A bill to amend the Internal Revenue Code of 1954 with respect to the tax treatment of earned income of United States citizens and resident aliens from sources without the United States, and for other purposes.

Amends the Internal Revenue Code to revise the rules for qualification for the income tax exemption for income earned abroad to provide that resident aliens shall qualify and to base the amount of the exemption upon the cost of living in the country where the income is earned. Requires the inclusion in gross income overseas cost of living reimbursements made by an employer to an employee for which deductions are allowed under this Act. Allows the deduction by employees of a limited portion of cost of living reimbursements for housing, schooling of dependents and home leave travel. Broadens the definition of what meals and lodging provided by the employer are excludible from the gross income of overseas employees.