House Report 114-310 - EDUCATOR TAX RELIEF ACT OF 2015

[House Report 114-310]
[From the U.S. Government Publishing Office]

114th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 114-310

======================================================================

EDUCATOR TAX RELIEF ACT OF 2015

_______

October 23, 2015.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

_______

Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted
the following

R E P O R T

together with

DISSENTING VIEWS

[To accompany H.R. 2940]

[Including cost estimate of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the
bill (H.R. 2940) to amend the Internal Revenue Code of 1986 to
improve and make permanent the above-the-line deduction for
certain expenses of elementary and secondary school teachers,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.

CONTENTS

Page
I. SUMMARY AND BACKGROUND...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 3
II. EXPLANATION OF THE BILL..........................................3
A. Above-the-Line Deduction for Certain Expenses of
Elementary and Secondary School Teachers Modified
and Made Permanent................................. 3
III. VOTES OF THE COMMITTEE...........................................5
IV. BUDGET EFFECTS OF THE BILL.......................................5
A. Committee Estimate of Budgetary Effects............. 5
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 6
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 6
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......7
A. Committee Oversight Findings and Recommendations.... 7
B. Statement of General Performance Goals and
Objectives......................................... 7
C. Information Relating to Unfunded Mandates........... 7
D. Applicability of House Rule XXI 5(b)................ 7
E. Tax Complexity Analysis............................. 8
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 8
G. Duplication of Federal Programs..................... 8
H. Disclosure of Directed Rule Makings................. 8
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............8
A. Text of Existing Law Amended or Repealed by the
Bill, as Reported.................................. 8
B. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 13
VII. DISSENTING VIEWS................................................20

The amendment is as follows:
Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Educator Tax Relief Act of 2015''.

SEC. 2. DEDUCTION FOR CERTAIN EXPENSES OF SCHOOL TEACHERS.

(a) Deduction Made Permanent.--Section 62(a)(2)(D) of the Internal
Revenue Code of 1986 is amended by striking ``In the case of taxable
years beginning during 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009,
2010, 2011, 2012, 2013, or 2014, the deductions'' and inserting ``The
deductions''.
(b) Inflation Adjustment.--Section 62(d) of such Code is amended by
adding at the end the following new paragraph:
``(3) Inflation adjustment.--In the case of any taxable year
beginning after 2014, the $250 amount in subsection (a)(2)(D)
shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 2013' for `calendar year 1992' in
subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $50.''.
(c) Professional Development Expenses.--Section 62(a)(2)(D) of such
Code is amended--
(1) by striking ``educator in connection'' and all that
follows and inserting ``educator--'', and
(2) by inserting at the end the following:
``(i) by reason of the participation of the
educator in professional development courses
related to the curriculum in which the educator
provides instruction or to the students for
which the educator provides instruction, and
``(ii) in connection with books, supplies
(other than nonathletic supplies for courses of
instruction in health or physical education),
computer equipment (including related software
and services) and other equipment, and
supplementary materials used by the eligible
educator in the classroom.''.
(d) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after December 31, 2014.

I. SUMMARY AND BACKGROUND

A. Purpose and Summary

H.R. 2940, as reported by the Committee on Ways and Means,
provides a permanent deduction for eligible educator expenses
of elementary and secondary school teachers. A temporary
deduction for eligible educator expenses of elementary and
secondary school teachers expired for tax years beginning after
December 31, 2014.

B. Background and Need for Legislation

While the Committee continues actively to pursue
comprehensive tax reform as a critical means of promoting
economic growth and job creation, the Committee also believes
that it is important to provide individuals with permanent and
immediate tax relief and certainty concerning tax provisions
like the deduction for eligible educator expenses. The
deduction for eligible educator expenses has been a temporary
provision of the tax code since 2002, and has now been extended
for more than an entire ten-year budget window. In addition,
the deduction does not cover expenses relating to professional
development, and it is not indexed for inflation. Instead of
repeatedly extending this provision on a temporary basis, the
Committee believes the deduction for educator expenses should
be made permanent, expanded to cover professional development
expenses, and indexed for inflation to provide taxpayers much-
needed certainty in the tax code while Congress works to enact
comprehensive reform.

C. Legislative History

Background

H.R. 2940 was introduced on June 25, 2015, and was referred
to the Committee on Ways and Means.

Committee action

The Committee on Ways and Means marked up H.R. 2940, the
``Educator Tax Relief Act of 2015,'' on September 17, 2015, and
ordered the bill, as amended, favorably reported (with a quorum
being present).

Committee hearings

The need for permanent rules regarding the deduction for
certain educator expenses was discussed at two hearings during
the 112th and 113th Congresses:
Select Revenue Measures Subcommittee Hearing
on Certain Expiring Tax Provisions (April 26, 2012);
and
Full Committee Hearing on the Benefits of
Permanent Tax Policy for America's Job Creators (April
8, 2014).

