To allow a custodial parent a refundable credit for unpaid child support payments and to require a parent who is chronically delinquent in child support to include the amount of the unpaid obligation in gross income.

November 4, 2005

Mr. KENNEDY of Minnesota (for himself and Ms. MILLENDER-MCDONALD) introduced the following bill; which was referred to the Committee on Ways and Means

To allow a custodial parent a refundable credit for unpaid child support payments and to require a parent who is chronically delinquent in child support to include the amount of the unpaid obligation in gross income.

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 `Child Support Enforcement Act of 2005'.

SEC. 2. NO EFFECT ON RIGHTS AND LIABILITIES.

Nothing in this Act shall be construed to affect--

(1) the right of an individual or State to receive any child support payment; or

(2) the obligation of an individual to pay child support.

SEC. 3. REFUNDABLE CREDIT FOR UNPAID CHILD SUPPORT PAYMENTS.

(a) In General- Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 36 as section 37 and inserting after section 35 the following new section:

`SEC. 36. UNPAID CHILD SUPPORT.

`(a) In General- In the case of a custodial parent who, as of the close of the taxable year, is owed child support, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the unpaid child support as of the close of the taxable year.

`(b) Subsequent Payments- If any unpaid child support with respect to which a credit was allowed under subsection (a) is subsequently paid to the custodial parent, the amount of such payment shall not be included in the gross income of the custodial parent, nor shall it be allowed as a deduction to the delinquent debtor. The delinquent debtor shall be neither required nor allowed to file an amended return in any subsequent year to reflect the subsequent payment of unpaid child support.

`(c) Identication Requirements-

`(1) IN GENERAL- A qualifying child shall not be taken into account under subsection (a) unless the taxpayer includes the name, age, and TIN of the qualifying child on the return of tax for the taxable year.

`(2) OTHER METHODS- The Secretary may prescribe other methods for providing the information described in paragraph (1).

`(d) Information Returns-

`(1) IN GENERAL- No amount shall be allowed as a credit under subsection (a) for a taxable year unless the custodial parent completes Form 1099-CS (or such other form as the Secretary may prescribe) and provides such form to the Secretary, and (if the address is known) to the delinquent debtor, within 45 days following the close of the taxable year for which the credit is claimed.

`(2) CONTENTS OF FORM- The Form 1099-CS (or such other form as the Secretary may prescribe) shall contain--

`(A) the total amount of child support owed (whether or not paid) for such taxable year,

`(B) the total amount of unpaid child support as of the last day of such taxable year,

`(C) the name, address (if known), and taxpayer identification number of the delinquent debtor, and

`(D) notice that the delinquent debtor is required to include such total amount of unpaid child support in gross income for the delinquent debtor's taxable year which includes the last day of the custodial parent's taxable year.

`(3) DEBTOR'S ADDRESS UNKNOWN- If the delinquent debtor's address is not known to the custodial parent, the Form 1099-CS (or such other form as the Secretary may prescribe) shall indicate that fact. In such a case, the Secretary may send such notice if the address is available to the Secretary, and the notice from the custodial parent to the delinquent debtor under subparagraph (A) shall not be required.

`(e) Determination of Whether Child Support Is Paid-

`(1) CHILD SUPPORT ENFORCEMENT OFFICE RECORDS AS CONCLUSIVE EVIDENCE OF PAYMENT- Child support shall be treated as paid if such payment is recorded by the State office of child support enforcement in which the custodial parent is registered.

`(2) TIMELY MAILING AS TIMELY PAYMENT- A payment received by the State office of child support enforcement in which the custodial parent is registered after the last day of the custodial parent's taxable year shall be treated for the purpose of this section as paid on such day if the postmark date falls on or before such day. The rules of section 7502(f) and regulations issued thereunder shall apply for purposes of this paragraph.

`(f) Definitions- For the purposes of this section--

`(1) UNPAID CHILD SUPPORT- The term `unpaid child support' means child support that is payable for months during a custodial parent's taxable year and unpaid as of the last day of such taxable year, but only if such unpaid amount as of such day equals or exceeds one-half of the total amount of child support due to the custodial parent for such year.

`(2) CHILD SUPPORT- The term `child support' means--

`(A) any periodic payment of a fixed amount, or

`(B) any payment of a medical education expense, insurance premium, or other similar item,

which is required to be paid to a custodial parent by an individual under a support instrument for the support of any qualifying child of such individual. The term `child support' does not include any amount which is described in section 408(a)(3) of the Social Security Act and which has been assigned to a State.

`(3) CUSTODIAL PARENT- The term `custodial parent' means an individual who is entitled to receive child support and who has registered with the appropriate State office of child support enforcement charged with implementing section 454 of the Social Security Act.

