LOW INCOME ALLOWANCE; INCREASE IN STANDARD DEDUCTION.

SEC. 802. LOW INCOME ALLOWANCE; INCREASE IN STANDARD DEDUCTION. (a) General.—Section 141 (relating to the standard deduction) is amended by striking out subsections (a), (b), and (c) and inserting in lieu thereof the following: “(a) Standard Deduction.—Except as otherwise provided in this section, the standard deduction referred to in this title is the larger of the percentage standard deduction or the low income allowance. “(b) Percentage Standard Deduction.—The percentage standard deduction is an amount equal to the applicable percentage of adjusted gross income shown in the following table, but not to exceed the maximum amount shown in such table (or one-half of such maximum amount in the case of a separate return by a married individual): “Taxable years beginning in— Applicable percentage Maximum amount 1970 10 $1,000 1971 13 1,500 1972 14 2,000 1973 and thereafter 15 2,000 “(c) Low Income Allowance.— “(1) In general.—The low income allowance is an amount equal to the sum of— “(A) the basic allowance, and “(B) the additional allowance. “(2) Basic allowance.—For purposes of this subsection, the basic allowance is an amount equal to the sum of— “(A) $200, plus “(B) $100, multiplied by the number of exemptions. The basic allowance shall not exceed $1,000. 83 Stat. 677 “(3) Additional allowance.— “(A) In general.—For purposes of this subsection, the additional allowance is an amount equal to the excess (if any) of $900 over the sum of— “(i) $100, multiplied by the number of exemptions, plus “(ii) the income phase-out. “(B) Income phase-out.—For purposes of subparagraph (A)(ii), the income phase-out is an amount equal to one-half of the amount by which the adjusted gross income for the taxable year exceeds the sum of— “(i) $1,100, plus “(ii) $625, multiplied by the number of exemptions. “(4) Married individuals filing separate returns.—In the case of a married taxpayer filing a separate return— “(A) the low income allowance is an amount equal to the basic allowance, and “(B) the basic allowance is an amount (not in excess of $500) equal to the sum of— “(i) $100, plus “(ii) $100, multiplied by the number of exemptions. “(5) Number of exemptions.—For purposes of this subsection, the number of exemptions is the number of exemptions allowed as a deduction for the taxable year under section 151. “(6) Special rule for 1971.—For a taxable year beginning after December 31, 1970, and before January 1, 1972,— “(A) paragraph (3)(A) shall be applied by substituting ‘$850’ for ‘$900’, “(B) paragraph (3)(B) shall be applied by substituting ‘one-fifteenth’ for ‘one-half’, “(C) paragraph (3)(B)(i) shall be applied by substituting ‘$1050’ for ‘$1100’, and “(D) paragraph (3)(B)(ii) shall be applied by substituting ‘$650’ for ‘$625’.” (b) Determination of Martial Status.—Section 143 (relating to determination of marital status) is amended— (1) by striking out “For purposes of this part—” and inserting in lieu thereof “(a) General Rule.—For purposes of this part—”; and (2) by adding at the end thereof the following new subsection: “(b) Certain Married Individuals Living Apart.—For purposes of this part, if— “(1) an individual who is married (within the meaning of subsection (a)) and who files a separate return maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a dependent (A) who (within the meaning of section 152) is a son, stepson, daughter, or stepdaughter of the individual, and (B) with respect to whom such individual is entitled to a deduction for the taxable year under section 151, “(2) such individual furnishes over half of the cost of maintaining such household during the taxable year, and “(3) during the entire taxable year such individual’s spouse is not a member of such household, such individual shall not be considered as married.” (c) Technical and Conforming Amendments.— (1) Section 4(a) (relating to number of exemptions) is amended to read as follows: “(a) Number of Exemptions.—For purposes of the tables prescribed by the Secretary or his delegate pursuant to section 3, the term 83 Stat. 678 ‘number of exemptions’ means the number of exemptions allowed under section 151 as deductions in computing taxable income.” (2) Section 4(c) (relating to married individuals filing separate returns) is amended to read as follows: “(c) Husband or Wife Filing Separate return.— “(1) A husband or wife may not elect to pay the optional tax imposed by section 3 if the tax of the other spouse is determined under section 1 on the basis of taxable income computed without regard to the standard deduction. “(2) Except as otherwise provided in this subsection, in the case of a husband or wife filing a separate return the tax imposed by section 3 shall be the lesser of the tax shown in— “(A) the table prescribed under section 3 applicable in the case of married persons filing separate returns which applies the percentage standard deduction, or “(B) the table prescribed under section 3 applicable in the case of married persons filing separate returns which applies the low income allowance. “(3) The table referred to in paragraph (2)(B) shall not apply in the case of a husband or wife filing a separate return if the tax of the other spouse is determined with regard to the percentage standard deduction; except that an individual described in section 141(d)(2) may elect (under regulations prescribed by the Secretary or his delegate) to pay the tax shown in the table referred to in paragraph (2)(B) in lieu of the tax shown in the table referred to in paragraph (2)(A). For purposes of this title, an election under the preceding sentence shall be treated as an election made under section 141(d)(2). “(4) For purposes of this subsection, determination of marital status shall be made under section 143.” (3) Paragraph (4) of section 4(f) is amended to read as follows: “(4) For computation of tax by Secretary or his delegate, see section 6014.” (4) Section 141(d) (relating to married individuals filing separate returns) is amended— (A) by striking out “minimum standard deduction” each place it appears and inserting in lieu thereof “low income allowance”; and (B) by striking out “10-percent” each place it appears therein and inserting in lieu thereof “percentage”. (5) Section 1304(c)(4) (relating to special rules for income averaging) is amended by striking out “section 143” and inserting in lieu thereof “section 143(a)”. (d) Effective Date.—The amendments made by subsections (a), (b), and (c) shall apply to taxable years beginning after December 31, 1969. (e) Years After 1971.—Effective with respect to taxable years beginning after December 31, 1971, section 141(c) (relating to low income allowance), as amended by subsection (a), is amended to read as follows: “(c) Low Income Allowance.—The low income allowance is $1,000 ($500, in the case of a married individual filing a separate return).”