II. EXPLANATION OF THE BILL

A. Above-the-Line Deduction for Certain Expenses of Elementary and
Secondary School Teachers Modified and Made Permanent

PRESENT LAW

In general, ordinary and necessary business expenses are
deductible. However, unreimbursed employee business expenses
generally are deductible only as an itemized deduction and only
to the extent that the individual's total miscellaneous
deductions (including employee business expenses) exceed two
percent of adjusted gross income. An individual's otherwise
allowable itemized deductions may be further limited by the
overall limitation on itemized deductions, which reduces
itemized deductions for taxpayers with adjusted gross income in
excess of a threshold amount. In addition, miscellaneous
itemized deductions are not allowable under the alternative
minimum tax.
Certain expenses of eligible educators are allowed as an
above-the-line deduction. Specifically, for taxable years
beginning prior to January 1, 2015, an above-the-line deduction
is allowed for up to $250 annually of expenses paid or incurred
by an eligible educator for books, supplies (other than
nonathletic supplies for courses of instruction in health or
physical education), computer equipment (including related
software and services) and other equipment, and supplementary
materials used by the eligible educator in the classroom.\1\ To
be eligible for this deduction, the expenses must be otherwise
deductible under section 162 as a trade or business expense. A
deduction is allowed only to the extent the amount of expenses
exceeds the amount excludable from income under section 135
(relating to education savings bonds), section 529(c)(1)
(relating to qualified tuition programs), and section 530(d)(2)
(relating to Coverdell education savings accounts).
---------------------------------------------------------------------------
\1\Sec. 62(a)(2)(D). Except where otherwise provided, all section
references are to the Internal Revenue Code of 1986, as amended (the
``Code'').
---------------------------------------------------------------------------
An eligible educator is a kindergarten through grade twelve
teacher, instructor, counselor, principal, or aide in a school
for at least 900 hours during a school year. A school means any
school that provides elementary education or secondary
education (kindergarten through grade 12), as determined under
State law.
The above-the-line deduction for eligible educators is not
allowed for taxable years beginning after December 31, 2014.

REASONS FOR CHANGE

The Committee recognizes that many elementary and secondary
school teachers provide substantial classroom resources at
their own expense, and believe that it is appropriate to extend
the present law deduction for such expenses in order to
continue to partially offset the substantial costs such
educators incur for the benefit of their students.
Additionally, the Committee recognizes that teachers must often
incur out-of-pocket expenses for professional development, and
believes that it is appropriate to include these amounts as
expenses eligible for the deduction. The Committee believes
that it is appropriate to index the $250 maximum deduction
amount for inflation, so as to prevent the real value of the
deduction from eroding over time. Finally, the Committee
believes it is appropriate to make this provision permanent
law, rather than repeatedly extending it, often retroactively,
for a year or two at a time.

EXPLANATION OF PROVISION

The provision makes the deduction for eligible educator
expenses permanent. The provision indexes the $250 maximum
deduction amount for inflation, and provides that expenses for
professional development shall also be considered eligible
expenses for purposes of the deduction.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2014.

III. VOTES OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 2940, the ``Educator Tax Relief Act of
2015,'' on September 17, 2015.
The Chairman's amendment in the nature of a substitute was
adopted by a voice vote (with a quorum being present).
The bill, H.R. 2940, was ordered favorably reported as
amended to the House of Representatives by a roll call vote of
23 yeas to 13 nays (with a quorum being present). The vote was
as follows:

----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Ryan....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Tiberi..................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Thompson..... ........ ........ .........
Mr. Price...................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Smith (NE)................. X ........ ......... Mr. Kind......... ........ X .........
Ms. Jenkins.................... X ........ ......... Mr. Pascrell..... ........ X .........
Mr. Paulsen.................... X ........ ......... Mr. Crowley...... ........ ........ .........
Mr. Marchant................... X ........ ......... Mr. Davis........ ........ X .........
Ms. Black...................... X ........ ......... Ms. Sanchez...... ........ X .........
Mr. Reed....................... X
Mr. Young...................... X
Mr. Kelly...................... X
Mr. Renacci.................... X
Mr. Meehan..................... X
Ms. Noem....................... X
Mr. Holding.................... ........
Mr. Smith (MO)................. X
Mr. Dold....................... X
----------------------------------------------------------------------------------------------------------------

IV. BUDGET EFFECTS OF THE BILL

A. Committee Estimate of Budgetary Effects

In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 2940, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal budget receipts for fiscal years 2016-2025:

----------------------------------------------------------------------------------------------------------------
Fiscal years, in millions of dollars--
-----------------------------------------------------------------------------------------------------------------
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-20 2016-25
----------------------------------------------------------------------------------------------------------------
-269 -236 -241 -260 -302 -306 -311 -319 -332 -335 -1,307 -2,909
----------------------------------------------------------------------------------------------------------------
Note: Details do not add to totals due to rounding.

