26 U.S.C. § 7530 — Application of earned income tax credit to possessions of the United States

submitted 5 years ago by Pub. L. 117-2 to r/title-26-INTERNAL-REVENUE-CODE · 1,047 words · no verdicts yet

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The Secretary must pay several U.S. possessions for their earned income tax credit programs. These possessions include Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Puerto Rico and American Samoa must run their own qualifying credit to receive payment.

(a) Starting with calendar year 2021, the Secretary must pay Puerto Rico an amount each year. This amount has two parts. The first part is the "specified matching amount." The second part applies only for 2021 through 2025. It is Puerto Rico's education spending on the earned income tax credit, up to $1,000,000. The Secretary will not make these payments unless Puerto Rico has its own earned income tax credit. That credit must increase the credit percentage compared to what was in effect in 2019. It must be designed to boost work. The "specified matching amount" is the smaller of two figures. The first figure is the extra cost of Puerto Rico's credit above a "base amount." The second figure is three times that base amount. For 2021, the "base amount" is the greater of two numbers: Puerto Rico's 2019 credit cost, or $200,000,000. In later years, this base amount rises with inflation. The Secretary must make these payments after getting needed information. Payments must come within a reasonable time before Puerto Rico's tax-filing deadline. (b) Starting with 2021, the Secretary must pay the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands. The payment equals the full cost of each possession's earned income tax credit. Through 2025, the Secretary also pays limited education-spending reimbursement to these possessions. Rules similar to those for Puerto Rico apply here. (c) Starting with 2021, the Secretary must pay American Samoa the smaller of its credit cost or $16,000,000. Through 2025, the Secretary also pays limited education-spending reimbursement, up to $50,000 a year. After 2021, the $16,000,000 figure rises with inflation. American Samoa must have its own earned income tax credit designed to boost work. Without that credit, American Samoa gets no payment under this subsection. (d) These payments are treated the same as a tax refund for purposes of a separate funding law.

facts

- Codified at 26 U.S.C. § 7530, titled "Application of earned income tax credit to possessions of the United States." - Added by Pub. L. 117–2, title IX, § 9625(a), enacted March 11, 2021, 135 Stat. 155. - Comprises 1,047 words with a single source-credit reference (no subsequent amendments recorded). - Covers earned income tax credit payment rules for Puerto Rico, mirror-code possessions (Virgin Islands, Guam, CNMI), and American Samoa, plus treatment of payments under 31 U.S.C. § 1324.

the actual law source: uscode.house.gov ↗public domain

(a) Puerto Rico

(1) In general

With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to Puerto Rico equal to—

(A)

the specified matching amount for such calendar year, plus

(B)

in the case of calendar years 2021 through 2025, the lesser of—

(i)

the expenditures made by Puerto Rico during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to the earned income tax credit, or

(ii)

$1,000,000.

(2) Requirement to reform earned income tax credit

The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless Puerto Rico has in effect an earned income tax credit for taxable years beginning in or with such calendar year which (relative to the earned income tax credit which was in effect for taxable years beginning in or with calendar year 2019) increases the percentage of earned income which is allowed as a credit for each group of individuals with respect to which such percentage is separately stated or determined in a manner designed to substantially increase workforce participation.

(3) Specified matching amount

For purposes of this subsection—

(A) In general

The term “specified matching amount” means, with respect to any calendar year, the lesser of—

(i)

the excess (if any) of—

(I)

the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with such calendar year, over

(II)

the base amount for such calendar year, or

(ii)

the product of 3, multiplied by the base amount for such calendar year.

(B) Base amount

(i) Base amount for 2021

In the case of calendar year 2021, the term “base amount” means the greater of—

(I)

the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with calendar year 2019 (rounded to the nearest multiple of $1,000,000), or

(II)

$200,000,000.