`(4) DELINQUENT DEBTOR- The term `delinquent debtor' means a taxpayer who owes unpaid child support to a custodial parent.

`(5) QUALIFYING CHILD- The term `qualifying child' means a child of a custodial parent with respect to whom a dependent deduction is allowable under section 151 for the taxable year (or would be so allowable but for section 152(e)(4)).

`(6) SUPPORT INSTRUMENT- The term `support instrument' means--

`(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

`(B) a written separation agreement, or

`(C) a decree (not described in clause (i)) of a court or administrative agency requiring a parent to make payments for the support or maintenance of 1 or more children of such parent.'.

(b) Conforming and Clerical Amendments-

(1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period `, or from section 36 of such Code'.

(2) The table of sections for subpart C of part IV of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating the item relating to section 36 as an item relating to section 37 and by inserting after the item relating to section 35 the following new item:

`Sec. 36. Unpaid child support.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 4. INCLUSION IN INCOME OF AMOUNT OF UNPAID CHILD SUPPORT.

(a) In General- Section 108 of the Internal Revenue Code of 1986 (relating to discharge of indebtedness income) is amended by adding at the end the following new subsection:

`(h) Unpaid Child Support-

`(1) IN GENERAL- For purposes of this chapter, any unpaid child support of a delinquent debtor for any taxable year shall be treated as amounts includible in gross income of the delinquent debtor for the taxable year.

`(2) DETERMINATION OF WHETHER CHILD SUPPORT IS UNPAID-

`(A) IN GENERAL- Child support shall be treated as paid if such payment is recorded by the State office of child support enforcement in which the custodial parent is registered.

`(B) TIMELY MAILING AS TIMELY PAYMENT- A payment received by the State office of child support enforcement in which the custodial parent is registered after the last day of the custodial parent's taxable year shall be treated for the purpose of this subsection as paid on such day if the postmark date falls on or before such day. The rules of section 7502(f) and regulations issued thereunder shall apply for purposes of this subparagraph.

`(3) DEFINITIONS- For the purposes of this subsection--

`(A) CHILD SUPPORT- The term `child support' means--

`(i) any periodic payment of a fixed amount, or

`(ii) any payment of a medical education expense, insurance premium, or other similar item,

which is required to be paid to a custodial parent by an individual under a support instrument for the support of any qualifying child of such individual. `Child support' does not include any amount which is described in section 408(a)(3) of the Social Security Act and which has been assigned to a State.

`(B) CUSTODIAL PARENT- The term `custodial parent' means an individual who is entitled to receive child support and who has registered with the appropriate State office of child support enforcement charged with implementing section 454 of the Social Security Act.

`(C) DELINQUENT DEBTOR- The term `delinquent debtor' means a taxpayer who owes unpaid child support to a custodial parent.

`(D) QUALIFYING CHILD- The term `qualifying child' means a child of a custodial parent with respect to whom a dependent deduction is allowable under section 151 for the taxable year (or would be so allowable but for section 152(e)(4)).

`(E) SUPPORT INSTRUMENT- The term `support instrument' means--

`(i) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

`(ii) a written separation agreement, or

`(iii) a decree (not described in clause (i)) of a court or administrative agency requiring a parent to make payments for the support or maintenance of 1 or more children of such parent.

`(F) UNPAID CHILD SUPPORT- The term `unpaid child support' means child support that is payable for months during a custodial parent's taxable year and unpaid as of the last day of such taxable year, provided that such unpaid amount as of such day equals or exceeds one-half of the total amount of child support due to the custodial parent for such year.

`(4) COORDINATION WITH OTHER LAWS- Amounts treated as income by paragraph (1) shall not be treated as income by reason of paragraph (1) for the purposes of any provision of law which is not an internal revenue law.'.

SEC. 5. TAXPAYER INFORMATION REGARDING CHILD SUPPORT NOT BASIS FOR AUDIT.

A discrepancy between the tax returns of a custodial parent and a delinquent debtor concerning whether a payment of child support has been made may not be used or relied upon by the Internal Revenue Service in any way in selecting an individual's tax return for a general audit.

SEC. 6. EFFECTIVE DATE; IMPLEMENTATION.

The amendments made by the Act shall apply to taxable years beginning after December 31, 2004. The Secretary of the Treasury shall publish Form 1099-CS (or such other form that may be prescribed to comply with section 36(d) of the Internal Revenue Code of 1986 (as added by this Act)) regulations, if any, that may be deemed necessary to carry out the purposes of this Act, not later than 90 days after the date of enactment of this Act.

END