Merge pull request #1819 from codykallen/modify_pt_exclusion

Modify pass-through exclusion calculation
PSLmodels · Jan 11, 2018 · 85d9d81 · 85d9d81
2 parents fac067c + 27f4973
commit 85d9d81
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Showing 7 changed files with 125 additions and 26 deletions.
diff --git a/docs/index.html b/docs/index.html
diff --git a/taxcalc/current_law_policy.json b/taxcalc/current_law_policy.json
@@ -619,6 +619,36 @@
         "out_of_range_action": "stop"
     },
 
+    "_ALD_BusinessLosses_c": {
+        "long_name": "Maximum amount of business losses deductible",
+        "description": "Business losses in excess of this amount may not be deducted from AGI.",
+        "section_1": "Above The Line Deductions",
+        "section_2": "Misc. Exclusions",
+        "irs_ref": "",
+        "notes": "",
+        "row_var": "FLPDYR",
+        "row_label": ["2013",
+                      "2014",
+                      "2015",
+                      "2016",
+                      "2017"],
+        "start_year": 2013,
+        "cpi_inflated": true,
+        "col_var": "MARS",
+        "col_label": ["single", "joint", "separate", "headhousehold", "widow"],
+        "boolean_value": false,
+        "integer_value": false,
+        "value": [[9e99, 9e99, 9e99, 9e99, 9e99],
+                  [9e99, 9e99, 9e99, 9e99, 9e99],
+                  [9e99, 9e99, 9e99, 9e99, 9e99],
+                  [9e99, 9e99, 9e99, 9e99, 9e99],
+                  [9e99, 9e99, 9e99, 9e99, 9e99]],
+        "range": {"min": 0.0, "max": 9e99},
+        "out_of_range_minmsg": "",
+        "out_of_range_maxmsg": "",
+        "out_of_range_action": "stop"
+    },
+
     "_II_em": {
         "long_name": "Personal and dependent exemption amount",
         "description": "Subtracted from AGI in the calculation of taxable income, per taxpayer and dependent.",
@@ -3189,7 +3219,7 @@
         "out_of_range_action": "stop"
     },
 
-    "_PT_exclusion_rt": {
+    "_PT_excl_rt": {
         "long_name": "Pass-through income exclusion rate",
         "description": "Fraction of qualified business income excluded from taxable income.",
         "section_1": "Personal Income",
@@ -3211,8 +3241,8 @@
         "out_of_range_action": "stop"
     },
 
-    "_PT_exclusion_wage_limit": {
-        "long_name": "Limit on pass-through income exclusion",
+    "_PT_excl_wagelim_rt": {
+        "long_name": "Wage limit rate on pass-through income exclusion",
         "description": "If taxpayer has partnership/ S corporation income, the amount of business income excluded from taxable income may not exceed this fraction of wages.",
         "section_1": "Personal Income",
         "section_2": "Pass-Through",
@@ -3233,6 +3263,58 @@
         "out_of_range_action": "stop"
     },
 
+    "_PT_excl_wagelim_thd": {
+        "long_name": "Phase-in threshold of wage limit on pass-through income exclusion",
+        "description": "If taxpayer has partnership/ S corporation income, the amount of business income excluded from taxable income is limited by wages if taxable income exceeds this threshold.",
+        "section_1": "Personal Income",
+        "section_2": "Pass-Through",
+        "irs_ref": "",
+        "notes": "",
+        "row_var": "FLPDYR",
+        "row_label": ["2013",
+                      "2014",
+                      "2015",
+                      "2016",
+                      "2017"],
+        "start_year": 2013,
+        "cpi_inflated": true,
+        "col_var": "MARS",
+        "col_label": ["single", "joint", "separate", "headhousehold", "widow"],
+        "boolean_value": false,
+        "integer_value": false,
+        "value": [[0.0, 0.0, 0.0, 0.0, 0.0],
+                  [0.0, 0.0, 0.0, 0.0, 0.0],
+                  [0.0, 0.0, 0.0, 0.0, 0.0],
+                  [0.0, 0.0, 0.0, 0.0, 0.0],
+                  [0.0, 0.0, 0.0, 0.0, 0.0]],
+        "range": {"min": 0.0, "max": 9e99},
+        "out_of_range_minmsg": "",
+        "out_of_range_maxmsg": "",
+        "out_of_range_action": "stop"
+    },
+
+    "_PT_excl_wagelim_prt": {
+        "long_name": "Phase-in rate of wage limit on pass-through income exclusion",
+        "description": "If taxpayer has partnership/ S corporation income, the wage limitation on the amount of business income excluded from taxable income is phased in at this rate.",
+        "section_1": "Personal Income",
+        "section_2": "Pass-Through",
+        "irs_ref": "",
+        "notes": "",
+        "row_var": "FLPDYR",
+        "row_label": ["2013"],
+        "start_year": 2013,
+        "cpi_inflated": false,
+        "col_var": "MARS",
+        "col_label": ["single", "joint", "separate", "headhousehold", "widow"],
+        "boolean_value": false,
+        "integer_value": false,
+        "value": [[1.0, 1.0, 1.0, 1.0, 1.0]],
+        "range": {"min": 0.0, "max": 1.0},
+        "out_of_range_minmsg": "",
+        "out_of_range_maxmsg": "",
+        "out_of_range_action": "stop"
+    },
+
     "_AMT_em": {
         "long_name": "AMT exemption amount",
         "description": "The amount of AMT taxable income exempted from AMT.",

