[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2621 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 2621
To amend the Internal Revenue Code of 1986 to establish deductions for
cash tips, repeal the inclusion of social security benefits in gross
income, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 3, 2025
Mr. Cohen (for himself and Mr. Carson) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish deductions for
cash tips, repeal the inclusion of social security benefits in gross
income, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Reward Each
American's Labor And Make Every Rich Individual Contribute Again Act''
or the ``REAL AMERICA Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. DEDUCTION FOR CASH TIPS.
(a) Deduction Allowed.--
(1) In general.--Part VII of subchapter B of chapter 1 is
amended by redesignating section 224 as section 225 and by
inserting after section 223 the following new section:
``SEC. 224. CASH TIPS.
``(a) In General.--There shall be allowed as a deduction an amount
equal to the cash tips received during the taxable year that are
included on statements furnished to the employer pursuant to section
6053(a).
``(b) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--No deduction shall be allowed by this
section for any taxpayer if such taxpayer's modified adjusted
gross income for the taxable year exceeds $450,000 ($900,000,
in the case of a joint return).
``(2) Modified adjusted gross income.--For purposes of this
subsection, the term `modified adjusted gross income' means the
adjusted gross income of the taxpayer for the taxable year
increased by any amount excluded from gross income under
section 911, 931, or 933.''.
(2) Clerical amendment.--The table of sections for part VII
of subchapter B of chapter 1 is amended by redesignating the
item relating to section 224 as relating to section 225 and by
inserting after the item relating to section 223 the following
new item:
``Sec. 224. Cash tips.''.
(b) Deduction Allowed to Non-itemizers.--Section 63(b) is amended
by striking ``and'' at the end of paragraph (3), by striking the period
at the end of paragraph (4) and inserting ``, and'', and by adding at
the end the following new paragraph:
``(5) the deduction provided in section 224.''.
(c) Withholding.--The Secretary of the Treasury (or the Secretary's
delegate) shall modify the tables and procedures prescribed under
section 3402(a) of the Internal Revenue Code of 1986 to take into
account the deduction allowed under section 224 of such Code (as added
by this Act).
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 3. REPEAL OF INCLUSION OF SOCIAL SECURITY BENEFITS IN GROSS
INCOME.
(a) In General.--Section 86 is amended by adding at the end the
following new subsection:
``(g) Termination.--This section shall not apply to any taxable
year beginning after December 31, 2025.''.
(b) Social Security Trust Funds Held Harmless.--There are hereby
appropriated (out of any money in the Treasury not otherwise
appropriated) for each fiscal year to each fund under the Social
Security Act (including the Federal Hospital Insurance Trust Fund) or
the Railroad Retirement Act of 1974 an amount equal to the reduction in
the transfers to such fund for such fiscal year by reason of section
86(g) of the Internal Revenue Code of 1986.
SEC. 4. DEDUCTION FOR QUALIFIED OVERTIME COMPENSATION.
(a) Deduction Allowed.--
(1) In general.--Part VII of subchapter B of chapter 1, as
amended by the preceding provisions of this Act, is amended by
redesignating section 225 as section 226 and by inserting after
section 224 the following new section:
``SEC. 225. QUALIFIED OVERTIME COMPENSATION.
``(a) In General.--There shall be allowed as a deduction an amount
equal to the qualified overtime compensation received during the
taxable year.
``(b) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--No deduction shall be allowed by this
section for any taxpayer if such taxpayer's modified adjusted
gross income for the taxable year exceeds $450,000 ($900,000,
in the case of a joint return).
``(2) Modified adjusted gross income.--For purposes of this
subsection, the term `modified adjusted gross income' means the
adjusted gross income of the taxpayer for the taxable year
increased by any amount excluded from gross income under
section 911, 931, or 933.
``(c) Qualified Overtime Compensation.--For purposes of this
section, the term `qualified overtime compensation' means overtime
compensation that is paid to an individual as required under section 7
of the Fair Labor Standards Act of 1938 and is in excess of the regular
rate (as used in such section) at which such individual is employed.
Such term shall not include any amount deducted under section 224.''.