Pursuant to clause 8 of rule XIII of the Rules of the House
of Representatives, the following statement is made by the
Joint Committee on Taxation with respect to the provisions of
the bill amending the Internal Revenue Code of 1986: The gross
budgetary effect (before incorporating macroeconomic effects)
in any fiscal year is less than 0.25 percent of the current
projected gross domestic product of the United States for that
fiscal year; therefore, the bill is not ``major legislation''
for purposes of requiring that the estimate include the
budgetary effects of changes in economic output, employment,
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority

In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that the revenue-reducing tax
provisions involve increased tax expenditures. (See amounts in
table in Part IV.A., above.)

C. Cost Estimate Prepared by the Congressional Budget Office

In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.

U.S. Congress,
Congressional Budget Office,
Washington, DC, September 22, 2015.
Hon. Paul Ryan,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2940, the Educator
Tax Relief Act of 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Peter
Huether.
Sincerely,
Keith Hall.
Enclosure.

H.R. 2940--Educator Tax Relief Act of 2015

H.R. 2940 would amend the Internal Revenue Code to
permanently extend and expand the tax deduction of up to $250
that is allowed for certain classroom expenses of teachers.
Under current law the deduction is unavailable for taxable
years after 2014, and H.R. 2940 would permanently extend the
deduction. The bill would also expand eligible expenses to
include those for professional development and index the
maximum deduction for inflation.
The staff of the Joint Committee on Taxation (JCT)
estimates that enacting H.R. 2940 would reduce revenues, thus
increasing federal deficits, by about $3 billion over the 2016-
2025 period.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending or revenues. Enacting H.R. 2940 would result in
revenue losses in each year beginning in 2016. The estimated
increases in the deficit are shown in the following table.
JCT has determined that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Peter Huether.
The estimate was approved by David Weiner, Assistant Director
for Tax Analysis.

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2940, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON SEPTEMBER 17, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-2020 2016-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT

Statutory Pay-As-You-Go Effects............................. 269 236 241 260 302 306 311 319 332 335 1,307 2,909
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components do not sum to totals because of rounding.

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

A. Committee Oversight Findings and Recommendations

With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the provisions of H.R. 2940 that the
Committee concluded that it is appropriate to report the bill,
as amended, favorably to the House of Representatives with the
recommendation that the bill do pass.

B. Statement of General Performance Goals and Objectives

With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.

C. Information Relating to Unfunded Mandates

This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.

D. Applicability of House Rule XXI 5(b)

Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.

E. Tax Complexity Analysis

Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (``IRS Reform Act'')
requires the staff of the Joint Committee on Taxation (in
consultation with the Internal Revenue Service and the Treasury
Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code and has widespread applicability to
individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code and that have ``widespread applicability'' to individuals
or small businesses, within the meaning of the rule.

F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits

With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.

G. Duplication of Federal Programs

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th
Congress), the Committee states that no provision of the bill
establishes or reauthorizes: (1) a program of the Federal
Government known to be duplicative of another Federal program,
(2) a program included in any report from the Government
Accountability Office to Congress pursuant to section 21 of
Public Law 111-139, or (3) a program related to a program
identified in the most recent Catalog of Federal Domestic
Assistance, published pursuant to the Federal Program
Information Act (Public Law 95-220, as amended by Public Law
98-169).

H. Disclosure of Directed Rule Makings

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

A. Text of Existing Law Amended or Repealed by the Bill, as Reported

In compliance with clause 3(e)(1)(A) of rule XIII of the
Rules of the House of Representatives, the text of each section
proposed to be amended or repealed by the bill, as reported, is
shown below:

Text of Existing Law Amended or Repealed by the Bill, as Reported

In compliance with clause 3(e)(1)(A) of rule XIII of the
Rules of the House of Representatives, the text of each section
proposed to be amended or repealed by the bill, as reported, is
shown below:

SECTION 62 OF THE INTERNAL REVENUE CODE OF 1986

SEC. 62. ADJUSTED GROSS INCOME DEFINED.

