposes of this paragraph—

"(i) In general.—The term `qualified motor vehicle' means—

"(I) a passenger automobile or light truck which is treated as a motor vehicle for purposes of title II of the Clean Air Act, the gross vehicle weight rating of which is not more than 8,500 pounds, and the original use of which commences with the taxpayer,

"(II) a motorcycle the gross vehicle weight rating of which is not more than 8,500 pounds and the original use of which commences with the taxpayer, and

"(III) a motor home the original use of which commences with the taxpayer.

"(ii) Other terms.—The terms `motorcycle' and `motor home' have the meanings given such terms under section 571.3 of title 49, Code of Federal Regulations (as in effect on the date of the enactment of this paragraph).

"(E) Qualified motor vehicle taxes not included in cost of acquired property.—The last sentence of subsection (a) shall not apply to any qualified motor vehicle taxes.

"(F) Coordination with general sales tax.—This paragraph shall not apply in the case of a taxpayer who makes an election under paragraph (5) for the taxable year.

"(G) Termination.—This paragraph shall not apply to purchases after December 31, 2009.".

(c) Deduction Allowed to Nonitemizers.—

(1) In general.—

Paragraph (1) of section 63(c) is amended by striking "and" at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting ", and", and by adding at the end the following new subparagraph:

"(E) the motor vehicle sales tax deduction.".

(2) Definition.—

Section 63(c) is amended by adding at the end the following new paragraph:

"(9) Motor vehicle sales tax deduction.—For purposes of paragraph (1), the term `motor vehicle sales tax deduction' means the amount allowable as a deduction under section 164(a)(6). Such term shall not include any amount taken into account under section 62(a).".

(d) Treatment of Deduction Under Alternative Minimum Tax.—

The last sentence of section 56(b)(1)(E) is amended by striking "section 63(c)(1)(D)" and inserting "subparagraphs (D) and (E) of section 63(c)(1)".

(e) Effective Date.—

The amendments made by this section shall apply to purchases on or after the date of the enactment of this Act in taxable years ending after such date.

PART II—ALTERNATIVE MINIMUM TAX RELIEF

SEC. 1011. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR NONREFUNDABLE PERSONAL CREDITS.

(a) In General.—

Paragraph (2) of section 26(a) (relating to special rule for taxable years 2000 through 2008) is amended—

(1) by striking "or 2008" and inserting "2008, or 2009", and

(2) by striking "2008" in the heading thereof and inserting "2009".

(b) Effective Date.—

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

SEC. 1012. EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNT.

(a) In General.—

Paragraph (1) of section 55(d) (relating to exemption amount) is amended—

(1) by striking "($69,950 in the case of taxable years beginning in 2008)" in subparagraph (A) and inserting "($70,950 in the case of taxable years beginning in 2009)", and

(2) by striking "($46,200 in the case of taxable years beginning in 2008)" in subparagraph (B) and inserting "($46,700 in the case of taxable years beginning in 2009)".

(b) Effective Date.—

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.