(2) Clerical amendment.--The table of sections for part VII
of subchapter B of chapter 1, as amended by the preceding
provisions of this Act, is amended by redesignating the item
relating to section 225 as relating to section 226 and by
inserting after the item relating to section 224 the following
new item:
``225. Qualified overtime compensation.''.
(b) Deduction Allowed to Non-itemizers.--Section 63(b), as amended
by the preceding provisions of this Act, is amended by striking ``and''
at the end of paragraph (4), by striking the period at the end of
paragraph (5) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(6) the deduction provided in section 225.''.
(c) Requirement To Include Overtime Compensation on W-2.--Section
6051(a) is amended by striking ``and'' at the end of paragraph (16), by
striking the period at the end of paragraph (17) and inserting ``,
and'', and by inserting after paragraph (17) the following new
paragraph:
``(18) the total amount of qualified overtime compensation
(as defined in section 225(b)).''.
(d) Withholding.--The Secretary of the Treasury (or the Secretary's
delegate) shall modify the tables and procedures prescribed under
section 3402(a) of the Internal Revenue Code of 1986 to take into
account the deduction allowed under section 225 of such Code (as added
by this Act).
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 5. PARTNERSHIP INTERESTS TRANSFERRED IN CONNECTION WITH
PERFORMANCE OF SERVICES.
(a) Modification to Election To Include Partnership Interest in
Gross Income in Year of Transfer.--Subsection (c) of section 83 is
amended by redesignating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new paragraph:
``(4) Partnership interests.--Except as provided by the
Secretary--
``(A) In general.--In the case of any transfer of
an interest in a partnership in connection with the
provision of services to (or for the benefit of) such
partnership--
``(i) the fair market value of such
interest shall be treated for purposes of this
section as being equal to the amount of the
distribution which the partner would receive if
the partnership sold (at the time of the
transfer) all of its assets at fair market
value and distributed the proceeds of such sale
(reduced by the liabilities of the partnership)
to its partners in liquidation of the
partnership, and
``(ii) the person receiving such interest
shall be treated as having made the election
under subsection (b)(1) unless such person
makes an election under this paragraph to have
such subsection not apply.
``(B) Election.--The election under subparagraph
(A)(ii) shall be made under rules similar to the rules
of subsection (b)(2).''.
(b) Effective Date.--The amendments made by this section shall
apply to interests in partnerships transferred after the date of the
enactment of this Act.
SEC. 6. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT
SERVICES TO PARTNERSHIPS.
(a) In General.--Part I of subchapter K of chapter 1 is amended by
adding at the end the following new section:
``SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT
SERVICES TO PARTNERSHIPS.
``(a) Treatment of Distributive Share of Partnership Items.--For
purposes of this title, in the case of an investment services
partnership interest--
``(1) In general.--Notwithstanding section 702(b)--
``(A) an amount equal to the net capital gain with
respect to such interest for any partnership taxable
year shall be treated as ordinary income, and
``(B) subject to the limitation of paragraph (2),
an amount equal to the net capital loss with respect to
such interest for any partnership taxable year shall be
treated as an ordinary loss.
``(2) Recharacterization of losses limited to
recharacterized gains.--The amount treated as ordinary loss
under paragraph (1)(B) for any taxable year shall not exceed
the excess (if any) of--
``(A) the aggregate amount treated as ordinary
income under paragraph (1)(A) with respect to the
investment services partnership interest for all
preceding partnership taxable years to which this
section applies, over
``(B) the aggregate amount treated as ordinary loss
under paragraph (1)(B) with respect to such interest
for all preceding partnership taxable years to which
this section applies.
``(3) Allocation to items of gain and loss.--
``(A) Net capital gain.--The amount treated as
ordinary income under paragraph (1)(A) shall be
allocated ratably among the items of long-term capital
gain taken into account in determining such net capital
gain.
``(B) Net capital loss.--The amount treated as
ordinary loss under paragraph (1)(B) shall be allocated
ratably among the items of long-term capital loss and
short-term capital loss taken into account in
determining such net capital loss.
``(4) Terms relating to capital gains and losses.--For
purposes of this section--
``(A) In general.--Net capital gain, long-term
capital gain, and long-term capital loss, with respect
to any investment services partnership interest for any
taxable year, shall be determined under section 1222,
except that such section shall be applied--
``(i) without regard to the
recharacterization of any item as ordinary
income or ordinary loss under this section,
``(ii) by only taking into account items of
gain and loss taken into account by the holder
of such interest under section 702 (other than
subsection (a)(9) thereof) with respect to such
interest for such taxable year, and
``(iii) by treating property which is taken
into account in determining gains and losses to
which section 1231 applies as capital assets
held for more than 1 year.
