History of Changes to the FederalTax Module

The FederalTax module is written largely in the "forms" language (although some basic functions such as the construction of filing units and identification of dependents are performed in the C++ code). Forms, like TRIM3 program rules, are stored in the TRIM3 database and can be modified by the user. Therefore, the FederalTax module's capabilities depend on the version of "forms" included in the run. The FederalTax documentation describes the capabilities of the forms and C++ code used in the 2013 FederalTax baseline simulation. Changes introduced beginning with the version of forms and C++ code used in the 2013 and prior baselines are listed below.

Changes Effective with the 2013 Baseline

• Incorporated changes in code to allow simulation of provisions of the Affordable Care Act:
• Higher maximum tax rate on net capital gains and qualified dividends (via CapitalGainsTaxRate3 and CapitalGainsBreakpoint2).
• The Additional Medicare Tax that applies to taxpayers with high AGI.
• The Net Investment Income Tax that applies a tax to the smaller of a taxpayer's net investment income or the amount of modified AGI over a specified threshold.
• Changes to the medical and dental expense deduction to use a different AGI limitation for taxpayers over 65 years old, via MedicalExpensesAGIPercent65Plus.
• Added rule EITCForUnauthorizedImmigrant to allow users to assume that unauthorized immigrants do not have valid SSNs when computing EITC eligibility.
• Added rule BlindDeductionParticipationRate to allow simulation of the additional standard deduction for blind individuals.
• Added capability to simulate a child and dependent care credit that applies only to young children (through rules beginning with "YoungChildCare").

Changes Effective with the 2012 Baseline

• Added RefundableChildCareCredit rule to enable simulation of a refundable child care credit.

Changes Effective with the 2011 Baseline

• Adds variable list rules ParentIDs and BioOrAdoptiveParentIDs to allow assigning parents to children with more specificity.
• Adds rule CohabParentChildAssignment that specifies how children are assigned for tax purposes when both cohabiting parents are present in the household.

Changes Effective with the 2010 Baseline

• Improvements to the Statistical Match.
• Ended the 2005-2009 practice of using the PUF to restore variation to top-coded CPS incomes, due to changed top-coding procedures. (See here for more detail).

Changes Effective with the 2009 Baseline

• Enabled simulation of the Making Work Pay tax credit.
• Incorporated the expansion of the EITC for families with at least 3 children.
• Allowed exemption of unemployment compensation in taxable income through rule ExcludedUnemploymentCompensation.
• Began using child care expenses from the TRIM3 Child Care module, rather than the ChildCareExp module.
• Inadvertently excluded the code from 2008 to model FSAs in the CDCTC (code was restored in 2010 baseline forward).
• Adds rule ChildlessEITCRestrictions to introduce the possibility of setting restrictions on taking the childless EITC based on whether a person has EITC-qualifying children in the household.

Changes Effective with the 2008 Baseline

• Added new output variable ExpandedUnitID to better enable matching tax units with dependents.
• Enabled simulation of phasing out the personal exemption phase-out (PEP) and the phase-out of itemized deductions (Pease). (Use rules PersonalExemptionLimitationPhaseout, PersonalExemptionMinimum and ItemizedDeductionLimitationPhaseout).
• Added capability to simulate the Recovery Rebate credit.
• Improved the modeling of the Child and Dependent Tax Credit (CDCTC) to reflect the fact that some tax filers offset childcare costs with both the CDCTC and a Flexible Spending Account (FSA), via rules MaxFSAChildCareExpenses and PctFamiliesWithFSA.
• Added AdditionalDeductionPropTax rule allowing for an addition to the standard deduction for taxpayers with property taxes.

Changes Effective with the 2007 Baseline

• Added methods to simulate a change in the phase-out of the IRA deduction for joint returns (via rules IRADeductAGICutoffCoupleMin and IRAPhaseOutRangeJoint).
• Adds four new rules to provide more flexibility in setting maximum child ages for dependency and EITC purposes: MaxAgeDepNonStudent, MaxAgeDepStudent, MaxChildAgeEITCNonStudent, and MaxChildAgeEITCStudent.
• Improvements to the Statistical Match.
• Revised blocking variables and changed "minimum distance function" to use AGI for non-high-income units. (See here for more detail).
• Improved methods for identifying tax units likely to file a return.
• Edited PUF variables used to capture capital gain distributions, bottom-code large negative rental/business/farm income amounts, and adjust dollar amounts to the current tax year.

