Bill Summary
This legislation, titled the "Restoring Tax Fairness for States and Localities Act," aims to amend the Internal Revenue Code of 1986 in order to make changes to the deduction limitations for state and local taxes, as well as provide other tax-related adjustments. The bill includes provisions such as eliminating the "marriage penalty" for the deduction of state and local taxes for the year 2019, suspending the limitation on these deductions for 2020 and 2021, increasing the deduction amount for certain expenses of elementary and secondary school teachers, and allowing for an above-the-line deduction for first responders' expenses. Additionally, the top marginal individual income tax rate would be increased to 39.6% and the "zero rate" for capital gains would also be adjusted. These changes would apply to taxable years beginning after December 31, 2019.
Possible Impacts
1. This legislation could affect people who are married and have a combined income over $100,000,000 in 2019 by eliminating the marriage penalty in the limitation on deduction of state and local taxes. This may result in a larger tax deduction for these individuals.
2. People who are high-income taxpayers may be affected by this legislation in 2020 and 2021 by not being able to take advantage of the suspension of the dollar limitation on state and local taxes. This means they will still be subject to the previous limitations on deductions, which could result in a higher tax bill.
3. The increase in the top marginal income tax rate from 37% to 39.6% could affect individuals who make over $479,000 (or $452,400 for married individuals) by potentially increasing their tax liability. This change would apply to taxable years beginning after December 31, 2019.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 3178 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
2d Session
S. 3178
To amend the Internal Revenue Code of 1986 to modify the limitation on
deduction of State and local taxes, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 9, 2020
Mr. Schumer (for himself, Mr. Wyden, and Mr. Menendez) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to modify the limitation on
deduction of State and local taxes, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Restoring Tax Fairness for States
and Localities Act''.
SEC. 2. ELIMINATION FOR 2019 OF MARRIAGE PENALTY IN LIMITATION ON
DEDUCTION OF STATE AND LOCAL TAXES.
(a) In General.--Section 164(b) of the Internal Revenue Code of
1986 is amended by adding at the end the following new paragraph:
``(7) Special rule for limitation on individual deductions
for 2019.--In the case of a taxable year beginning after
December 31, 2018, and before January 1, 2020, if the adjusted
gross income of the taxpayer for such taxable year does not
exceed $100,000,000, paragraph (6) shall be applied by
substituting `($20,000 in the case of a joint return)' for
`($5,000 in the case of a married individual filing a separate
return)'.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2018.
SEC. 3. ELIMINATION FOR 2020 AND 2021 OF LIMITATION ON DEDUCTION OF
STATE AND LOCAL TAXES.
(a) In General.--Section 164(b) of the Internal Revenue Code of
1986, as amended by section 2, is further amended by adding at the end
the following new paragraph:
``(8) Suspension of dollar limitation on state and local
taxes for 2020 and 2021.--
``(A) In general.--In the case of any taxable year
beginning in 2020 or 2021, subparagraph (B) of
paragraph (6) shall not apply.
``(B) Exception for certain high-income
taxpayers.--Subparagraph (A) shall not apply to any
taxpayer for any taxable year if the adjusted gross
income of such taxpayer for such taxable year exceeds
$100,000,000.''.
(b) Conforming Amendments.--Section 164(b)(6) of the Internal
Revenue Code of 1986 is amended--
(1) by striking ``For purposes of subparagraph (B)'' and
inserting ``For purposes of this section'';
(2) by striking ``January 1, 2018'' and inserting ``January
1, 2022'';
(3) by striking ``December 31, 2017, shall'' and inserting
``December 31, 2021, shall''; and
(4) by adding at the end the following: ``For purposes of
this section, in the case of State or local taxes with respect
to any real or personal property paid during a taxable year
beginning in 2020 or 2021, the Secretary shall prescribe rules
which treat all or a portion of such taxes as paid in a taxable
year or years other than the taxable year in which actually
paid as necessary or appropriate to prevent the avoidance of
the limitations of this subsection.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxes paid or accrued in taxable years beginning after
December 31, 2019.
SEC. 4. INCREASE IN DEDUCTION FOR CERTAIN EXPENSES OF ELEMENTARY AND
SECONDARY SCHOOL TEACHERS.
(a) Increase.--Section 62(a)(2)(D) of the Internal Revenue Code of
1986 is amended by striking ``$250'' and inserting ``$1,000''.
(b) Conforming Amendments.--Section 62(d)(3) of the Internal
Revenue Code of 1986 is amended--
(1) by striking ``2015'' and inserting ``2019'';
(2) by striking ``$250'' and inserting ``$1,000''; and
(3) in subparagraph (B), by striking ``2014'' and inserting
``2018''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2018.
