[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 493 Introduced in Senate (IS)]
113th CONGRESS
1st Session
S. 493
To amend the Internal Revenue Code of 1986 to establish dairy farm
savings accounts, and for other purposes.
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IN THE SENATE OF THE UNITED STATES
March 7, 2013
Mr. Schumer (for himself and Mr. Crapo) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish dairy farm
savings accounts, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Dairy Augmentation for Increased
Retail in Yogurt products (DAIRY) Act''.
SEC. 2. ESTABLISHMENT OF DAIRY FARM SAVINGS ACCOUNTS.
(a) In General.--Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by redesignating section 224
as section 225 and by inserting after section 223 the following new
section:
``SEC. 224. DAIRY FARM SAVINGS ACCOUNTS.
``(a) Deduction Allowed.--In the case of a qualified dairy farmer,
there shall be allowed as a deduction for the taxable year an amount
equal to the aggregate amount paid in cash during such taxable year by
or on behalf of such individual to a dairy farm savings account of such
individual.
``(b) Account Balance Limitation.--A deduction shall not be allowed
under subsection (a) with respect to any portion of a contribution to a
dairy farm savings account of an individual if such contribution would
result in the sum of the balances in all such accounts of such
individual to exceed 150 percent of the individual's 3-year average of
income derived from dairy farming.
``(c) Qualified Dairy Farmer.--For purposes of this section, the
term `qualified dairy farmer' means, with respect to any taxable year,
any individual who, during such year was engaged in the trade or
business of dairy farming.
``(d) Dairy Farm Savings Account.--For purposes of this section--
``(1) In general.--The term `dairy farm savings account'
means a trust created or organized in the United States as a
dairy farm savings account exclusively for the purpose of
making qualified distributions, but only if the written
governing instrument creating the trust meets the following
requirements:
``(A) Except in the case of a rollover contribution
described in subsection (f)(4), no contribution will be
accepted unless it is in cash.
``(B) The trustee is a bank (as defined in section
408(n)), an insurance company (as defined in section
816), or another person who demonstrates to the
satisfaction of the Secretary that the manner in which
such person will administer the trust will be
consistent with the requirements of this section.
``(C) No part of the trust assets will be invested
in anything other than--
``(i) cash,
``(ii) securities issued by the United
States Treasury, or
``(iii) or such other low-risk, interest-
bearing securities as are approved by the
Secretary.
``(D) The assets of the trust will not be
commingled with other property except in a common trust
fund or common investment fund.
``(E) The interest of an individual in the balance
in his account is nonforfeitable.
``(2) Qualified distribution.--The term `qualified
distribution' means any amount paid from a dairy farm savings
account to the account beneficiary to the extent that such
amount when added to all other amounts paid from such accounts
to such beneficiary during the taxable year (other than
rollover contributions) does not exceed the excess (if any)
of--
``(A) 100 percent of such beneficiary's 3-year
average of income derived from dairy farming, over
``(B) such beneficiary's gross income derived from
dairy farming for the taxable year.
``(3) 3-year average of income derived from dairy
farming.--The term `3-year average of income derived from dairy
farming' means, with respect to any individual--
``(A) the sum of the individual's gross income
derived from dairy farming for the taxable year and the
2 preceding taxable years, divided by
``(B) the number of taxable years taken into
account under subparagraph (A) during which such
individual was engaged in the trade or business of
dairy farming.
``(4) Account beneficiary.--The term `account beneficiary'
means the individual on whose behalf the dairy farm savings
account was established.
``(5) Special rules; other rules.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 219(d)(2) (relating to no deduction
for rollovers).
``(B) Section 219(f)(3) (relating to time when
contributions deemed made).
``(C) Section 408(g) (relating to community
property laws).
``(D) Section 408(h) (relating to custodial
accounts).
``(e) Tax Treatment of Accounts.--
``(1) In general.--A dairy farm savings account is exempt
from taxation under this subtitle unless such account has
ceased to be a dairy farm savings account. Notwithstanding the
preceding sentence, any such account is subject to the taxes
imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable, etc. organizations).
