[House Report 113-614]
[From the U.S. Government Publishing Office]
113th Congress } { Rept. 113-614
HOUSE OF REPRESENTATIVES
2d Session } { Part 1
======================================================================
ABLE ACT OF 2014
_______
November 12, 2014.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means, submitted the following
R E P O R T
[To accompany H.R. 647]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 647) to amend the Internal Revenue Code of 1986 to
provide for the tax treatment of ABLE accounts established
under State programs for the care of family members with
disabilities, and for other purposes, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
CONTENTS
Page
I. Summary and Background............................................7
A. Purpose and Summary................................... 7
B. Background and Need for Legislation................... 7
C. Legislative History................................... 7
II. Explanation of the Bill...........................................8
A. Qualified ABLE Programs (secs. 3 and 4 of the bill and
new sec. 529A of the Code)........................... 8
III.Votes of the Committee...........................................16
IV. Budget Effects of the Bill.......................................17
A. Committee Estimate of Budgetary Effects............... 17
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority........................ 19
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 19
D. Macroeconomic Impact Analysis......................... 24
V. Other Matters To Be Discussed Under the Rules of the House.......24
A. Committee Oversight Findings and Recommendations...... 24
B. Statement of General Performance Goals and Objectives. 25
C. Information Relating to Unfunded Mandates............. 25
D. Applicability of House Rule XXI 5(b).................. 25
E. Tax Complexity Analysis............................... 25
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 25
G. Duplication of Federal Programs....................... 26
H. Disclosure of Directed Rule Makings................... 26
VI. Changes in Existing Law Made by the Bill, as Reported............26
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Achieving a Better Life Experience Act
of 2014'' or the ``ABLE Act of 2014''.
SEC. 2. PURPOSES.
The purposes of this Act are as follows:
(1) To encourage and assist individuals and families in
saving private funds for the purpose of supporting individuals
with disabilities to maintain health, independence, and quality
of life.
(2) To provide secure funding for disability-related expenses
on behalf of designated beneficiaries with disabilities that
will supplement, but not supplant, benefits provided through
private insurance, the Medicaid program under title XIX of the
Social Security Act, the supplemental security income program
under title XVI of such Act, the beneficiary's employment, and
other sources.
SEC. 3. QUALIFIED ABLE PROGRAMS.
(a) In General.--Subchapter F of chapter 1 of the Internal Revenue
Code of 1986 is amended by inserting after section 529 the following
new section:
``SEC. 529A. QUALIFIED ABLE PROGRAMS.
``(a) General Rule.--A qualified ABLE program shall be exempt from
taxation under this subtitle. Notwithstanding the preceding sentence,
such program shall be subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business income of
charitable organizations).
``(b) Qualified ABLE Program.--For purposes of this section--
``(1) In general.--The term `qualified ABLE program' means a
program established and maintained by a State, or agency or
instrumentality thereof--
``(A) under which a person may make contributions for
a taxable year, for the benefit of an individual who is
an eligible individual for such taxable year, to an
ABLE account which is established for the purpose of
meeting the qualified disability expenses of the
designated beneficiary of the account,
``(B) which limits a designated beneficiary to 1 ABLE
account for purposes of this section,
``(C) which allows for the establishment of an ABLE
account only for a beneficiary who is a resident of
such State or a resident of a contracting State, and
``(D) which meets the other requirements of this
section.
``(2) Cash contributions.--A program shall not be treated as
a qualified ABLE program unless it provides that no
contribution will be accepted--
``(A) unless it is in cash, or
``(B) except in the case of contributions under
subsection (c)(1)(C), if such contribution to an ABLE
account would result in aggregate contributions from
all contributors to the ABLE account for the taxable
year exceeding the amount in effect under section
2503(b) for the calendar year in which the taxable year
begins.
For purposes of this paragraph, rules similar to the rules of
section 408(d)(4) (determined without regard to subparagraph
(B) thereof) shall apply.
``(3) Separate accounting.--A program shall not be treated as
a qualified ABLE program unless it provides separate accounting
for each designated beneficiary.
``(4) No investment direction.--A program shall not be
treated as a qualified ABLE program unless it provides that any
contributor to, or designated beneficiary under, such program
may not directly or indirectly direct the investment of any
contributions to the program (or any earnings thereon).
``(5) No pledging of interest as security.--A program shall
not be treated as a qualified ABLE program if it allows any
interest in the program or any portion thereof to be used as
security for a loan.
