Count every taxed cash source in SPM market income

changelog.d/spm-market-income-gross-income-sources.fixed.md

@@ -0,0 +1 @@
+Count partnership and S corporation income, farm rental income, capital gain distributions reported without Schedule D, Form 4797 gains and losses, and employer-plan disability benefits in person `market_income`, and so in SPM resources, since `spm_unit_taxes` already subtracted the tax on them (#9919). Household market income now also counts the last three, so the person and household lists match except for discharged debt. A new `other_net_gain_person` splits the tax unit's Form 4797 net gain or loss between the head and spouse. Programs whose income adds `market_income` (North Dakota's renter's refund, Washington's ECEAP and Missouri's Supplemental Nursing Care) and the ranking that picks which adults get a simulated marginal tax rate now see these sources too. North Dakota's renter's refund leaves out the disability benefits federal law excludes from income, as NDCC 57-02-08.1(5)(c) requires.

docs/spm.md

@@ -10,6 +10,33 @@ aggregates count actual `housing_assistance`; only SPM resources count
 `spm_unit_capped_housing_subsidy`. The cap uses the canonical housing amount before
 the final model storage conversion.
 
+## Cash income in resources
+
+SPM resources add person `market_income` and `spm_unit_benefits`, and
+`spm_unit_taxes` subtracts the tax on every source of federal gross income. Each
+source in `gov.irs.gross_income.sources` therefore needs a place in resources:
+without one, the SPM takes a family's tax on the income and never counts the
+income. `test_household_spm_resource_parity.py` maps each source to the variable
+that counts its cash, and it fails when a new source has none. Market income
+keeps a source's losses where the source has them, such as partnership, farm
+rental and Form 4797 losses.
+
+Three sources stay out of resources on purpose:
+
+- `debt_relief`: discharged debt brings the family no cash.
+- `taxable_roth_conversions`: a conversion moves savings from one retirement
+  account to another.
+- `salt_refund_income`: the refund returns state or local tax from an earlier
+  year, and the SPM subtracts each year's tax as the family owes it.
+
+Census money income leaves out capital gains
+([CPS subject definitions](https://www.census.gov/programs-surveys/cps/technical-documentation/subject-definitions.html#incomemeasurement)).
+PolicyEngine's market income counts realized capital gains, and it counts
+capital gain distributions and Form 4797 gains alongside them, so resources hold
+every gain whose tax the SPM subtracts. Disability benefits from an employer plan
+count in full, the part federal tax exempts included, since Census lists
+disability benefits among the sources of money income.
+
 ## Housing allocation and its assumptions
 
 The country sums modeled `housing_assistance` within each household, then

policyengine_us/parameters/gov/household/market_income_sources.yaml

@@ -9,13 +9,20 @@ values:
   - farm_operations_income
   - farm_rent_income
   - capital_gains
+  # Capital gain distributions reported without Schedule D.
+  - non_sch_d_capital_gains
+  # Form 4797 other gains and losses.
+  - other_net_gain_person
   - interest_income
   - rental_income
   # Royalties included in rental income
   - dividend_income
   - pension_income
   # Pension income includes annuities and endowment contracts
   - military_retirement_income
+  # Disability benefits from an employer plan, taxable or not.
+  - disability_benefits
+  # Discharged debt. person market_income, and so SPM resources, leave it out.
   - debt_relief
   # Income from estates and trusts (Schedule E Part III), including income
   # in respect of a decedent received through an estate or trust.

policyengine_us/tests/policy/baseline/gov/states/nd/tax/property/renters_refund/nd_renters_refund_income.yaml

@@ -225,3 +225,27 @@
   output:
     # Medical costs paid: 10,000 + 6,400 = 16,400.
     nd_renters_refund_income: 13_600
+
+- name: North Dakota counts partnership income and capital gain distributions from all sources (#9919).
+  period: 2025
+  input:
+    state_code: ND
+    partnership_income: 20_000
+    s_corp_income: -2_000
+    farm_rent_income: 1_500
+    non_sch_d_capital_gains: 500
+  output:
+    # NDCC 57-02-08.1(5)(c): income for the year from all sources.
+    nd_renters_refund_income: 20_000
+
+- name: North Dakota leaves out disability benefits that federal law excludes from income.
+  period: 2025
+  input:
+    state_code: ND
+    employment_income: 10_000
+    disability_benefits: 12_000
+    tax_exempt_disability_benefits: 5_000
+  output:
+    # The 5,000 from a plan the recipient paid for is excluded by IRC
+    # 104(a)(3), and NDCC 57-02-08.1(5)(c) excludes it: 10,000 + 7,000.
+    nd_renters_refund_income: 17_000

policyengine_us/tests/policy/baseline/household/income/household/household_market_income.yaml

