Add Working Parents Tax Relief Act of 2026

[DTrim99]

Summary

Implements the Working Parents Tax Relief Act of 2026 (H.R. by Rep. McDonald Rivet) as a contributed reform. This bill enhances the EITC for parents of young children (under age 4).

Closes #7913

Note: Bill text is not yet public. Legislative reference will be added when the bill is released.

Key Provisions

Credit Percentage Increases

• 1 qualifying child: If the child has not attained age 4, increase credit percentage by 42.24 percentage points
• 2+ qualifying children: Increase credit percentage by 30.07 percentage points for each of the youngest 3 qualifying children that has not attained age 4

Phaseout Percentage Increases

• For 1+ qualifying children: Increase phaseout percentage by 5 percentage points for each of the youngest 3 qualifying children that has not attained age 4

Effective Date

Tax years beginning after December 31, 2025 (i.e., 2026+)

IRC §32 Statute Structure Implementation

Per IRC §32(b), the EITC maximum is calculated as:

maximum_credit = credit_percentage × earned_income_amount

When this reform increases the credit percentage, the maximum EITC must also increase proportionally. PolicyEngine's baseline EITC implementation specifies the phase-in rate and maximum directly, so this reform overrides eitc_maximum to scale it correctly:

new_max = baseline_max × (new_rate / baseline_rate)

Corrected EITC Maximums Under Reform

Scenario	Baseline Max	Reform Max	Multiplier
1 child with young child (76.24% vs 34%)	$4,427	$9,927	×2.242
2 children with 2 young (100.14% vs 40%)	$7,316	$18,316	×2.504
3+ children with 3 young (135.21% vs 45%)	$8,231	$24,731	×3.005

Increased Phase-Out Rates

Children	Baseline Rate	Reform Rate	Increase
1 child with young	15.98%	20.98%	+5pp
2 children with 2 young	21.06%	31.06%	+10pp
3+ children with 3 young	21.06%	36.06%	+15pp

Parameters Created

Under gov/contrib/congress/mcdonald_rivet/working_parents_tax_relief_act/:

• in_effect.yaml - Boolean toggle (default: false, period: year)
• young_child_age_threshold.yaml - Age threshold (4 years)
• credit_percentage_increase_one_child.yaml - 42.24%
• credit_percentage_increase_per_young_child.yaml - 30.07%
• phaseout_percentage_increase_per_young_child.yaml - 5%
• max_young_children.yaml - Maximum 3 children for bonus

Variables Defined

In the reform Python file:

• eitc_young_child_count (NEW) - Count of EITC-qualifying children under age 4 (unit: child)
• eitc_phase_in_rate (OVERRIDE) - Adds young child bonus to baseline
• eitc_phase_out_rate (OVERRIDE) - Adds young child bonus to baseline
• eitc_maximum (OVERRIDE) - Scales maximum proportionally with rate increase (calls eitc_phase_in_rate to avoid duplicated logic)

State EITC Impact

This reform affects state EITCs that are calculated as a percentage of the federal EITC (e.g., NY, CA, etc.) because it modifies the underlying federal EITC amount.

Test Coverage

56 test cases covering:

Rate Tests (Cases 1-9, 14-15, 19-22, 26)

• Phase-in and phase-out rate calculations for 1, 2, and 3+ children
• Mixed young/older children scenarios
• Filing status variations (Single, Joint, Head of Household)
• Newborn and infant edge cases
• Reform ON vs OFF comparison

Phase-In Region Dollar Amount Tests (Cases 10-13, 27-45)

• Federal EITC dollar amounts with income in phase-in region
• Verification that increased rates lead to increased maximum credits
• State EITC impacts (NY, CA)
• Summary tests showing +124% to +200% EITC increases

Phase-Out Boundary Tests (Cases 46-48)

• Tests at exact phase-out threshold ($23,890 for 1-2 children, $23,890 for 3+)
• Verifies EITC equals maximum at boundary

