To modify the optional method of computing net earnings from self-employment.

April 25, 2005

Mr. FEINGOLD introduced the following bill; which was read twice and referred to the Committee on Finance

To modify the optional method of computing net earnings from self-employment.

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 `Farmer Tax Fairness Act of 2005'.

SEC. 2. MODIFICATION TO OPTIONAL METHOD OF COMPUTING NET EARNINGS FROM SELF-EMPLOYMENT.

(a) Amendments to the Internal Revenue Code of 1986-

(1) IN GENERAL- The matter following paragraph (15) of section 1402(a) of the Internal Revenue Code of 1986 is amended--

(A) by striking `$2,400' each place it appears and inserting `the upper limit', and

(B) by striking `$1,600' each place it appears and inserting `the lower limit'.

(2) DEFINITIONS- Section 1402 of such Code is amended by adding at the end the following new subsection:

`(l) Upper and Lower Limits- For purposes of subsection (a)--

`(1) LOWER LIMIT- The lower limit for any taxable year is the sum of the amounts required under section 213(d) of the Social Security Act for a quarter of coverage in effect with respect to each calendar quarter ending with or within such taxable year.

`(2) UPPER LIMIT- The upper limit for any taxable year is the amount equal to 150 percent of the lower limit for such taxable year.'.

(b) Amendments to the Social Security Act-

(1) IN GENERAL- The matter following paragraph (15) of section 211(a) of the Social Security Act is amended--

(A) by striking `$2,400' each place it appears and inserting `the upper limit', and

(B) by striking `$1,600' each place it appears and inserting `the lower limit'.

(2) DEFINITIONS- Section 211 of such Act is amended by adding at the end the following new subsection:

`Upper and Lower Limits

`(k) For purposes of subsection (a)--

`(1) The lower limit for any taxable year is the sum of the amounts required under section 213(d) for a quarter of coverage in effect with respect to each calendar quarter ending with or within such taxable year.

`(2) The upper limit for any taxable year is the amount equal to 150 percent of the lower limit for such taxable year.'.

(3) CONFORMING AMENDMENT- Section 212 of such Act is amended--

(A) in subsection (b), by striking `For' and inserting `Except as provided in subsection (c), for'; and

(B) by adding at the end the following new subsection:

`(c) For the purpose of determining average indexed monthly earnings, average monthly wage, and quarters of coverage in the case of any individual who elects the option described in clause (ii) or (iv) in the matter following section 211(a)(15) for any taxable year that does not begin with or during a particular calendar year and end with or during such year, the self-employment income of such individual deemed to be derived during such taxable year shall be allocated to the two calendar years, portions of which are included within such taxable year, in the same proportion to the total of such deemed self-employment income as the sum of the amounts applicable under section 213(d) for the calendar quarters ending with or within each such calendar year bears to the lower limit for such taxable year specified in section 211(k)(1).'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

END