REVISION OF RETIREMENT INCOME CREDIT.

SEC. 503. REVISION OF RETIREMENT INCOME CREDIT. (a) In General.— Section 37 (relating to retirement income) is 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. 90 STAT. 1560 “(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— “(A) under title II of the Social Security Act, “(B) under the Railroad Retirement Act of 1935 or 1937, or “(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), 101 (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 87 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. 90 STAT. 1561 “(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 Secret ary 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 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 the meaning of section 401(c)(1), distributions by a trust described in section 401(a) which is exempt from tax under section 501 (a)), “(ii) interest, “(iii) rents, “(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— 90 STAT. 1562 “(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 mark led 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 tinder 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)(he 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 tax-payer) 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 lien thereof the following: “Sec. 37. Credit for the elderly.”