``(B) Net capital loss.--The term `net capital
loss' means the excess of the losses from sales or
exchanges of capital assets over the gains from such
sales or exchanges. Rules similar to the rules of
clauses (i) through (iii) of subparagraph (A) shall
apply for purposes of the preceding sentence.
``(5) Special rule for dividends.--Any dividend allocated
with respect to any investment services partnership interest
shall not be treated as qualified dividend income for purposes
of section 1(h).
``(6) Special rule for qualified small business stock.--
Section 1202 shall not apply to any gain from the sale or
exchange of qualified small business stock (as defined in
section 1202(c)) allocated with respect to any investment
services partnership interest.
``(b) Dispositions of Partnership Interests.--
``(1) Gain.--
``(A) In general.--Any gain on the disposition of
an investment services partnership interest shall be--
``(i) treated as ordinary income, and
``(ii) recognized notwithstanding any other
provision of this subtitle.
``(B) Gift and transfers at death.--In the case of
a disposition of an investment services partnership
interest by gift or by reason of death of the
taxpayer--
``(i) subparagraph (A) shall not apply,
``(ii) such interest shall be treated as an
investment services partnership interest in the
hands of the person acquiring such interest,
and
``(iii) any amount that would have been
treated as ordinary income under this
subsection had the decedent sold such interest
immediately before death shall be treated as an
item of income in respect of a decedent under
section 691.
``(2) Loss.--Any loss on the disposition of an investment
services partnership interest shall be treated as an ordinary
loss to the extent of the excess (if any) of--
``(A) the aggregate amount treated as ordinary
income under subsection (a) with respect to such
interest for all partnership taxable years to which
this section applies, over
``(B) the aggregate amount treated as ordinary loss
under subsection (a) with respect to such interest for
all partnership taxable years to which this section
applies.
``(3) Election with respect to certain exchanges.--
Paragraph (1)(A)(ii) shall not apply to the contribution of an
investment services partnership interest to a partnership in
exchange for an interest in such partnership if--
``(A) the taxpayer makes an irrevocable election to
treat the partnership interest received in the exchange
as an investment services partnership interest, and
``(B) the taxpayer agrees to comply with such
reporting and recordkeeping requirements as the
Secretary may prescribe.
``(4) Distributions of partnership property.--
``(A) In general.--In the case of any distribution
of property by a partnership with respect to any
investment services partnership interest held by a
partner, the partner receiving such property shall
recognize gain equal to the excess (if any) of--
``(i) the fair market value of such
property at the time of such distribution, over
``(ii) the adjusted basis of such property
in the hands of such partner (determined
without regard to subparagraph (C)).
``(B) Treatment of gain as ordinary income.--Any
gain recognized by such partner under subparagraph (A)
shall be treated as ordinary income to the same extent
and in the same manner as the increase in such
partner's distributive share of the taxable income of
the partnership would be treated under subsection (a)
if, immediately prior to the distribution, the
partnership had sold the distributed property at fair
market value and all of the gain from such disposition
were allocated to such partner. For purposes of
applying subsection (a)(2), any gain treated as
ordinary income under this subparagraph shall be
treated as an amount treated as ordinary income under
subsection (a)(1)(A).
``(C) Adjustment of basis.--In the case of a
distribution to which subparagraph (A) applies, the
basis of the distributed property in the hands of the
distributee partner shall be the fair market value of
such property.
``(D) Special rules with respect to mergers and
divisions.--In the case of a taxpayer which satisfies
requirements similar to the requirements of
subparagraphs (A) and (B) of paragraph (3), this
paragraph and paragraph (1)(A)(ii) shall not apply to
the distribution of a partnership interest if such
distribution is in connection with a contribution (or
deemed contribution) of any property of the partnership
to which section 721 applies pursuant to a transaction
described in section 708(b)(2).
``(c) Investment Services Partnership Interest.--For purposes of
this section--
``(1) In general.--