@@ -101,3 +101,63 @@
         members: [parent, child]
   output:
     household_market_income: 75_000
+
+- name: Partnership, S corporation and farm rental income are market income, with their signs.
+  period: 2026
+  input:
+    people:
+      person:
+        partnership_income: 40_000
+        s_corp_income: -5_000
+        farm_rent_income: 3_000
+    households:
+      household:
+        members: [person]
+  output:
+    household_market_income: 38_000
+
+- name: Capital gain distributions reported without Schedule D are market income.
+  period: 2026
+  input:
+    people:
+      person:
+        non_sch_d_capital_gains: 2_500
+    households:
+      household:
+        members: [person]
+  output:
+    household_market_income: 2_500
+
+- name: Employer disability benefits are market income, taxable or not.
+  period: 2026
+  input:
+    people:
+      person:
+        disability_benefits: 9_000
+        tax_exempt_disability_benefits: 9_000
+    households:
+      household:
+        members: [person]
+  output:
+    taxable_disability_benefits: 0
+    household_market_income: 9_000
+
+- name: Form 4797 gains are market income for the household as a whole.
+  period: 2026
+  input:
+    people:
+      head:
+        age: 50
+        is_tax_unit_head: true
+      spouse:
+        age: 48
+        is_tax_unit_spouse: true
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        other_net_gain: 8_000
+    households:
+      household:
+        members: [head, spouse]
+  output:
+    household_market_income: 8_000

policyengine_us/tests/policy/baseline/household/income/person/market_income.yaml

@@ -29,3 +29,86 @@
     ak_permanent_fund_dividend: 1_000
     market_income: 1_000
     household_market_income: 1_000
+
+- name: Partnership and S corporation income is market income, with its sign.
+  period: 2026
+  input:
+    partnership_income: 50_000
+    s_corp_income: -20_000
+  output:
+    partnership_s_corp_income: 30_000
+    market_income: 30_000
+
+- name: Farm rental income is market income, with its sign.
+  period: 2026
+  input:
+    employment_income: 30_000
+    farm_rent_income: -4_000
+  output:
+    market_income: 26_000
+
+- name: Capital gain distributions reported without Schedule D are market income.
+  period: 2026
+  input:
+    non_sch_d_capital_gains: 1_200
+  output:
+    market_income: 1_200
+
+- name: Employer disability benefits are market income, taxable or not.
+  period: 2026
+  input:
+    disability_benefits: 12_000
+    tax_exempt_disability_benefits: 5_000
+  output:
+    taxable_disability_benefits: 7_000
+    market_income: 12_000
+
+- name: A Form 4797 loss is split between the head and spouse, and not the dependent.
+  period: 2026
+  input:
+    people:
+      head:
+        age: 50
+        is_tax_unit_head: true
+      spouse:
+        age: 48
+        is_tax_unit_spouse: true
+      child:
+        age: 10
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, spouse, child]
+        other_net_gain: -6_000
+  output:
+    other_net_gain_person: [-3_000, -3_000, 0]
+    other_net_gain_gross_income: [0, 0, 0]
+    market_income: [-3_000, -3_000, 0]
+
+- name: A Form 4797 gain is split between the head and spouse, and both parts are gross income.
+  period: 2026
+  input:
+    people:
+      head:
+        age: 50
+        is_tax_unit_head: true
+      spouse:
+        age: 48
+        is_tax_unit_spouse: true
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        other_net_gain: 10_000
+  output:
+    other_net_gain_person: [5_000, 5_000]
+    other_net_gain_gross_income: [5_000, 5_000]
+    market_income: [5_000, 5_000]
+
+- name: A single filer's Form 4797 gain is all theirs.
+  period: 2026
+  input:
+    other_net_gain: 7_500
+  output:
+    other_net_gain_person: 7_500
+    other_net_gain_gross_income: 7_500
+    market_income: 7_500

policyengine_us/tests/policy/baseline/household/income/spm_unit/spm_unit_market_income.yaml

@@ -46,3 +46,38 @@
         state_code: WA
   output:
     spm_unit_market_income: 0
+
+- name: Partnership income and employer disability benefits reach SPM unit market income.
+  period: 2026
+  input:
+    people:
+      parent:
+        age: 45
+        partnership_income: 287_010
+      grandparent:
+        age: 70
+        disability_benefits: 6_000
+    spm_units:
+      spm_unit:
+        members: [parent, grandparent]
+    households:
+      household:
+        members: [parent, grandparent]
+        state_code: TN
+  output:
+    spm_unit_market_income: 287_010 + 6_000
+    household_market_income: 287_010 + 6_000
+
+- name: A farm rental loss and capital gain distributions reach SPM unit market income.
+  period: 2026
+  input:
+    people:
+      person:
+        age: 60
+        farm_rent_income: -2_000
+        non_sch_d_capital_gains: 3_500
+    spm_units:
+      spm_unit:
+        members: [person]
+  output:
+    spm_unit_market_income: 1_500

policyengine_us/tests/policy/baseline/household/income/spm_unit/spm_unit_net_income.yaml

@@ -52,3 +52,25 @@
     spm_unit_spm_expenses: 0
   output:
     spm_unit_net_income: 1 + 2 + 3 + 4 + 5 + 6
+
+- name: Partnership income below the standard deduction is all SPM net income (#9919).
+  period: 2026
+  input:
+    people:
+      person:
+        age: 40
+        partnership_income: 10_000
+    spm_units:
+      spm_unit:
+        members: [person]
+        takes_up_snap_if_eligible: false
+    households:
+      household:
+        members: [person]
+        state_code: TN
+  output:
+    spm_unit_market_income: 10_000
+    spm_unit_benefits: 0
+    spm_unit_taxes: 0
+    spm_unit_spm_expenses: 0
+    spm_unit_net_income: 10_000