(a) General Rule.--For purposes of this subtitle, the term
``adjusted gross income'' means, in the case of an individual,
gross income minus the following deductions:
(1) Trade and business deductions.--The deductions
allowed by this chapter (other than by part VII of this
subchapter) which are attributable to a trade or
business carried on by the taxpayer, if such trade or
business does not consist of the performance of
services by the taxpayer as an employee.
(2) Certain trade and business deductions of
employees.--
(A) Reimbursed expenses of employees.--The
deductions allowed by part VI (section 161 and
following) which consist of expenses paid or
incurred by the taxpayer, in connection with
the performance by him of services as an
employee, under a reimbursement or other
expense allowance arrangement with his
employer. The fact that the reimbursement may
be provided by a third party shall not be
determinative of whether or not the preceding
sentence applies.
(B) Certain expenses of performing artists.--
The deductions allowed by section 162 which
consist of expenses paid or incurred by a
qualified performing artist in connection with
the performances by him of services in the
performing arts as an employee.
(C) Certain expenses of officials.--The
deductions allowed by section 162 which consist
of expenses paid or incurred with respect to
services performed by an official as an
employee of a State or a political subdivision
thereof in a position compensated in whole or
in part on a fee basis.
(D) Certain expenses of elementary and
secondary school teachers.--In the case of
taxable years beginning during 2002, 2003,
2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011,
2012, 2013, or 2014, the deductions allowed by
section 162 which consist of expenses, not in
excess of $250, paid or incurred by an eligible
educator in connection with books, supplies
(other than nonathletic supplies for courses of
instruction in health or physical education),
computer equipment (including related software
and services) and other equipment, and
supplementary materials used by the eligible
educator in the classroom.
(E) Certain expenses of members of reserve
components of the Armed Forces of the United
States.--The deductions allowed by section 162
which consist of expenses, determined at a rate
not in excess of the rates for travel expenses
(including per diem in lieu of subsistence)
authorized for employees of agencies under
subchapter I of chapter 57 of title 5, United
States Code, paid or incurred by the taxpayer
in connection with the performance of services
by such taxpayer as a member of a reserve
component of the Armed Forces of the United
States for any period during which such
individual is more than 100 miles away from
home in connection with such services.
(3) Losses from sale or exchange of property.--The
deductions allowed by part VI (sec. 161 and following)
as losses from the sale or exchange of property.
(4) Deductions attributable to rents and royalties.--
The deductions allowed by part VI (sec. 161 and
following), by section 212 (relating to expenses for
production of income), and by section 611 (relating to
depletion) which are attributable to property held for
the production of rents or royalties.
(5) Certain deductions of life tenants and income
beneficiaries of property.--In the case of a life
tenant of property, or an income beneficiary of
property held in trust, or an heir, legatee, or devisee
of an estate, the deduction for depreciation allowed by
section 167 and the deduction allowed by section 611.
(6) Pension, profit-sharing, and annuity plans of
self-employed individuals.--In the case of an
individual who is an employee within the meaning of
section 401(c)(1), the deduction allowed by section
404.
(7) Retirement savings.--The deduction allowed by
section 219 (relating to deduction of certain
retirement savings).
(9) Penalties forfeited because of premature
withdrawal of funds from time savings accounts or
deposits.--The deductions allowed by section 165 for
losses incurred in any transaction entered into for
profit, though not connected with a trade or business,
to the extent that such losses include amounts
forfeited to a bank, mutual savings bank, savings and
loan association, building and loan association,
cooperative bank or homestead association as a penalty
for premature withdrawal of funds from a time savings
account, certificate of deposit, or similar class of
deposit.
(10) Alimony.--The deduction allowed by section 215.
(11) Reforestation expenses.--The deduction allowed
by section 194.
(12) Certain required repayments of supplemental
unemployment compensation benefits.--The deduction
allowed by section 165 for the repayment to a trust
described in paragraph (9) or (17) of section 501(c) of
supplemental unemployment compensation benefits
received from such trust if such repayment is required
because of the receipt of trade readjustment allowances
under section 231 or 232 of the Trade Act of 1974 (19
U.S.C. Sec. 2291 and 2292).
(13) Jury duty pay remitted to employer.--Any
deduction allowable under this chapter by reason of an
individual remitting any portion of any jury pay to
such individual's employer in exchange for payment by
the employer of compensation for the period such
individual was performing jury duty. For purposes of
the preceding sentence, the term ``jury pay'' means any
payment received by the individual for the discharge of
jury duty.
(15) Moving expenses.--The deduction allowed by
section 217.
(16) Archer MSAs.--The deduction allowed by section
220.
(17) Interest on education loans.--The deduction
allowed by section 221.
(18) Higher education expenses.--The deduction
allowed by section 222.
(19) Health savings accounts.--The deduction allowed
by section 223.
(20) Costs involving discrimination suits, etc..--Any
deduction allowable under this chapter for attorney
fees and court costs paid by, or on behalf of, the
taxpayer in connection with any action involving a
claim of unlawful discrimination (as defined in
subsection (e)) or a claim of a violation of subchapter
III of chapter 37 of title 31, United States Code or a
claim made under section 1862(b)(3)(A) of the Social
Security Act (42 U.S.C. 1395y(b)(3)(A)). The preceding
sentence shall not apply to any deduction in excess of
the amount includible in the taxpayer's gross income
for the taxable year on account of a judgment or
settlement (whether by suit or agreement and whether as
