CHILD TAX CREDIT.

SEC. 101. CHILD TAX CREDIT. (a) In General.—Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 23 the following new section: “SEC. 24. CHILD TAX CREDIT. “(a) Allowance of Credit.—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to each qualifying child of the taxpayer an amount equal to $500 ($400 in the case of taxable years beginning in 1998). “(b) Limitation Based on Adjusted Gross Income.— “(1) In general.—The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 111 STAT. 797for each $1,000 (or fraction thereof) by which the taxpayer’s modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term ‘modified adjusted gross income’ means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933. “(2) Threshold amount.—For purposes of paragraph (1), the term ‘threshold amount’ means— “(A) $110,000 in the case of a joint return, “(B) $75,000 in the case of an individual who is not married, and “(C) $55,000 in the case of a married individual filing a separate return. For purposes of this paragraph, marital status shall be determined under section 7703. “(c) Qualifying Child.—For purposes of this section— “(1) In general.—The term ‘qualifying child’ means any individual if— “(A) the taxpayer is allowed a deduction under section 151 with respect to such individual for the taxable year, “(B) such individual has not attained the age of 17 as of the close of the calendar year in which the taxable year of the taxpayer begins, and “(C) such individual bears a relationship to the taxpayer described in section 32(c)(3)(B). “(2) Exception for certain noncitizens.—The term ‘qualifying child’ shall not include any individual who would not be a dependent if the first sentence of section 152(b)(3) were applied without regard to all that follows ‘resident of the United States’. “(d) Additional Credit for Families With 3 or More Children.— “(1) In general.—In the case of a taxpayer with 3 or more qualifying children for any taxable year, the amount of the credit allowed under this section shall be equal to the greater of— “(A) the amount of the credit allowed under this section (without regard to this subsection and after application of the limitation under section 26), or “(B) the alternative credit amount determined under paragraph (2). “(2) Alternative credit amount.—For purposes of this subsection, the alternative credit amount is the amount of the credit which would be allowed under this section if the limitation under paragraph (3) were applied in lieu of the limitation under section 26. “(3) Limitation.—The limitation under this paragraph for any taxable year is the limitation under section 26 (without regard to this subsection)— “(A) increased by the taxpayer’s social security taxes for such taxable year, and “(B) reduced by the sum of— “(i) the credits allowed under this part other than under subpart C or this section, and “(ii) the credit allowed under section 32 without regard to subsection (m) thereof.111 STAT. 798 “(4) Unused credit to be refundable.—If the amount of the credit under paragraph (1)(B) exceeds the amount of the credit under paragraph (1)(A), such excess shall be treated as a credit to which subpart C applies. The rule of section 32(h) shall apply to such excess. “(5) Social security taxes.—For purposes of paragraph (3)— “(A) In general.—The term ‘social security taxes’ means, with respect to any taxpayer for any taxable year— “(i) the amount of the taxes imposed by sections 3101 and 3201(a) on amounts received by the taxpayer during the calendar year in which the taxable year begins, “(ii) 50 percent of the taxes imposed by section 1401 on the self-employment income of the taxpayer for the taxable year, and “(iii) 50 percent of the taxes imposed by section 3211(a)(1) on amounts received by the taxpayer during the calendar year in which the taxable year begins. “(B) Coordination with special refund of social security taxes.—The term ‘social security taxes’ shall not include any taxes to the extent the taxpayer is entitled to a special refund of such taxes under section 6413(c). “(C) Special rule.—Any amounts paid pursuant to an agreement under section 3121(1) (relating to agreements entered into by American employers with respect to foreign affiliates) which are equivalent to the taxes referred to in subparagraph (A)(i) shall be treated as taxes referred to in such subparagraph. “(e) Identification Requirement.—No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the name and taxpayer identification number of such qualifying child on the return of tax for the taxable year. “(f) Taxable Year Must Be Full Taxable Year.—Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.”. (b) Supplemental Credit.—Section 32 is amended by adding at the end the following new subsection: “(m) Supplemental Child Credit.— “(1) In general.—In the case of a taxpayer with respect to whom a credit is allowed under section 24 for the taxable year, there shall be allowed as a credit under this section an amount equal to the supplemental child credit (if any) determined for such taxpayer for such taxable year under paragraph (2). Such credit shall be in addition to the credit allowed under subsection (a). “(2) Supplemental child credit.—For purposes of this subsection, the supplemental child credit is an amount equal to the excess (if any) of— “(A) the amount determined under section 24(d)(1)(A), over “(B) the amount determined under section 24(d)(1)(B). The amounts referred to in subparagraphs (A) and (B) shall be determined as if section 24(d) applied to all taxpayers.111 STAT. 799 “(3) Coordination with section 24.—The amount of the credit under section 24 shall be reduced by the amount of the credit allowed under this subsection.”. (c) High Risk Pools Permitted To Cover Spouses and Dependents of High Risk Individuals.—Paragraph (26) of section 501(c) is amended by adding at the end the following flush sentence: “A spouse and any qualifying child (as defined in section 24(c)) of an individual described in subparagraph (B) (without regard to this sentence) shall be treated as described in subparagraph (B).”. (d) Conforming Amendments.— (1) Section 1324(b)(2) of title 31, United States Code, is amended by inserting before the period at the end “, or enacted by the Taxpayer Relief Act of 1997”. (2) Paragraph (2) of section 6213(g) (relating to the definition of mathematical or clerical errors) is amended by striking “and” at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting , and”, and by inserting after subparagraph (H) the following new subparagraph: “(I) an omission of a correct TIN required under section 24(e) (relating to child tax credit) to be included on a return.”. (3) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 23 the following new item: “Sec. 24. Child tax credit.”. (e) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 1997.