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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’
services.
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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