lump sum or periodic payments) resulting from such
claim.
(21) Attorneys fees relating to awards to
whistleblowers.--Any deduction allowable under this
chapter for attorney fees and court costs paid by, or
on behalf of, the taxpayer in connection with any award
under section 7623(b) (relating to awards to
whistleblowers). The preceding sentence shall not apply
to any deduction in excess of the amount includible in
the taxpayer's gross income for the taxable year on
account of such award.
Nothing in this section shall permit the same item to
be deducted more than once.
(b) Qualified Performing Artist.--
(1) In general.--For purposes of subsection
(a)(2)(B), the term ``qualified performing artist''
means, with respect to any taxable year, any individual
if--
(A) such individual performed services in the
performing arts as an employee during the
taxable year for at least 2 employers,
(B) the aggregate amount allowable as a
deduction under section 162 in connection with
the performance of such services exceeds 10
percent of such individual's gross income
attributable to the performance of such
services, and
(C) the adjusted gross income of such
individual for the taxable year (determined
without regard to subsection (a)(2)(B)) does
not exceed $16,000.
(2) Nominal employer not taken into account.--An
individual shall not be treated as performing services
in the performing arts as an employee for any employer
during any taxable year unless the amount received by
such individual from such employer for the performance
of such services during the taxable year equals or
exceeds $200.
(3) Special rules for married couples.--
(A) In general.--Except in the case of a
husband and wife who lived apart at all times
during the taxable year, if the taxpayer is
married at the close of the taxable year,
subsection (a)(2)(B) shall apply only if the
taxpayer and his spouse file a joint return for
the taxable year.
(B) Application of paragraph (1).--In the
case of a joint return--
(i) paragraph (1) (other than
subparagraph (C) thereof) shall be
applied separately with respect to each
spouse, but
(ii) paragraph (1)(C) shall be
applied with respect to their combined
adjusted gross income.
(C) Determination of marital status.--For
purposes of this subsection, marital status
shall be determined under section 7703(a).
(D) Joint return.--For purposes of this
subsection, the term ``joint return'' means the
joint return of a husband and wife made under
section 6013.
(c) Certain Arrangements Not Treated as Reimbursement
Arrangements.--For purposes of subsection (a)(2)(A), an
arrangement shall in no event be treated as a reimbursement or
other expense allowance arrangement if--
(1) such arrangement does not require the employee to
substantiate the expenses covered by the arrangement to
the person providing the reimbursement, or
(2) such arrangement provides the employee the right
to retain any amount in excess of the substantiated
expenses covered under the arrangement.
The substantiation requirements of the preceding sentence shall
not apply to any expense to the extent that substantiation is
not required under section 274(d) for such expense by reason of
the regulations prescribed under the 2nd sentence thereof.
(d) Definition; Special Rules.--
(1) Eligible educator.--
(A) In general.--For purposes of subsection
(a)(2)(D), the term ``eligible educator''
means, with respect to any taxable year, an
individual who is a kindergarten through grade
12 teacher, instructor, counselor, principal,
or aide in a school for at least 900 hours
during a school year.
(B) School.--The term ``school'' means any
school which provides elementary education or
secondary education (kindergarten through grade
12), as determined under State law.
(2) Coordination with exclusions.--A deduction shall
be allowed under subsection (a)(2)(D) for expenses only
to the extent the amount of such expenses exceeds the
amount excludable under section 135, 529(c)(1), or
530(d)(2) for the taxable year.
(e) Unlawful Discrimination Defined.--For purposes of
subsection (a)(20), the term ``unlawful discrimination'' means
an act that is unlawful under any of the following:
(1) Section 302 of the Civil Rights Act of 1991 (2
U.S.C. 1202).
(2) Section 201, 202, 203, 204, 205, 206, or 207 of
the Congressional Accountability Act of 1995 (2 U.S.C.
1311, 1312, 1313, 1314, 1315, 1316, or 1317).
(3) The National Labor Relations Act (29 U.S.C. 151
et seq.).
(4) The Fair Labor Standards Act of 1938 (29 U.S.C.
201 et seq.).
(5) Section 4 or 15 of the Age Discrimination in
Employment Act of 1967 (29 U.S.C. 623 or 633a).
(6) Section 501 or 504 of the Rehabilitation Act of
1973 (29 U.S.C. 791 or 794).
(7) Section 510 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1140).
(8) Title IX of the Education Amendments of 1972 (20
U.S.C. 1681 et seq.).
(9) The Employee Polygraph Protection Act of 1988 (29
U.S.C. 2001 et seq.).
(10) The Worker Adjustment and Retraining
Notification Act (29 U.S.C. 2102 et seq.).
(11) Section 105 of the Family and Medical Leave Act
of 1993 (29 U.S.C. 2615).
(12) Chapter 43 of title 38, United States Code
(relating to employment and reemployment rights of
members of the uniformed services).
(13) Section 1977, 1979, or 1980 of the Revised
Statutes (42 U.S.C. 1981, 1983, or 1985).
(14) Section 703, 704, or 717 of the Civil Rights Act
of 1964 (42 U.S.C. 2000e-2, 2000e-3, or 2000e-16).
(15) Section 804, 805, 806, 808, or 818 of the Fair
Housing Act (42 U.S.C. 3604, 3605, 3606, 3608, or
3617).
(16) Section 102, 202, 302, or 503 of the Americans
with Disabilities Act of 1990 (42 U.S.C. 12112, 12132,
12182, or 12203).
(17) Any provision of Federal law (popularly known as
whistleblower protection provisions) prohibiting the
discharge of an employee, the discrimination against an
employee, or any other form of retaliation or reprisal
against an employee for asserting rights or taking
other actions permitted under Federal law.
(18) Any provision of Federal, State, or local law,
or common law claims permitted under Federal, State, or
local law--
(i) providing for the enforcement of civil
rights, or
(ii) regulating any aspect of the employment
relationship, including claims for wages,
compensation, or benefits, or prohibiting the
discharge of an employee, the discrimination
against an employee, or any other form of
retaliation or reprisal against an employee for
asserting rights or taking other actions
permitted by law.