(ii) Inflation adjustment

In the case of any calendar year after 2021, the term “base amount” means the dollar amount determined under clause (i) increased by an amount equal to—

(I)

such dollar amount, multiplied by—

(II)

the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting “calendar year 2020” for “calendar year 2016” in subparagraph (A)(ii) thereof.

Any amount determined under this clause shall be rounded to the nearest multiple of $1,000,000.

(4) Rules related to payments

(A) Timing of payments

The Secretary shall make payments under paragraph (1) for any calendar year—

(i)

after receipt of such information as the Secretary may require to determine such payments, and

(ii)

except as provided in clause (i), within a reasonable period of time before the due date for individual income tax returns (as determined under the laws of Puerto Rico) for taxable years which began on the first day of such calendar year.

(B) Information

The Secretary may require the reporting of such information as the Secretary may require to carry out this subsection.

For purposes of this subsection, the cost to Puerto Rico of the earned income tax credit shall be determined by the Secretary on the basis of the laws of Puerto Rico and shall include reductions in revenues received by Puerto Rico by reason of such credit and refunds attributable to such credit, but shall not include any administrative costs with respect to such credit.

(b) Possessions with mirror code tax systems

(1) In general

With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands equal to—

(A)

the cost to such possession of the earned income tax credit for taxable years beginning in or with such calendar year, plus

(B)

in the case of calendar years 2021 through 2025, the lesser of—

(i)

the expenditures made by such possession during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or

(ii)

$50,000.

(2) Application of certain rules

Rules similar to the rules of subparagraphs (A), (B), and (C) of subsection (a)(4) shall apply for purposes of this subsection.

(1) In general

With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to American Samoa equal to—

(A)

the lesser of—

(i)

the cost to American Samoa of the earned income tax credit for taxable years beginning in or with such calendar year, or

(ii)

$16,000,000, plus

(B)

in the case of calendar years 2021 through 2025, the lesser of—

(i)

the expenditures made by American Samoa during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or

(ii)

$50,000.

(2) Requirement to enact and maintain an earned income tax credit

The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless American Samoa has in effect an earned income tax credit for taxable years beginning in or with such calendar year which allows a refundable tax credit to individuals on the basis of the taxpayer’s earned income which is designed to substantially increase workforce participation.

(3) Inflation adjustment

In the case of any calendar year after 2021, the $16,000,000 amount in paragraph (1)(A)(ii) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by—

(B)

Any increase determined under this clause shall be rounded to the nearest multiple of $100,000.

(4) Application of certain rules

Rules similar to the rules of subparagraphs (A), (B), and (C) of subsection (a)(4) shall apply for purposes of this subsection.

(d) Treatment of payments

For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.

Source credit: (Added Pub. L. 117–2, title IX, § 9625(a), Mar. 11, 2021, 135 Stat. 155.)

history & why it existsrecord from the source credit

2021Enacted · Pub. L. 117-2 · 135 Stat. 155

The record establishes that 26 U.S.C. § 7530 was added by Public Law 117-2, title IX, § 9625(a), enacted March 11, 2021, and appearing at 135 Stat. 155. The source credit reflects no subsequent amendments to the section; it stands as originally enacted. Public Law 117-2 is commonly known as the American Rescue Plan Act of 2021, a large fiscal-relief measure enacted in the early months of the Biden administration in response to the economic and public-health disruptions of the COVID-19 pandemic. The Act is generally understood to have combined emergency spending with a range of tax-relief provisions aimed at individuals, states, and territories. Within that broader framework, Title IX of the Act addressed tax provisions, and § 9625 in particular is generally understood to have extended federal support for earned income tax credit programs to Puerto Rico and other U.S. possessions—jurisdictions that, prior to this enactment, were not integrated into the federal earned income tax credit structure in the same way as the states. The commonly cited purpose of such provisions was to encourage low-income workforce participation in the territories and to help finance locally administered earned income tax credits. Beyond this general context, the record does not establish the specific legislative reasoning, negotiations, or committee deliberations that produced the particular formulas, thresholds, and conditions set out in the section's text.

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