PUBLIC LAW 107-16-JUNE 7, 2001 115 STAT. 55 SEC. 303. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT; EARNED INCOME TO INCLUDE ONLY AMOUNTS INCLUD- IBLE IN GROSS INCOME; SIMPLIFICATION OF EARNED INCOME CREDIT. (a) INCREASED PHASEOUT AMOUNT.— (1) IN GENERAL. —Section 32(b)(2) (relating to amounts) 26 USC 32. is amended— (A) by striking "AMOUNTS.— The earned" and inserting " AMOUNTS.— "(A) IN GENERAL.—Subject to subparagraph (B), the earned", and (B) by adding at the end the following new subparagraph: "(B) JOINT RETURNS.—In the case of a joint return filed by an eligible individual and such individual's spouse, the phaseout amount determined under subparagraph (A) shall be increased by— "(i) $1,000 in the case of taxable years beginning in 2002, 2003, and 2004, "(ii) $2,000 in the case of taxable years beginning in 2005, 2006, and 2007, and "(iii) $3,000 in the case of taxable years beginning after 2007.". (2) INFLATION ADJUSTMENT.— Paragraph (1)(B) of section 32(j) (relating to inflation adjustments) is amended to read as follows: "(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined— "(i) in the case of amounts in subsections (b)(2)(A) and (i)(l), by substituting 'calendar year 1995' for 'calendar year 1992' in subparagraph (B) thereof, and "(ii) in the case of the $3,000 amount in subsection (b)(2)(B)(iii), by substituting 'calendar year 2007' for 'calendar year 1992' in subparagraph (B) of such section 1.". (3) ROUNDING.— Section 32(j)(2)(A) (relating to rounding) is amended by striking "subsection (b)(2)" and inserting "subsection (b)(2)(A) (after being increased under subparagraph (B) thereof)". (b) EARNED INCOME TO INCLUDE ONLY AMOUNTS INCLUDIBLE IN GROSS INCOME. —Clause (i) of section 32(c)(2)(A) (defining earned income) is amended by inserting ", but only if such amounts are includible in gross income for the taxable year" after "other employee compensation". (c) REPEAL OF REDUCTION OF CREDIT TO TAXPAYERS SUBJECT TO ALTERNATIVE MINIMUM TAX. —Section 32(h) is repealed. (d) REPLACEMENT OF MODIFIED ADJUSTED GROSS INCOME WITH ADJUSTED GROSS INCOME. — (1) IN GENERAL.— Section 32(a)(2)(B) is amended by striking "modified". (2) CONFORMING AMENDMENTS. — (A) Section 32(c) is amended by striking paragraph (5). (B) Section 32(f)(2)(B) is amended by striking "modified" each place it appears. (e) RELATIONSHIP TEST. —
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