B. Changes in Existing Law Proposed by the Bill, as Reported

In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
proposed by the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italics, existing law in
which no change is proposed is shown in roman):

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
proposed by the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italics, and existing law in
which no change is proposed is shown in roman):

SECTION 62 OF THE INTERNAL REVENUE CODE OF 1986

SEC. 62. ADJUSTED GROSS INCOME DEFINED.

(a) General Rule.--For purposes of this subtitle, the term
``adjusted gross income'' means, in the case of an individual,
gross income minus the following deductions:
(1) Trade and business deductions.--The deductions
allowed by this chapter (other than by part VII of this
subchapter) which are attributable to a trade or
business carried on by the taxpayer, if such trade or
business does not consist of the performance of
services by the taxpayer as an employee.
(2) Certain trade and business deductions of
employees.--
(A) Reimbursed expenses of employees.--The
deductions allowed by part VI (section 161 and
following) which consist of expenses paid or
incurred by the taxpayer, in connection with
the performance by him of services as an
employee, under a reimbursement or other
expense allowance arrangement with his
employer. The fact that the reimbursement may
be provided by a third party shall not be
determinative of whether or not the preceding
sentence applies.
(B) Certain expenses of performing artists.--
The deductions allowed by section 162 which
consist of expenses paid or incurred by a
qualified performing artist in connection with
the performances by him of services in the
performing arts as an employee.
(C) Certain expenses of officials.--The
deductions allowed by section 162 which consist
of expenses paid or incurred with respect to
services performed by an official as an
employee of a State or a political subdivision
thereof in a position compensated in whole or
in part on a fee basis.
(D) Certain expenses of elementary and
secondary school teachers.--[In the case of
taxable years beginning during 2002, 2003,
2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011,
2012, 2013, or 2014, the deductions] The
deductions allowed by section 162 which consist
of expenses, not in excess of $250, paid or
incurred by an eligible [educator in connection
with books, supplies (other than nonathletic
supplies for courses of instruction in health
or physical education), computer equipment
(including related software and services) and
other equipment, and supplementary materials
used by the eligible educator in the
classroom.] educator--
(i) by reason of the participation of
the educator in professional
development courses related to the
curriculum in which the educator
provides instruction or to the students
for which the educator provides
instruction, and
(ii) in connection with books,
supplies (other than nonathletic
supplies for courses of instruction in
health or physical education), computer
equipment (including related software
and services) and other equipment, and
supplementary materials used by the
eligible educator in the classroom.
(E) Certain expenses of members of reserve
components of the Armed Forces of the United
States.--The deductions allowed by section 162
which consist of expenses, determined at a rate
not in excess of the rates for travel expenses
(including per diem in lieu of subsistence)
authorized for employees of agencies under
subchapter I of chapter 57 of title 5, United
States Code, paid or incurred by the taxpayer
in connection with the performance of services
by such taxpayer as a member of a reserve
component of the Armed Forces of the United
States for any period during which such
individual is more than 100 miles away from
home in connection with such services.
(3) Losses from sale or exchange of property.--The
deductions allowed by part VI (sec. 161 and following)
as losses from the sale or exchange of property.
(4) Deductions attributable to rents and royalties.--
The deductions allowed by part VI (sec. 161 and
following), by section 212 (relating to expenses for
production of income), and by section 611 (relating to
depletion) which are attributable to property held for
the production of rents or royalties.
(5) Certain deductions of life tenants and income
beneficiaries of property.--In the case of a life
tenant of property, or an income beneficiary of
property held in trust, or an heir, legatee, or devisee
of an estate, the deduction for depreciation allowed by
section 167 and the deduction allowed by section 611.
(6) Pension, profit-sharing, and annuity plans of
self-employed individuals.--In the case of an
individual who is an employee within the meaning of
section 401(c)(1), the deduction allowed by section
404.
(7) Retirement savings.--The deduction allowed by
section 219 (relating to deduction of certain
retirement savings).
(9) Penalties forfeited because of premature
withdrawal of funds from time savings accounts or
deposits.--The deductions allowed by section 165 for
losses incurred in any transaction entered into for
profit, though not connected with a trade or business,
to the extent that such losses include amounts
forfeited to a bank, mutual savings bank, savings and
loan association, building and loan association,
cooperative bank or homestead association as a penalty
for premature withdrawal of funds from a time savings
account, certificate of deposit, or similar class of
deposit.
(10) Alimony.--The deduction allowed by section 215.
(11) Reforestation expenses.--The deduction allowed
by section 194.
(12) Certain required repayments of supplemental
unemployment compensation benefits.--The deduction
allowed by section 165 for the repayment to a trust
described in paragraph (9) or (17) of section 501(c) of
supplemental unemployment compensation benefits
received from such trust if such repayment is required
because of the receipt of trade readjustment allowances
under section 231 or 232 of the Trade Act of 1974 (19
U.S.C. Sec. 2291 and 2292).
(13) Jury duty pay remitted to employer.--Any
deduction allowable under this chapter by reason of an
individual remitting any portion of any jury pay to
such individual's employer in exchange for payment by
the employer of compensation for the period such
individual was performing jury duty. For purposes of
the preceding sentence, the term ``jury pay'' means any
payment received by the individual for the discharge of
jury duty.
(15) Moving expenses.--The deduction allowed by
section 217.
(16) Archer MSAs.--The deduction allowed by section
220.
(17) Interest on education loans.--The deduction
allowed by section 221.
(18) Higher education expenses.--The deduction
allowed by section 222.
(19) Health savings accounts.--The deduction allowed
by section 223.
(20) Costs involving discrimination suits, etc..--Any
deduction allowable under this chapter for attorney
fees and court costs paid by, or on behalf of, the
taxpayer in connection with any action involving a
claim of unlawful discrimination (as defined in
subsection (e)) or a claim of a violation of subchapter
III of chapter 37 of title 31, United States Code or a