``(2) Termination of accounts.--If the account beneficiary
ceases to engage in the trade or business of dairy farming--
``(A) all dairy farm savings accounts of such
individual shall cease to be such accounts, and
``(B) the balance of all such accounts shall be
treated as--
``(i) distributed to such individual, and
``(ii) not paid in a qualified
distribution.
``(3) Prohibited transactions; pledging account as
security.--Rules similar to the rules of paragraphs (2) and (4)
of section 408(e) shall apply to dairy farm savings accounts,
and any amount treated as distributed under such rules shall be
treated as not used to pay qualified distributions.
``(f) Tax Treatment of Distributions.--
``(1) In general.--Any amount paid or distributed out of a
dairy farm savings account (other than a rollover contribution
described in paragraph (4)) shall be included in gross income
of the account beneficiary in the manner provided under section
72. Rules similar to the rules of paragraphs (2) and (3)(H) of
section 408(d) shall apply for purposes of this paragraph.
``(2) Additional tax on non-qualified distributions.--
``(A) In general.--The tax imposed by this chapter
on the account beneficiary for any taxable year in
which there is a payment or distribution from a dairy
farm savings account of such beneficiary which is not a
qualified distribution shall be increased by 15 percent
of the amount of such payment or distribution which is
not a qualified distribution.
``(B) Exception for disability or death.--
Subparagraph (A) shall not apply if the payment or
distribution is made after the account beneficiary
becomes disabled within the meaning of section 72(m)(7)
or dies.
``(3) Excess contributions returned before due date of
return.--
``(A) In general.--If any excess contribution is
contributed for a taxable year to a dairy farm savings
account of an individual, paragraph (2) shall not apply
to distributions from the dairy farm savings accounts
of such individual (to the extent such distributions do
not exceed the aggregate excess contributions to all
such accounts of such individual for such year) if--
``(i) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for
filing such individual's return for such
taxable year, and
``(ii) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in clause (ii) shall be
included in the gross income of the individual for the
taxable year in which it is received.
``(B) Excess contribution.--For purposes of
subparagraph (A), the term `excess contribution' means
any contribution (other than a rollover contribution)
which is not deductible under this section.
``(4) Rollover contribution.--An amount is described in
this paragraph as a rollover contribution if it meets the
requirements of subparagraphs (A) and (B).
``(A) In general.--For purposes of this section,
any amount paid or distributed from a dairy farm
savings account to the account beneficiary shall be
treated as a qualified distribution to the extent the
amount received is paid into a dairy farm savings
account for the benefit of such beneficiary not later
than the 60th day after the day on which the
beneficiary receives the payment or distribution.
``(B) Limitation.--This paragraph shall not apply
to any amount described in subparagraph (A) received by
an individual from a dairy farm savings account if, at
any time during the 1-year period ending on the day of
such receipt, such individual received any other amount
described in subparagraph (A) from a dairy farm savings
account which was not included in the individual's
gross income because of the application of this
paragraph.
``(5) Transfer of account incident to divorce.--The
transfer of an individual's interest in a dairy farm savings
account to an individual's spouse or former spouse under a
divorce or separation instrument described in subparagraph (A)
of section 71(b)(2) shall not be considered a taxable transfer
made by such individual notwithstanding any other provision of
this subtitle, and such interest shall, after such transfer, be
treated as a dairy farm savings account with respect to which
such spouse is the account beneficiary.
``(6) Treatment after death of account beneficiary.--
``(A) Treatment if designated beneficiary is
spouse.--If the account beneficiary's surviving spouse
acquires such beneficiary's interest in a dairy farm
savings account by reason of being the designated
beneficiary of such account at the death of the account
beneficiary, such dairy farm savings account shall be
treated as if the spouse were the account beneficiary.