diff --git a/taxcalc/functions.py b/taxcalc/functions.py
@@ -222,6 +222,7 @@ def CapGains(p23250, p22250, sep, ALD_StudentLoan_hc,
              ALD_InvInc_ec_rt, invinc_ec_base, ALD_InvInc_ec_base_RyanBrady,
              e00200, e00300, e00600, e00650, e00700, e00800,
              CG_nodiff, CG_ec, CG_reinvest_ec_rt,
+             ALD_BusinessLosses_c, MARS, c02900_in_ei,
              e00900, e01100, e01200, e01400, e01700, e02000, e02100,
              e02300, e00400, e02400, c02900, e03210, e03230, e03240,
              c01000, c23650, ymod, ymod1, invinc_agi_ec):
@@ -249,9 +250,12 @@ def CapGains(p23250, p22250, sep, ALD_StudentLoan_hc,
                                         p22250 + ALD_InvInc_ec_rt * p23250))
         invinc_agi_ec = ALD_InvInc_ec_rt * (e00300 + e00650) + CG_ec_RyanBrady
     # compute ymod1 variable that is included in AGI
-    ymod1 = (e00200 + e00700 + e00800 + e00900 + e01400 + e01700 +
-             invinc - invinc_agi_ec +
-             e02000 + e02100 + e02300)
+    ymod1 = (e00200 + e00700 + e00800 + e01400 + e01700 +
+             invinc - invinc_agi_ec + e02100 + e02300 +
+             max(e00900 + e02000, -ALD_BusinessLosses_c[MARS - 1]))
+    # compute loss limitation to be added onto ymod1
+    loss_limit = min(e00900 + e02000 + ALD_BusinessLosses_c[MARS - 1], 0.)
+    c02900_in_ei = c02900_in_ei + loss_limit
     if CG_nodiff:
         # apply QDIV+CG exclusion if QDIV+LTCG receive no special tax treatment
         qdcg_pos = max(0., e00650 + c01000)
@@ -263,7 +267,7 @@ def CapGains(p23250, p22250, sep, ALD_StudentLoan_hc,
     ymod2 = e00400 + (0.50 * e02400) - c02900
     ymod3 = (1. - ALD_StudentLoan_hc) * e03210 + e03230 + e03240
     ymod = ymod1 + ymod2 + ymod3
-    return (c01000, c23650, ymod, ymod1, invinc_agi_ec)
+    return (c01000, c23650, ymod, ymod1, invinc_agi_ec, c02900_in_ei)
 
 
 @iterate_jit(nopython=True)
@@ -709,17 +713,21 @@ def StdDed(DSI, earned, STD, age_head, age_spouse, STD_Aged, STD_Dep,
 
 
 @iterate_jit(nopython=True)
-def TaxInc(c00100, standard, c04470, c04600, c04800,
-           PT_exclusion_rt, PT_exclusion_wage_limit, e00900,
-           e26270, e00200):
+def TaxInc(c00100, standard, c04470, c04600, c04800, MARS,
+           PT_excl_rt, PT_excl_wagelim_rt, PT_excl_wagelim_thd,
+           PT_excl_wagelim_prt, e00900, e26270, e00200):
     """
     TaxInc function: ...
     """
-    pt_exclusion = max(0., PT_exclusion_rt * (e00900 + e26270))
-    if e26270 > 0.:
-        pt_exclusion = min(pt_exclusion, e00200 * PT_exclusion_wage_limit)
-    c04800 = max(0., c00100 - max(c04470, standard) - c04600 -
-                 pt_exclusion)
+    pt_excl_pre = max(0., PT_excl_rt * (e00900 + e26270))
+    wagelim_pre = e00200 * PT_excl_wagelim_rt
+    taxinc_pre = max(0., c00100 - max(c04470, standard) - c04600)
+    # calculate business income exclusion
+    excess = max(taxinc_pre - PT_excl_wagelim_thd[MARS - 1], 0.)
+    wagelim_rt = min(excess * PT_excl_wagelim_prt[MARS - 1], 1.)
+    limit = wagelim_rt * max(pt_excl_pre - wagelim_pre, 0.)
+    pt_excl = pt_excl_pre - limit
+    c04800 = max(0., taxinc_pre - pt_excl)
     return c04800
 