claim made under section 1862(b)(3)(A) of the Social
Security Act (42 U.S.C. 1395y(b)(3)(A)). The preceding
sentence shall not apply to any deduction in excess of
the amount includible in the taxpayer's gross income
for the taxable year on account of a judgment or
settlement (whether by suit or agreement and whether as
lump sum or periodic payments) resulting from such
claim.
(21) Attorneys fees relating to awards to
whistleblowers.--Any deduction allowable under this
chapter for attorney fees and court costs paid by, or
on behalf of, the taxpayer in connection with any award
under section 7623(b) (relating to awards to
whistleblowers). The preceding sentence shall not apply
to any deduction in excess of the amount includible in
the taxpayer's gross income for the taxable year on
account of such award.
Nothing in this section shall permit the same item to
be deducted more than once.
(b) Qualified Performing Artist.--
(1) In general.--For purposes of subsection
(a)(2)(B), the term ``qualified performing artist''
means, with respect to any taxable year, any individual
if--
(A) such individual performed services in the
performing arts as an employee during the
taxable year for at least 2 employers,
(B) the aggregate amount allowable as a
deduction under section 162 in connection with
the performance of such services exceeds 10
percent of such individual's gross income
attributable to the performance of such
services, and
(C) the adjusted gross income of such
individual for the taxable year (determined
without regard to subsection (a)(2)(B)) does
not exceed $16,000.
(2) Nominal employer not taken into account.--An
individual shall not be treated as performing services
in the performing arts as an employee for any employer
during any taxable year unless the amount received by
such individual from such employer for the performance
of such services during the taxable year equals or
exceeds $200.
(3) Special rules for married couples.--
(A) In general.--Except in the case of a
husband and wife who lived apart at all times
during the taxable year, if the taxpayer is
married at the close of the taxable year,
subsection (a)(2)(B) shall apply only if the
taxpayer and his spouse file a joint return for
the taxable year.
(B) Application of paragraph (1).--In the
case of a joint return--
(i) paragraph (1) (other than
subparagraph (C) thereof) shall be
applied separately with respect to each
spouse, but
(ii) paragraph (1)(C) shall be
applied with respect to their combined
adjusted gross income.
(C) Determination of marital status.--For
purposes of this subsection, marital status
shall be determined under section 7703(a).
(D) Joint return.--For purposes of this
subsection, the term ``joint return'' means the
joint return of a husband and wife made under
section 6013.
(c) Certain Arrangements Not Treated as Reimbursement
Arrangements.--For purposes of subsection (a)(2)(A), an
arrangement shall in no event be treated as a reimbursement or
other expense allowance arrangement if--
(1) such arrangement does not require the employee to
substantiate the expenses covered by the arrangement to
the person providing the reimbursement, or
(2) such arrangement provides the employee the right
to retain any amount in excess of the substantiated
expenses covered under the arrangement.
The substantiation requirements of the preceding sentence shall
not apply to any expense to the extent that substantiation is
not required under section 274(d) for such expense by reason of
the regulations prescribed under the 2nd sentence thereof.
(d) Definition; Special Rules.--
(1) Eligible educator.--
(A) In general.--For purposes of subsection
(a)(2)(D), the term ``eligible educator''
means, with respect to any taxable year, an
individual who is a kindergarten through grade
12 teacher, instructor, counselor, principal,
or aide in a school for at least 900 hours
during a school year.
(B) School.--The term ``school'' means any
school which provides elementary education or
secondary education (kindergarten through grade
12), as determined under State law.
(2) Coordination with exclusions.--A deduction shall
be allowed under subsection (a)(2)(D) for expenses only
to the extent the amount of such expenses exceeds the
amount excludable under section 135, 529(c)(1), or
530(d)(2) for the taxable year.
(3) Inflation adjustment.--In the case of any taxable
year beginning after 2014, the $250 amount in
subsection (a)(2)(D) shall be increased by an amount
equal to--
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in
which the taxable year begins, determined by
substituting ``calendar year 2013'' for
``calendar year 1992'' in subparagraph (B)
thereof.
Any increase determined under the preceding sentence
shall be rounded to the nearest multiple of $50.
(e) Unlawful Discrimination Defined.--For purposes of
subsection (a)(20), the term ``unlawful discrimination'' means
an act that is unlawful under any of the following:
(1) Section 302 of the Civil Rights Act of 1991 (2
U.S.C. 1202).
(2) Section 201, 202, 203, 204, 205, 206, or 207 of
the Congressional Accountability Act of 1995 (2 U.S.C.
1311, 1312, 1313, 1314, 1315, 1316, or 1317).
(3) The National Labor Relations Act (29 U.S.C. 151
et seq.).
(4) The Fair Labor Standards Act of 1938 (29 U.S.C.
201 et seq.).
(5) Section 4 or 15 of the Age Discrimination in
Employment Act of 1967 (29 U.S.C. 623 or 633a).
(6) Section 501 or 504 of the Rehabilitation Act of
1973 (29 U.S.C. 791 or 794).
(7) Section 510 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1140).
(8) Title IX of the Education Amendments of 1972 (20
U.S.C. 1681 et seq.).
(9) The Employee Polygraph Protection Act of 1988 (29
U.S.C. 2001 et seq.).
(10) The Worker Adjustment and Retraining
Notification Act (29 U.S.C. 2102 et seq.).
(11) Section 105 of the Family and Medical Leave Act
of 1993 (29 U.S.C. 2615).
(12) Chapter 43 of title 38, United States Code
(relating to employment and reemployment rights of
members of the uniformed services).
(13) Section 1977, 1979, or 1980 of the Revised
Statutes (42 U.S.C. 1981, 1983, or 1985).
(14) Section 703, 704, or 717 of the Civil Rights Act
of 1964 (42 U.S.C. 2000e-2, 2000e-3, or 2000e-16).
(15) Section 804, 805, 806, 808, or 818 of the Fair
Housing Act (42 U.S.C. 3604, 3605, 3606, 3608, or
3617).
(16) Section 102, 202, 302, or 503 of the Americans
with Disabilities Act of 1990 (42 U.S.C. 12112, 12132,
12182, or 12203).
(17) Any provision of Federal law (popularly known as
whistleblower protection provisions) prohibiting the
discharge of an employee, the discrimination against an
employee, or any other form of retaliation or reprisal
against an employee for asserting rights or taking
other actions permitted under Federal law.
(18) Any provision of Federal, State, or local law,
or common law claims permitted under Federal, State, or
local law--
(i) providing for the enforcement of civil
rights, or
(ii) regulating any aspect of the employment
relationship, including claims for wages,
compensation, or benefits, or prohibiting the
discharge of an employee, the discrimination
against an employee, or any other form of
retaliation or reprisal against an employee for
asserting rights or taking other actions
permitted by law.

