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Earned Income Credit for Taxable Years Beginning After December 31, 1978

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Internal Revenue Service (IRS), Treasury.


Final regulations.

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This document contains final regulations relating to the earned income credit. The regulations reflect changes in the law since the existing regulations were published in the Federal Register on March 13, 1980. Due to subsequent statutory changes in the applicable tax law, substantial portions of the regulations are no longer in conformity with current law. Accordingly, portions of the existing regulations are removed. These regulations apply to individual taxpayers claiming the earned income credit.


Effective Date: These regulations are effective March 6, 2003.

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Shoshanna Tanner at (202) 622-6080 (not a toll-free number).

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This document contains amendments to the Income Tax Regulations (26 CFR Part 1) under section 32 of the Internal Revenue Code (Code). Section 32 allows a refundable credit to low-income taxpayers who meet certain income and eligibility requirements. Section 43 (the predecessor of section 32) was added to the Code by the Tax Reduction Act of 1975 (Pub. L. 94-12, 89 Stat. 26) and made permanent by the Revenue Act of 1978 (Pub. L. 95-600, 92 Stat. 2763). Final regulations (TD 7683) under section 43 were published in the Federal Register (45 FR 16174) on March 13, 1980. Section 43 was redesignated as section 32 by the Tax Reform Act of 1984 (Pub. L. 98-369, 98 Stat. 494). Section 1.43-2 was redesignated as § 1.32-2 in Treasury Decision 8448 (57 FR 54919) on November 23, 1992.

Section 1.32-2(b)(2) of the existing regulations refers to section 143 for an explanation of the term “married individual”. The provisions of section 143 were reenacted as section 7703 by the Tax Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085).

In addition, portions of the existing regulations are inconsistent with changes made by the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, 104 Stat. 1388), the Economic Growth and Tax Relief Reconciliation Act of 2001 (Pub. L. 107-16, 115 Stat. 38), and various other legislative enactments.

Explanation of Provisions

To comport with the redesignation of section 43 to section 32 and §§ 1.43-2 to 1.32-2, these final regulations replace references to section 43 with references to section 32. Similarly, these regulations replace the references to section 143 in § 1.32-2(b)(2) with references to section 7703. These regulations also remove the inconsistent provisions in the existing regulations.

Special Analyses

It has been determined that these final regulations are not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Because no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursuant to section 7805(f), these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Drafting Information

The principal author of these regulations is Shoshanna Tanner of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Department of Treasury participated in their development.

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List of Subjects in 26 CFR Part 1

  • Income taxes
  • Reporting and recordkeeping requirements
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Adoption of Amendments to the Regulations

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Accordingly, 26 CFR Part 1 is amended as follows:

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1. The authority for part 1 continues to read in part as follows:

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Authority: 26 U.S.C. 7805 * * *

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2. Section 1.32-2 is amended as follows:

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1. Paragraphs (a), (b)(1), (c)(1), and (d) are removed and reserved.

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2. Paragraphs (b)(2), (b)(3), (c)(2), and (e)(2) are revised.

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The revisions read as follows:

Earned income credit for taxable years beginning after December 31, 1978.

(a) [Reserved].

(b) * * * (1) [Reserved].

(2) Married individuals. No credit is allowed by section 32 in the case of an eligible individual who is married (within the meaning of section 7703 and the regulations thereunder) unless the individual and spouse file a single return jointly (a joint return) for the taxable year (see section 6013 and the regulations thereunder relating to joint returns of income tax by husband and wife). The requirements of the preceding sentence do not apply to an eligible individual who is not considered as married under section 7703(b) and the regulations thereunder (relating to certain married individuals living apart).

(3) Length of taxable year. No credit is allowed by section 32 in the case of a taxable year covering a period of less than 12 months. However, the rule of the preceding sentence does not apply to a taxable year closed by reason of the death of the eligible individual.

(c) * * * (1) [Reserved].

(2) Earned income. For purposes of this section, earned income is computed without regard to any community property laws which may otherwise be applicable. Earned income is reduced by any net loss in earnings from self-employment. Earned income does not include amounts received as a pension, an annuity, unemployment compensation, or workmen's compensation, or an amount to which section 871(a) and the regulations thereunder apply (relating to income of nonresident alien individuals not connected with United States business).

(d) [Reserved].

(e) * * * (1) * * *.

(2) Reconciliation of payments advanced and credit allowed. Any additional amount of tax under paragraph (e)(1) of this section is not treated as a tax imposed by chapter 1 of the Internal Revenue Code for purposes of determining the amount of any credit (other than the earned income credit) allowable under part IV, subchapter A, chapter 1 of the Internal Revenue Code.

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David A. Mader,

Assistant Deputy Commissioner of Internal Revenue.

Approved: February 11, 2003.

Pamela F. Olson,

Assistant Secretary of the Treasury.

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[FR Doc. 03-5339 Filed 3-5-03; 8:45 am]