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Bill to Extend EITC, Child Tax Credit Clears Congress

On December 17, the House approved, 318-109, the Protecting Americans from Tax Hikes (PATH) Act, which would extend and make permanent several tax provisions, including provisions of the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). On December 18, the Senate approved the measure, 65-33, which was combined, along with the FY2016 consolidated appropriations bill, into H.R. 2029. President Obama has indicated he will sign H.R. 2029 into law.

According to the House Ways and Means Committee summary, taxpayers are eligible to receive a refundable child tax credit equal to 15 percent of income in excess of a threshold income amount. Prior to 2009, the threshold income level was $10,000. However, in 2009, the threshold was lowered to $3,000 and due to expire in 2017; the PATH Act permanently sets the threshold income at $3,000. Unlike the previous income level of $10,000, the new level is not indexed for inflation.

The bill makes permanent credits increased in 2009 under the EITC for families with three or more children. In 2009, Congress increased the income phase-out range for married couples filing jointly (as compared to single filers) to $5,000 from $3,000. This provision is set to expire in 2017. H.R. 2029 makes permanent the $5,000 increase. Without this provision, the phase-out range for married couples would revert to its pre-2009 level of $3,000.

The legislation extends through 2019 the Work Opportunity Tax Credit, which allows employers who hire veterans and recipients of SNAP (Supplemental Nutrition Assistance Program) to claim up to 40 percent of qualified first-year wages.

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