VII. DISSENTING VIEWS

The five permanent, unpaid-for tax extender bills approved
by the Republicans at the markup would add more than $411
billion to the deficit. Combined with the eleven tax bills that
were approved by the Republicans in previous markups this
Congress, these sixteen tax bills would add more than $1
trillion to the deficit. In the 113th Congress, Ways and Means
Committee Republicans selectively approved fourteen of the more
than fifty expired tax provisions, totaling more than $825
billion worth of deficit-financed, permanent tax cuts. This
selective approach failed last Congress, with none of these
permanent provisions being enacted into law. The bills marked
up by the Committee set us down a partisan path, when we should
be working in a responsible, bipartisan manner on tax reform.
Even though a number of these bills were introduced
individually with some bipartisan support, our opposition to
these bills is based on the position that these tax provisions
should not be made permanent without any revenue offset. The
fiscally irresponsible approach that the Committee Republicans
are taking with respect to this and other important legislation
undermines the bipartisan support that some of the provisions
enjoy. In fact, this provision was repealed in the Republican
tax reform plan (H.R. 1) introduced by the Ways and Means
Committee Chairman last Congress. The cost of this provision
should be offset, and Republicans should stop playing games by
passing these important provisions outside of comprehensive tax
reform. The American people expect a tax code that maintains
and supports our shared priorities, and each time the Committee
considers these permanent tax bills in a piecemeal approach, it
is taking a step in the wrong direction and away from
comprehensive tax reform.
We all support provisions that help our nation's teachers
with their out-of-pocket classroom expenses that continue to
increase as a direct result of our underfunded education
system. However, expired provisions must be dealt with in a
comprehensive manner. The Republicans did not take up other tax
extenders that also are important to Democratic Committee
Members. Left to an uncertain fate are provisions like the Work
Opportunity Tax Credit, the New Markets Tax Credit, and the
renewable energy tax credits, as well as the long-term status
of the Earned Income Tax Credit, the Child Tax Credit, and the
American Opportunity Tax Credit.

Sincerely,
Sander M. Levin,
Ranking Member.