``(6) Prohibition on excess contributions.--A program shall
not be treated as a qualified ABLE program unless it provides
adequate safeguards to prevent aggregate contributions on
behalf of a designated beneficiary in excess of the limit
established by the State under section 529(b)(6). For purposes
of the preceding sentence, aggregate contributions include
contributions under any prior qualified ABLE program of any
State or agency or instrumentality thereof.
``(c) Tax Treatment.--
``(1) Distributions.--
``(A) In general.--Any distribution under a qualified
ABLE program shall be includible in the gross income of
the distributee in the manner as provided under section
72 to the extent not excluded from gross income under
any other provision of this chapter.
``(B) Distributions for qualified disability
expenses.--For purposes of this paragraph, if
distributions from a qualified ABLE program--
``(i) do not exceed the qualified disability
expenses of the designated beneficiary, no
amount shall be includible in gross income, and
``(ii) in any other case, the amount
otherwise includible in gross income shall be
reduced by an amount which bears the same ratio
to such amount as such expenses bear to such
distributions.
``(C) Change in beneficiaries or programs.--
``(i) Rollovers from able accounts.--
Subparagraph (A) shall not apply to any amount
paid or distributed from an ABLE account to the
extent that the amount received is paid, not
later than the 60th day after the date of such
payment or distribution, into another ABLE
account for the benefit of the same beneficiary
or an eligible individual who is a family
member of the beneficiary.
``(ii) Change in designated beneficiaries.--
Any change in the designated beneficiary of an
interest in a qualified ABLE program during a
taxable year shall not be treated as a
distribution for purposes of subparagraph (A)
if the new beneficiary is an eligible
individual for such taxable year and a member
of the family of the former beneficiary.
``(iii) Limitation on certain rollovers.--
Clause (i) shall not apply to any transfer if
such transfer occurs within 12 months from the
date of a previous transfer to any qualified
ABLE program for the benefit of the designated
beneficiary.
``(D) Operating rules.--For purposes of applying
section 72--
``(i) except to the extent provided by the
Secretary, all distributions during a taxable
year shall be treated as one distribution, and
``(ii) except to the extent provided by the
Secretary, the value of the contract, income on
the contract, and investment in the contract
shall be computed as of the close of the
calendar year in which the taxable year begins.
``(2) Gift tax rules.--For purposes of chapters 12 and 13--
``(A) Contributions.--Any contribution to a qualified
ABLE program on behalf of any designated beneficiary--
``(i) shall be treated as a completed gift to
such beneficiary which is not a future interest
in property, and
``(ii) shall not be treated as a qualified
transfer under section 2503(e).
``(B) Treatment of distributions.--Except as provided
in subparagraph (C), in no event shall a distribution
from a qualified ABLE program be treated as a taxable
gift.
``(C) Treatment of designation of new beneficiary.--
The taxes imposed by chapters 12 and 13 shall apply to
a transfer by reason of a change in the designated
beneficiary under the program (or a contribution under
paragraph (1)(C) to the ABLE account of a new
beneficiary) during any taxable year unless, as of the
beginning of such taxable year, the new beneficiary is
both an eligible individual for such taxable year and a
member of the family of the former beneficiary.
``(3) Additional tax for distributions not used for
disability expenses.--
``(A) In general.--The tax imposed by this chapter
for any taxable year on any taxpayer who receives a
distribution from a qualified ABLE program which is
includible in gross income shall be increased by 10
percent of the amount which is so includible.
``(B) Exception.--Subparagraph (A) shall not apply if
the payment or distribution is made to a beneficiary
(or to the estate of the designated beneficiary) on or
after the death of the designated beneficiary.
``(C) Contributions returned before certain date.--
Subparagraph (A) shall not apply to the distribution of
any contribution made during a taxable year on behalf
of the designated beneficiary if--
``(i) such distribution is received on or
before the day prescribed by law (including
extensions of time) for filing such designated
beneficiary'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 gross income for the taxable year in which
such excess contribution was made.
``(4) Loss of able account treatment.--If, during any taxable
year of an eligible individual for whose benefit any ABLE
account is established, more than 1 ABLE account for the
benefit of the eligible individual exists at the same time,
each such ABLE account other than the earliest established ABLE
account shall not be treated as an ABLE account as of the first
day of such taxable year.
``(d) Reports.--
``(1) In general.--Each officer or employee having control of
the qualified ABLE program or their designee shall make such
reports regarding such program to the Secretary and to
designated beneficiaries with respect to contributions,
distributions, the return of excess contributions, and such
other matters as the Secretary may require.