Phase-Out Region Tests (Cases 49-56)

• Tests with income $30k, $35k, $40k, $50k (well above phase-out start)
• Verifies increased phase-out rates work correctly
• Baseline comparison tests showing phase-out reduction differences

Edge Cases

• Child exactly age 4 (no bonus - must be under 4)
• 5+ young children capped at 3 for bonus calculation

Files Changed

• 6 parameter YAML files
• 3 Python files (reform + init.py files)
• 1 reforms.py registration
• 1 test YAML file (56 test cases)
• 1 changelog fragment

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🤖 Generated with Claude Code

[DTrim99]

Program Review: Working Parents Tax Relief Act of 2026 (PR #7914)

Source Documents

• Source: Bill text / IRC §32 (contributed reform - no regulatory PDF)
• Year: 2026
• Scope: PR changes only

Critical (Must Fix)

1. CI Failure: The "Full Suite - Baseline (excl States) & Reform & Python" test suite is failing. This is a blocking issue that must be investigated and resolved.

2. Missing References: All 6 parameter files lack the required reference metadata field:

   • credit_percentage_increase_one_child.yaml
   • credit_percentage_increase_per_young_child.yaml
   • in_effect.yaml
   • max_young_children.yaml
   • phaseout_percentage_increase_per_young_child.yaml
   • young_child_age_threshold.yaml

   For contributed reforms, parameters should cite the bill name, sponsor, and relevant section.

3. Incorrect Unit: The eitc_young_child_count variable has unit = USD but it counts children, not dollars. Should be unit = "child" or similar.

Should Address

1. Missing Period Metadata: in_effect.yaml is missing period metadata (should be year for annual parameters)

2. Documentation vs Reference: Variables use inline documentation strings instead of the reference field pattern

3. No Phase-Out Region Tests: The reform modifies eitc_phase_out_rate, but tests only cover phase-in calculations. Need tests with income in the phase-out range to verify the increased phase-out rate works correctly.

4. No Phase-Out Boundary Tests: Missing tests at the phase-out threshold boundaries (where the credit starts phasing out)

Suggestions

1. Test Naming: Consider more descriptive test names that indicate what's being tested (e.g., test_phase_in_rate_one_young_child)

2. Error Margins: Review absolute_error_margin values - ensure they're appropriate for the test type (dollar amounts vs percentages)

3. Description Format: Parameter descriptions could follow a more consistent format

4. Additional Edge Cases: Consider adding tests for:

   • Married filing separately with young children
   • Income exactly at maximum (no credit)
   • Verify state EITC calculations that depend on federal EITC

Positive Notes ✓

• Implementation is Correct: All parameter values match the bill provisions (42.24% for 1 child, 30.07% per child for 2+, 5% phase-out increase, age 4 threshold, max 3 young children)
• Formula Logic is Sound: Proper use of update_variable, where(), min_() for capping at 3 children
• Comprehensive Test Coverage: 45 test cases covering phase-in rates, reform ON/OFF comparisons, mixed ages, state EITC impacts
• Correct IRC §32 Structure: Maximum credit calculation correctly scales with the rate increase per the statute

Validation Summary

Check	Result
Regulatory Accuracy	✓ Correct implementation
Reference Quality	3 issues (missing references)
Code Patterns	2 issues (unit, period metadata)
Test Coverage	2 gaps (phase-out tests)
CI Status	❌ FAILING

Review Severity: REQUEST_CHANGES

Rationale: The CI failure is a blocking issue. Additionally, all parameters need references for traceability, and the unit error on eitc_young_child_count should be fixed.

Next Steps

1. Investigate and fix the CI failure
2. Add reference metadata to all 6 parameter files citing the bill
3. Fix unit = USD → unit = "child" on eitc_young_child_count
4. Consider adding phase-out region tests

To auto-fix some issues: /fix-pr 7914

---

🤖 Automated review by PolicyEngine program-reviewer

[daphnehanse11]

PR Review

Nice work overall — CI is all green and the reform logic is sound. A few issues to address before merge.