Changes Effective with the 2006 Baseline

• Added capability to enable children who are unrelated to the household reference person and are not in an unrelated subfamily, but report that they have relatives within the household, to be linked with their likely adult relatives (to use, specify UnrelatedHeadID rule).

Changes Effective with the 2005 Baseline

• Updated definitions of a "qualifying child" to correspond to changes in the Working Families Tax Act of 2004.
• Prevented the same child from being claimed by different tax units for different purposes via QualifyingChildRule
• Added ExemptGrossIncomeTest rule allowing users to modify the rules for determining whether a child is exempt from the gross income test used in determining dependency status.
• Modified which children are eligible for the child and dependent care credit and which families are allowed to claim the credit, via the rules ChildCareCreditQualifChild and SubfamilyEligForCDCTC.
• Introduced HeadOfHhldQualifyingPerson rule to indicate which children qualify a tax unit to claim head of household status.
• Corrected an error that had prevented 18-year-old children from being found exempt from the gross income test.
• Improvements to the Statistical Match.
• Added information on state and local general sales taxes (now included in the state and local tax deduction variable), and itemized deductions for casualty and theft losses (stored as "OtherTaxDeductions" in FedTaxImp).
• Introduced a practice of using the PUF to restore variation to top-coded CPS incomes. (See here for more detail).

Changes Effective with the 2004 Baseline

• Improved how "full-time" students are identified.
• Improved how disabled children (including disabled adult relatives) are identified.
• Corrected an error in the calculation of the credit for the elderly or disabled. Previously, workers' compensation (and no other income) was counted as "taxable disability income" when calculating the credit. However, workers' compensation is not taxable and so should not be included in taxable disability income. The revised definition counts disability related pension income as taxable disability income.
• Modified the Federal Tax forms to count the total amount of the value stored in the miscellaneous expenses variable obtained from the statistical match as miscellaneous expenses. Previously, 5 percent of the amount was treated as casualty and theft losses (because amounts obtained from the statistical match used prior to the 2003 baseline had combined miscellaneous expenses and casualty and loss expenses into a single variable). The statistical match introduced with the 2003 baseline does not yet bring over an amount for casualty and loss expenses.
• Prevented persons who are EITC qualifying children from receiving the childless EITC (this correction to the forms has no effect on the baseline, but could affect some alternative simulations).

Changes Effective with the 2003 Baseline

• Enabled qualified dividends to be taxed at the same rate as capital gains.
• Included alimony in taxable income.
• Introduced new statistical match (did not require any changes to forms).
• Introduced the ability to use income variables obtained from the "high-income match" with the PUF (note that we do not yet have a high-income match that produces results sufficiently close to target).
• Changed ElderlyCreditRetirement income to include Social Security variable including Railroad Retirement benefits (previously, the Social Security variable used for ElderlyCreditRetirement excluded RRR).
• Modified table B2 to include estates and trusts in the Dividends row.

Changes Effective with the 2002 Baseline

• Enabled higher EITC phase-down point for joint filers.
• Enabled persons aged 50 or older to receive a higher maximum IRA deduction than is allowed persons under 50.
• Enabled simulation of the Alternative Minimum Tax (AMT).
• Corrected an error in the calculation of the credit for the elderly and disabled that did not affect overall tax liability, but did cause TRIM3 to overestimate the amount of the credit.

Changes Effective with the 2001 Baseline

• Extended the refundable Additional Child Tax Credit to families with one or two children.

Changes Effective with the 2000 Baseline

• Added the program rules ChildCreditFosterKid and EITCFosterKid, enabling a narrower definition of "foster child" for the purpose of the Child Tax Credit and EITC.

Changes Effective with the 1999 Baseline

• No changes.

Changes Effective with the 1998 Baseline

• Enabled simulation of the Child Tax Credit and Additional Child Tax Credit.
• Allowed couples where one spouse is covered by a pension plan and one is not to claim the IRA deduction for the spouse who is not covered.

Changes Effective with the 1997 Baseline

• Enabled nonworking spouse to claim full IRA deduction.

Changes Effective with the 1996 Baseline

• Enabled simulation of the EITC investment income limit.
• Enabled use of Modified AGI in phasing out the EITC.
• Enabled TRIM3 to simulate the deductible portion of medical expenses (previously, the deductible portion was obtained through the match--now total expenses are obtained through the match and the deductible portion is calculated in TRIM3).
• Enabled FederalTax to use child care expenses imputed within TRIM3.

Contact TRIM3 staff with any questions regarding changes implemented prior to the 1996 baseline.