``(2) Certain aggregated information.--For research purposes,
the Secretary shall make available to the public reports
containing aggregate information, by diagnosis and other
relevant characteristics, on contributions and distributions
from the qualified ABLE program. In carrying out the preceding
sentence an item may not be made available to the public if
such item can be associated with, or otherwise identify,
directly or indirectly, a particular individual.
``(3) Notice of establishment of able account.--The trustee
of an ABLE account shall submit a notice to the Secretary upon
the establishment of the ABLE account. Such notice shall
contain the name and State of residence of the beneficiary and
such other information as the Secretary may require.
``(4) Electronic distribution statements.--For purposes of
section 4 of the Achieving a Better Life Experience Act of
2014, States shall submit electronically on a monthly basis to
the Commissioner of Social Security, in the manner specified by
the Commissioner, statements on relevant distributions and
account balances from all ABLE accounts.
``(5) Requirements.--The reports and notices required by
paragraphs (1), (2), and (3) 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.
``(e) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Eligible individual.--
``(A) In general.--An individual is an eligible
individual for a taxable year if during such taxable
year--
``(i) a disability certification with respect
to such individual is filed with the Secretary
for such taxable year, or
``(ii) the individual has been determined for
purposes of section 223 or 1614 of the Social
Security Act (42 U.S.C. 421, 1382c) to meet the
criteria of subparagraph (B) for such taxable
year.
``(B) Criteria.--An individual meets the criteria of
this subparagraph for a taxable year if--
``(i) in the case of an individual who has
not attained age 19 as of the close of the
taxable year, the individual is either blind
(within the meaning of section 1614(a)(2) of
the Social Security Act (42 U.S.C.
1382c(a)(2))) or disabled within the meaning of
section 1614(a)(3)(C) of such Act (42 U.S.C.
1382c(a)(3)(C)), or
``(ii) the individual--
``(I) is either blind (within the
meaning of section 1614(a)(2) of such
Act (42 U.S.C. 1382c(a)(2))) or
disabled within the meaning of section
1614(a)(3)(A) of such Act, and
``(II) such blindness or disability
occurred before the date on which the
individual attained age 26.
``(2) Disability certification.--
``(A) In general.--The term `disability
certification' means, with respect to an eligible
individual, a certification to the satisfaction of the
Secretary by the eligible individual or the parent or
guardian of the eligible individual that--
``(i) the individual meets the criteria
described in paragraph (1)(B), and
``(ii) includes a copy of the individual's
diagnosis relating to the individual's relevant
impairment or impairments, signed by a
physician meeting the criteria of section
1861(r)(1) of the Social Security Act.
``(B) Restriction on use of certification.--No
inference may be drawn from a disability certification
for purposes of establishing eligibility for benefits
under title II, XVI, or XIX of the Social Security Act.
``(3) Designated beneficiary.--The term `designated
beneficiary' in connection with an ABLE account established
under a qualified ABLE program means--
``(A) the eligible individual designated at the
commencement of participation in the qualified ABLE
program as the beneficiary of amounts paid (or to be
paid) to the program, and
``(B) in the case of a change in beneficiaries
described in subparagraph (C)(ii) of subsection (c)(1),
the individual who is the new beneficiary.
``(4) Member of family.--The term `member of the family'
means, with respect to any designated beneficiary, an
individual who bears a relationship to such beneficiary which
is described in subparagraph section 152(d)(2)(B). For purposes
of the preceding sentence, a rule similar to the rule of
section 152(f)(1)(B) shall apply.
``(5) Qualified disability expenses.--The term `qualified
disability expenses' means any expenses related to the eligible
individual's blindness or disability which are made for the
benefit of an eligible individual who is the designated
beneficiary, including the following expenses: education,
housing, transportation, employment training and support,
assistive technology and personal support services, health,
prevention and wellness, financial management and
administrative services, legal fees, expenses for oversight and
monitoring, funeral and burial expenses, and other expenses,
which are approved by the Secretary under regulations and
consistent with the purposes of this section.
``(6) ABLE account.--The term `ABLE account' means an account
established and maintained under a qualified ABLE program.
``(7) Contracting state.--The term `contracting State' means
a State without a qualified ABLE program which has entered into
a contract with a State with a qualified ABLE program to
provide residents of the contracting State access to a
qualified ABLE program.
``(f) Transfer to State.--Subject to any outstanding payments due for
qualified disability expenses, in the case that the designated
beneficiary dies, all amounts remaining in the qualified ABLE account
not in excess of the amount equal to the total medical assistance paid
for the designated beneficiary after the establishment of the account,
net of any premiums paid from the account or paid by or on behalf of
the beneficiary to a Medicaid Buy-In program, under any State Medicaid
plan established under title XIX of the Social Security Act shall be
distributed to such State upon filing of a claim for payment by such
State. For purposes of this paragraph, the State shall be a creditor of
an ABLE account and not a beneficiary. Subsection (c)(3) shall not
apply to a distribution under the preceding sentence.