``(B) Other cases.--
``(i) In general.--If, by reason of the
death of the account beneficiary, any person
acquires the account beneficiary's interest in
a dairy farm savings account in a case to which
subparagraph (A) does not apply--
``(I) such account shall cease to
be a dairy farm savings account as of
the date of death, and
``(II) an amount equal to the fair
market value of the assets in such
account on such date shall be included
if such person is not the estate of
such beneficiary, in such person's
gross income for the taxable year which
includes such date, or if such person
is the estate of such beneficiary, in
such beneficiary's gross income for the
last taxable year of such beneficiary.
``(ii) Deduction for estate taxes.--An
appropriate deduction shall be allowed under
section 691(c) to any person (other than the
decedent or the decedent's spouse) with respect
to amounts included in gross income under
clause (i) by such person.
``(g) Reports.--The Secretary may require the trustee of a dairy
farm savings account to make such reports regarding such account to the
Secretary and to the account beneficiary with respect to contributions,
distributions, and such other matters as the Secretary determines
appropriate. The reports required by this subsection shall be filed at
such time and in such manner and furnished to such individuals at such
time and in such manner as may be required by the Secretary.''.
(b) Deduction Allowed Whether or Not Individual Itemizes Other
Deductions.--Subsection (a) of section 62 of such Code is amended by
inserting after paragraph (21) the following new paragraph:
``(22) Dairy farm savings accounts.--The deduction allowed
by section 224.''.
(c) Tax on Excess Contributions.--Section 4973 of such Code
(relating to tax on excess contributions to certain tax-favored
accounts and annuities) is amended--
(1) by striking ``or'' at the end of subsection (a)(4), by
inserting ``or'' at the end of subsection (a)(5), and by
inserting after subsection (a)(5) the following new paragraph:
``(6) a dairy farm savings account (within the meaning of
section 224(d)),''; and
(2) by adding at the end the following new subsection:
``(h) Excess Contributions to Dairy Farm Savings Accounts.--For
purposes of this section, in the case of dairy farm savings accounts
(within the meaning of section 224(d)), the term `excess contribution'
means the sum of--
``(1) the aggregate amount contributed for the taxable year
to the accounts (other than rollover contributions described in
section 224(f)(4)) which is not allowable as a deduction under
section 224 for such year, and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the accounts with
respect to which additional tax was imposed under
section 224(f)(2), and
``(B) the excess (if any) of--
``(i) the maximum amount allowable as a
deduction under section 224(b) for the taxable
year, over
``(ii) the amount contributed to the
accounts for the taxable year.
For purposes of this subsection, any contribution which
is distributed out of the dairy farm savings account in
a distribution to which section 224(f)(3) applies shall
be treated as an amount not contributed.''.
(d) Tax on Prohibited Transactions.--
(1) Section 4975(c) of such Code (relating to tax on
prohibited transactions) is amended by adding at the end the
following new paragraph:
``(7) Special rule for dairy farm savings accounts.--An
individual for whose benefit a dairy farm savings account
(within the meaning of section 224(d)) is established shall be
exempt from the tax imposed by this section with respect to any
transaction concerning such account (which would otherwise be
taxable under this section) if, with respect to such
transaction, the account ceases to be a dairy farm savings
account by reason of the application of section 224(e)(2) to
such account.''.
(2) Section 4975(e)(1) of such Code is amended by
redesignating subparagraphs (F) and (G) as subparagraphs (G)
and (H), respectively, and by inserting after subparagraph (E)
the following new subparagraph:
``(F) a dairy farm savings account described in
section 224(d),''.
(e) Failure To Provide Reports on Dairy Farm Savings Accounts.--
Section 6693(a)(2) of such Code (relating to reports) is amended by
redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F),
respectively, and by inserting after subparagraph (C) the following new
subparagraph:
``(D) section 224(g) (relating to dairy farm
savings accounts),''.
(f) Clerical Amendment.--The table of sections for part VII of
subchapter B of chapter 1 of such Code is amended by redesignating the
item relating to section 224 as relating to section 225 and by
inserting after the item relating to section 223 the following:
``Sec. 224. Dairy farm savings accounts.''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
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