Code is amended by striking paragraph (2). (6) Section 129(e)(2) of such Code is amended to read as follows: (2) Earned income (A) The term earned income — (i) means— (I) wages, salaries, tips, and other employee compensation, but only if such amounts are includible in gross income for the taxable year, plus (II) the amount of the taxpayer's net earnings from self-employment for the taxable year (within the meaning of section 1402(a)), but such net earnings shall be determined with regard to the deduction allowed to the taxpayer by section 164(f), and (ii) does not include any amounts paid or incurred by an employer for dependent care assistance to an employee. (B) For purposes of subparagraph (A)— (i) the earned income of an individual shall be computed without regard to any community property laws, (ii) no amount received as a pension or annuity shall be taken into account, (iii) no amount to which section 871(a) applies (relating to income of nonresident alien individuals not connected with United States business) shall be taken into account, (iv) no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account, (v) no amount described in subparagraph (A) received for service performed in work activities as defined in paragraph (4) or (7) of section 407(d) of the Social Security Act to which the taxpayer is assigned under any State program under part A of title IV of such Act shall be taken into account, but only to the extent such amount is subsidized under such State program, and (vi) a taxpayer may elect to treat amounts excluded from gross income by reason of section 112 as earned income. . (7) Section 135(d)(1)(B) of such Code is amended by striking 32, . (8) Section 152(f)(6)(B) of such Code is amended— (A) in clause (iii), by striking , and and inserting a period, (B) by striking clauses (ii) and (iv), and (C) by redesignating clause (iii) as clause (ii). (9) Section 501 of such Code is amended— (A) in subsection (c)(26), by