``(g) Regulations.--The Secretary shall prescribe such regulations or
other guidance as the Secretary determines necessary or appropriate to
carry out the purposes of this section, including regulations--
``(1) to enforce the 1 ABLE account per eligible individual
limit,
``(2) providing for the information required to be presented
to open an ABLE account,
``(3) to generally define qualified disability expenses,
``(4) developed in consultation with the Commissioner of
Social Security, relating to disability certifications and
determinations of disability, including those conditions deemed
to meet the requirements of subsection (e)(1)(B)(ii),
``(5) to prevent fraud and abuse with respect to amounts
claimed as qualified disability expenses,
``(6) under chapters 11, 12, and 13 of this title, and
``(7) to allow for transfers from one ABLE account to another
ABLE account in cases in which there is a change in the State
of residence of an eligible individual.''.
(b) Tax on Excess Contributions.--
(1) In general.--Subsection (a) of section 4973 of the
Internal Revenue Code of 1986 (relating to tax on excess
contributions to certain tax-favored accounts and annuities) is
amended by striking ``or'' at the end of paragraph (4), by
inserting ``or'' at the end of paragraph (5), and by inserting
after paragraph (5) the following new paragraph:
``(6) an ABLE account (within the meaning of section
529A),''.
(2) Excess contribution.--Section 4973 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new subsection:
``(h) Excess Contributions to ABLE Account.--For purposes of this
section--
``(1) In general.--In the case of an ABLE account (within the
meaning of section 529A), the term `excess contributions' means
the amount by which the amount contributed for the taxable year
to such account (other than contributions under section
529A(c)(1)(C)) exceeds the contribution limit under section
529A(b)(2)(B).
``(2) Special rule.--For purposes of this subsection, any
contribution which is distributed out of the ABLE account in a
distribution to which the last sentence of section 529A(b)(2)
applies shall be treated as an amount not contributed.''.
(c) Penalty for Failure to File Reports.--Section 6693(a)(2) of the
Internal Revenue Code of 1986 is amended by striking ``and'' at the end
of subparagraph (D), by redesignating subparagraph (E) as subparagraph
(F), and by inserting after subparagraph (D) the following:
``(E) section 529A(d) (relating to qualified ABLE
programs), and''.
(d) Conforming Amendments.--
(1) Section 26(b)(2) of the Internal Revenue Code of 1986 is
amended by striking ``and'' at the end of subparagraph (W), by
striking the period at the end of subparagraph (X) and
inserting ``, and'', and by inserting after subparagraph (X)
the following:
``(Y) section 529A(c)(3)(A) (relating to additional
tax on ABLE account distributions not used for
qualified disability expenses).''.
(2) The heading for part VIII of subchapter F of chapter 1 of
the Internal Revenue Code of 1986 is amended by striking
``higher education'' and inserting ``certain''.
(3) The item in the table of parts for subchapter F of
chapter 1 of the Internal Revenue Code of 1986 relating to part
VIII is amended to read as follows:
``Part VIII. Certain Savings Entities.''.
(4) The table of sections for part VIII of subchapter F of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after the item relating to section 529 the following
new item:
``Sec. 529A. Qualified ABLE programs.''.
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2014.
(2) Regulations.--The Secretary of the Treasury (or the
Secretary's designee) shall promulgate the regulations or other
guidance required under section 529A(g) of the Internal Revenue
Code of 1986, as added by subsection (a), not later than 6
months after the date of the enactment of this Act.
SEC. 4. TREATMENT OF ABLE ACCOUNTS UNDER CERTAIN FEDERAL PROGRAMS.
(a) Account Funds Disregarded for Purposes of Certain Other Means-
Tested Federal Programs.--Notwithstanding any other provision of
Federal law that requires consideration of 1 or more financial
circumstances of an individual, for the purpose of determining
eligibility to receive, or the amount of, any assistance or benefit
authorized by such provision to be provided to or for the benefit of
such individual, any amount (including earnings thereon) in the ABLE
account (within the meaning of section 529A of the Internal Revenue
Code of 1986) of such individual, and any distribution for qualified
disability expenses (as defined in subsection (e)(5) of such section)
shall be disregarded for such purpose with respect to any period during
which such individual maintains, makes contributions to, or receives
distributions from such ABLE account, except that, in the case of the
supplemental security income program under title XVI of the Social
Security Act, a distribution for housing expenses (within the meaning
of such subsection) shall not be so disregarded, and in the case of
such program, only the 1st $100,000 of the amount (including such
earnings) in such ABLE account shall be so disregarded.