🔴 Critical (must fix)

All 6 parameter files are missing reference fields

Per PolicyEngine convention (and matching how other contrib reforms are structured, e.g. golden/fisc_act/in_effect.yaml, hawley/awra/in_effect.yaml), every parameter file needs a reference in its metadata linking to the authoritative bill text. Currently all 6 new parameter files have no reference at all.

Each of the following needs a reference block added to its metadata:

• in_effect.yaml
• credit_percentage_increase_one_child.yaml
• credit_percentage_increase_per_young_child.yaml
• phaseout_percentage_increase_per_young_child.yaml
• young_child_age_threshold.yaml
• max_young_children.yaml

Example structure (from existing reforms):

metadata:
  unit: bool
  label: Working Parents Tax Relief Act in effect
  period: year
  reference:
    - title: Working Parents Tax Relief Act of 2026
      href: <bill URL or congress.gov link>

Note: If the bill text isn't publicly available yet, use the best available source (press release, sponsor's website, or a news article describing the provisions) and note in a comment that the reference will be updated when the bill is formally introduced. Something like:

reference:
  - title: Working Parents Tax Relief Act of 2026 (bill not yet publicly available)
    href: <press release or sponsor page URL>

---

🟡 Should address

eitc_young_child_count uses is_qualifying_child_dependent but eitc_child_count uses is_child_dependent

In working_parents_tax_relief_act.py:139, the young child count formula calls is_qualifying_child_dependent. The baseline eitc_child_count variable uses is_child_dependent. Per the documentation on is_qualifying_child_dependent, this variable "does NOT include the disability exception" that is_child_dependent handles.

For children under age 4 this makes no practical difference (a disabled person under 4 would qualify under both), but it's semantically inconsistent — the reform's young child count and the baseline's total child count use different definitions of "qualifying child." Should use is_child_dependent + meets_eitc_identification_requirements to match eitc_child_count exactly.

Rate-bonus logic is duplicated between eitc_phase_in_rate and eitc_maximum

The rate_bonus calculation in eitc_maximum (lines 242–250) is a copy of the same logic in eitc_phase_in_rate. Since the reform overrides eitc_phase_in_rate, eitc_maximum could simplify to:

new_rate = tax_unit("eitc_phase_in_rate", period)
ratio = where(baseline_rate > 0, new_rate / baseline_rate, 1)
return baseline_max * ratio

This avoids the risk of the two formulas drifting out of sync if parameters change.

---

🟢 Looks good

• Reform structure and factory function pattern match existing contrib reforms
• Phase-in and phase-out rate formulas correctly handle the 1-child vs. 2+-child distinction
• max_young_children cap is correctly applied with min_()
• if not p.in_effect: return baseline_rate early-return pattern is correct for scalar parameter guards
• 56 test cases give comprehensive coverage across rate, dollar amount, phase-out boundary, and edge cases
• Reform registered in reforms.py correctly

---

Validation summary

Check	Result
CI	All green
Regulatory logic	Correct per bill provisions
Reference quality	Missing references in all 6 parameter files
Code patterns	2 issues (child variable inconsistency, duplication)
Test coverage	Comprehensive

[codecov]

Codecov Report

✅ All modified and coverable lines are covered by tests.
✅ Project coverage is 70.97%. Comparing base (77d1ff4) to head (342b1e6).
⚠️ Report is 35 commits behind head on main.

Additional details and impacted files

@@             Coverage Diff              @@
##              main    #7914       +/-   ##
============================================
- Coverage   100.00%   70.97%   -29.03%     
============================================
  Files            1     4121     +4120     
  Lines           11    59597    +59586     
  Branches         0      292      +292     
============================================
+ Hits            11    42296    +42285     
- Misses           0    17300    +17300     
- Partials         0        1        +1     

Flag	Coverage Δ
unittests	70.97% <ø> (-29.03%)	⬇️

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