Harold Wilson - Page 11

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          of penal institution are expressly excluded from the computation            
          of the earned income credit under section 32(c)(2)(B)(iv).  See             
          Taylor v. Commissioner, T.C. Memo. 1998-401.                                
              Petitioner’s position contradicts the plain language of the            
          statute.  Moreover, we are not persuaded by petitioner’s                    
          contention that the legislative history of section                          
          32(c)(2)(B)(iv) supports his interpretation of the provision.               
          Section 32(c)(2)(B)(iv) was enacted as an amendment to section 32           
          under the Uruguay Round Agreements Act, Pub. L. 103-465, sec.               
          723, 108 Stat. 5003 (1994).  H. Rept. 103-826, at 182 (1994)                
          explains the purpose for section 32(c)(2)(B)(iv) as follows:                
               3.  Income of prisoners disregarded in determining                     
               earned income tax credit (sec. 723 of the bill and sec.                
               32 of the Code)                                                        
                    Reasons for change                                                
                    The EITC is designed to alleviate poverty and to                  
               provide work incentives to low-income individuals.                     
               Because of the compulsory nature of much of the work                   
               performed by prison inmates, it does not further the                   
               objectives of the EITC to include in earned income for                 
               EITC calculations any amounts paid for inmates’                        
                    Explanation of provision                                          
                    The bill removes from the definition of earned                    
               income in section 32(c)(2) any amount received for                     
               services provided by an individual while the individual                
               is an inmate at a penal institution.                                   
                    Effective date                                                    
                    The provision is effective for taxable years                      
               beginning after December 31, 1993.                                     

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