 

diff --git a/taxcalc/reforms/TCJA_Reconciliation.json b/taxcalc/reforms/TCJA_Reconciliation.json
@@ -102,12 +102,18 @@
         "_PT_brk6":
             {"2018": [[500000, 600000, 300000, 500000, 500000]],
              "2026": [[504406, 567457, 283728, 535931, 567457]]},
-        "_PT_exclusion_rt":
+        "_PT_excl_rt":
             {"2018": [0.2],
              "2026": [0.0]},
-        "_PT_exclusion_wage_limit":
+        "_PT_excl_wagelim_rt":
             {"2018": [0.5],
              "2026": [9e+99]},
+        "_PT_excl_wagelim_thd":
+            {"2018": [[157500, 315000, 157500, 157500, 315000]],
+             "2026": [[0, 0, 0, 0, 0]]},
+        "_PT_excl_wagelim_prt":
+            {"2018": [[0.00002, 0.00001, 0.00002, 0.00002, 0.00001]],
+             "2026": [[0, 0, 0, 0, 0]]},
         "_STD":
             {"2018": [[12000, 24000, 12000, 18000, 24000]],
              "2026": [[7655, 15311, 7655, 11272, 15311]]},
@@ -147,6 +153,9 @@
         "_ALD_Alimony_hc":
             {"2019": [1],
              "2026": [0]},
+        "_ALD_BusinessLosses_c":
+            {"2018": [[250000, 500000, 250000, 250000, 500000]],
+             "2026": [[9e99, 9e99, 9e99, 9e99, 9e99]]},
         "_ID_prt":
             {"2018": [0],
              "2026": [0.03]},

diff --git a/taxcalc/reforms/TCJA_Senate.json b/taxcalc/reforms/TCJA_Senate.json
@@ -13,7 +13,7 @@
 // -  Adopt Chained CPI for parameter indexing (9)
 // Reform_Parameter_Map:
 // - 1: _II_rt*
-// - 2: _PT_rt*
+// - 2: _PT_*
 // - 3: _STD, _STD_Dep, _STD_Aged
 // - 4: _II_em
 // - 5: _DependentCredit_*, _CTC_c, _CTC_ps, _ACTC_Income_thd
@@ -75,9 +75,9 @@
             {"2018": [[200000, 390000, 195000, 200000, 390000]]},
         "_PT_brk6":
             {"2018": [[500000, 1000000, 500000, 500000, 1000000]]},
-        "_PT_exclusion_rt":
+        "_PT_excl_rt":
             {"2018": [0.174]},
-        "_PT_exclusion_wage_limit":
+        "_PT_excl_wagelim_rt":
             {"2018": [0.5]},
         "_STD":
             {"2018": [[12000, 24000, 12000, 18000, 24000]]},

diff --git a/taxcalc/reforms/TCJA_Senate_111417.json b/taxcalc/reforms/TCJA_Senate_111417.json
@@ -13,7 +13,7 @@
 // -  Changes to itemized deductions (8)
 // Reform_Parameter_Map:
 // - 1: _II_rt*
-// - 2: _PT_rt*
+// - 2: _PT_*
 // - 3: _STD (can safely ignore WARNINGs about 2026+ values)
 // - 4: _II_em
 // - 5: _DependentCredit_*, _CTC_c, _CTC_ps, _ACTC_Income_thd
@@ -103,10 +103,10 @@
         "_PT_brk6":
             {"2018": [[500000, 1000000, 500000, 500000, 1000000]],
              "2026": [[504406, 567457, 283728, 535931, 567457]]},
-        "_PT_exclusion_rt":
+        "_PT_excl_rt":
             {"2018": [0.174],
              "2026": [0.0]},
-        "_PT_exclusion_wage_limit":
+        "_PT_excl_wagelim_rt":
             {"2018": [0.5],
              "2026": [9e+99]},
         "_STD":

diff --git a/taxcalc/reforms/TCJA_Senate_120117.json b/taxcalc/reforms/TCJA_Senate_120117.json
@@ -101,10 +101,10 @@
         "_PT_brk6":
             {"2018": [[500000, 1000000, 500000, 500000, 1000000]],
              "2026": [[504406, 567457, 283728, 535931, 567457]]},
-        "_PT_exclusion_rt":
+        "_PT_excl_rt":
             {"2018": [0.23],
              "2026": [0.0]},
-        "_PT_exclusion_wage_limit":
+        "_PT_excl_wagelim_rt":
             {"2018": [0.5],
              "2026": [9e+99]},
         "_STD":