SEC. 5. ABOVE-THE-LINE DEDUCTION ALLOWED FOR CERTAIN EXPENSES OF FIRST
RESPONDERS.
(a) In General.--Section 62(a)(2) of the Internal Revenue Code of
1986 is amended by adding at the end the following new subparagraph:
``(F) Certain expenses of first responders.--The
deductions allowed by section 162 which consist of
expenses, not in excess of $1,000, paid or incurred by
a first responder--
``(i) as tuition or fees for the
participation of the first responder in
professional development courses related to
service as a first responder; or
``(ii) for uniforms used by the first
responder in service as a first responder.''.
(b) First Responder Defined.--Section 62(d) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
``(4) First responder.--For purposes of subsection
(a)(2)(F), the term `first responder' means, with respect to
any taxable year, any individual who is employed as a law
enforcement officer, firefighter, paramedic, or emergency
medical technician for at least 1,000 hours during such taxable
year.''.
(c) Inflation Adjustment.--Section 62(d)(3) of the Internal Revenue
Code of 1986, as amended by section 4, is further amended by striking
``the $1,000 amount in subsection (a)(2)(D)'' and inserting ``the
$1,000 amount in each of subparagraphs (D) and (F) of subsection
(a)(2)''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2019.
SEC. 6. INCREASE OF TOP MARGINAL INDIVIDUAL INCOME TAX RATE UNDER
TEMPORARY RULES.
(a) In General.--The tables contained in subparagraphs (A), (B),
(C), (D), and (E) of section 1(j)(2) of the Internal Revenue Code of
1986 are each amended by striking ``37%'' and inserting ``39.6%'' and--
(1) in subparagraph (A)--
(A) by striking ``$600,000'' each place such term
appears and inserting ``$479,000''; and
(B) by striking ``$161,379'' and inserting
``$119,029'';
(2) in subparagraph (B)--
(A) by striking ``$500,000'' each place such term
appears and inserting ``$452,400''; and
(B) by striking ``$149,298'' and inserting
``$132,638'';
(3) in subparagraph (C)--
(A) by striking ``$500,000'' each place such term
appears and inserting ``$425,800''; and
(B) by striking ``$150,689.50'' and inserting
``$124,719.50''; and
(4) in subparagraph (D)--
(A) by striking ``$300,000'' each place such term
appears and inserting ``$239,500''; and
(B) by striking ``$80,689.50'' and inserting
``$59,514.50''.
(b) Conforming Amendments.--
(1) Section 1(j)(4)(B)(iii) of the Internal Revenue Code of
1986 is amended--
(A) in the matter preceding subclause (I), by
striking ``37 percent'' and inserting ``39.6 percent'';
(B) in subclause (II), by striking ``37-percent
bracket'' and inserting ``39.6-percent bracket''; and
(C) in the heading, by striking ``37-percent
bracket'' and inserting ``39.6-percent bracket''.
(2) Section 1(j)(4)(C) of such Code is amended--
(A) in clause (i)(II), by striking ``paragraph
(5)(B)(i)(IV)'' and inserting ``paragraph (5)(B)(iv)'';
and
(B) by amending clause (ii) to read as follows:
``(ii) the amount which would (without
regard to this paragraph) be taxed at a rate
below 39.6 percent shall not be more than the
sum of--
``(I) the earned taxable income of
such child, plus
``(II) the maximum dollar amount
for the 35-percent rate bracket for
estates and trusts.''.
(3) The heading of section 1(j)(5) of such Code is amended
to read as follows: ``Application of zero percent capital gain
rate brackets''.
(4) Subparagraphs (A) and (B) of section 1(j)(5) of such
Code are amended to read as follows:
``(A) In general.--Subsection (h)(1)(B)(i) shall be
applied by substituting `below the maximum zero rate
amount' for `which would (without regard to this
paragraph) be taxed at a rate below 25 percent'.
``(B) Maximum zero rate amount defined.--For
purposes of subparagraph (A), the term `maximum zero
rate amount' means--
``(i) in the case of a joint return or
surviving spouse, $77,200;
``(ii) in the case of an individual who is
a head of household (as defined in section
2(b)), $51,700;
``(iii) in the case of any other individual
(other than an estate or trust), an amount
equal to \1/2\ of the amount in effect for the
taxable year under clause (i); and
``(iv) in the case of an estate or trust,
$2,600.''.
(5) Section 1(j)(5)(C) of such Code is amended by striking
``clauses (i) and (ii) of''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2019.
(d) Section 15 Not To Apply.--Section 15 of the Internal Revenue
Code of 1986 shall not apply to any change in a rate of tax by reason
of any amendment made by this section.
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