To amend the Internal Revenue Code of 1986 to simplify the application of self-employment tax in the case of family farming businesses.

February 25, 2003

Mr. POMEROY (for himself and Mr. HOUGHTON) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to simplify the application of self-employment tax in the case of family farming businesses.

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 `Family Farm Tax Simplification Act of 2003'.

SEC. 2. TREATMENT OF FARMING JOINT VENTURES BY HUSBAND AND WIFE.

(a) IN GENERAL- Section 761 of the Internal Revenue Code of 1986 (defining terms for purposes of partnerships) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

`(f) QUALIFIED FARMING JOINT VENTURE-

`(1) IN GENERAL- In the case of a qualified farming joint venture conducted by a husband and wife who file a joint return for the taxable year, for purposes of this title--

`(A) such joint venture shall not be treated as a partnership,

`(B) all items of income, gain, loss, deduction, and credit shall be divided equally between the spouses, and

`(C) each spouse shall take into account such spouse's respective share of such items as if they were attributable to a trade or business conducted by such spouse as a sole proprietor.

`(2) QUALIFIED FARMING JOINT VENTURE- For purposes of this paragraph (1), the term `qualified farming joint venture' means any joint venture involving the conduct of a farming business if--

`(A) the only members of such joint venture are a husband and wife,

`(B) both spouses materially participate in such business (within the meaning of section 1402(a)(1)(B)), and

`(C) both spouses elect the application of this subsection.'.

(b) NET EARNINGS FROM SELF-EMPLOYMENT-

(1) Subsection (a) of section 1402 of such Code (defining net earnings from self-employment) is amended by striking `and' at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting `; and', and by inserting after paragraph (15) the following new paragraph:

`(16) notwithstanding the preceding provisions of this subsection, each spouse's share of income or loss from a qualified farming joint venture shall be taken into account as provided in section 761(f) in determining net earnings from self-employment of such spouse.'.

(2) Subsection (a) of section 211 of the Social Security Act (defining net earnings from self-employment) is amended by striking `and' at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting `; and', and by inserting after paragraph (15) the following new paragraph:

`(16) Notwithstanding the preceding provisions of this subsection, each spouse's share of income or loss from a qualified farming joint venture shall be taken into account as provided in section 761(f) of the Internal Revenue Code of 1986 in determining net earnings from self-employment of such spouse.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2002.

END