(b) Suspension of SSI Benefits During Periods of Excessive Account
Funds.--
(1) In general.--The benefits of an individual under the
supplemental security income program under title XVI of the
Social Security Act shall not be terminated, but shall be
suspended, by reason of excess resources of the individual
attributable to an amount in the ABLE account (within the
meaning of section 529A of the Internal Revenue Code of 1986)
of the individual not disregarded under subsection (a) of this
section.
(2) No impact on medicaid eligibility.--An individual who
would be receiving payment of such supplemental security income
benefits but for the application of the previous sentence shall
be treated for purposes of title XIX of the Social Security Act
as if the individual continued to be receiving payment of such
benefits.
(c) Effective Date.--This section shall take effect on the date of
the enactment of this Act.
I. Summary and Background
A. PURPOSE AND SUMMARY
H.R. 647, as reported by the Committee on Ways and Means,
provides States with the option to establish an ABLE program.
Such a program would allow individuals with disabilities to
establish an ABLE account, modeled after Code section 529
savings accounts, permitting them to save to offset the cost of
certain qualified expenses for services and programs necessary
to manage their disability while maintaining access to Medicaid
and Supplemental Security Income (``SSI'').
B. BACKGROUND AND NEED FOR LEGISLATION
Individuals with disabilities can face significant barriers
to finding and holding employment and living independently
because their access to certain safety-net programs can be lost
once they establish a minimum level of savings and income, thus
creating a disincentive to find and obtain employment. The ABLE
Act would facilitate the ability of individuals with
disabilities to work and live independently without losing
access to Medicaid and SSI.
C. LEGISLATIVE HISTORY
Background
H.R. 647 was introduced on February 13, 2013, and was
referred to the Committee on Ways and Means and in addition to
the Committee on Energy and Commerce.
Committee action
The Committee on Ways and Means marked up H.R. 647, the
``Achieving A Better Life Experience Act of 2013 (`ABLE Act of
2013'),'' on July 31, 2014, and ordered the bill, as amended,
favorably reported (with a quorum being present).
Committee hearings
On June 19, 2013, the Social Security Subcommittee held a
hearing on encouraging work through the Social Security
Disability Insurance (``SSDI'') program. Testimony was received
from (i) Mark G. Duggan, Ph.D., Professor, The Wharton School,
University of Pennsylvania; (ii) Mary C. Daly, Ph.D., Group
Vice President and Associate Director of Research, Federal
Reserve Bank of San Francisco; (iii) Kevin Ufier, National
Director Managed Disability, GENEX Services; (iv) Lisa D.
Ekman, Director of Federal Policy, Health & Disability
Advocates, on behalf of the Consortium for Citizens with
Disabilities Social Security Task Force; (v) James Smith,
Budget and Policy Manager, Division of Vocational
Rehabilitation, Vermont Agency of Human Services; and (vi)
David Weaver, Ph.D., Associate Commissioner, Office of Program
Development and Research, accompanied by Robert Williams,
Associate Commissioner, Office of Employment Support Programs,
Social Security Administration (``SSA''). Witnesses discussed
the impact of the SSDI program on the economy, efforts by the
SSA to return individuals to work, international efforts to
return individuals to work, and other options to encourage
work. They highlighted the role of employment supports in
helping individuals with disabilities remain in and return to
the workforce. Witnesses argued for the need to reexamine the
SSA's return to work programs to enable more individuals to
leave the rolls and seek gainful employment. Reforms discussed
included those to offer vocational and health benefits in lieu
of cash benefits; create incentives for firms to keep workers
employed; alter the treatment of earnings to an approach
similar to the SSI program; simplify earnings rules for
beneficiaries; and allow States more authority to target
certain revenue streams to reduce SSDI applications.
II. Explanation of the Bill
A. QUALIFIED ABLE PROGRAMS (SECS. 3 AND 4 OF THE BILL AND NEW SEC. 529A
OF THE CODE)
PRESENT LAW
Although present law does not contain tax-advantaged
savings vehicles specifically targeted to persons with
disabilities, present law does contain other tax-advantaged
savings vehicles, as well as rules for certain trusts intended
for those with disabilities. Below is a description of one such
savings vehicle and the rules applicable to special needs
trusts.
Section 529 qualified tuition programs
A qualified tuition program is a program established and
maintained by a State or agency or instrumentality thereof, or
by one or more eligible educational institutions, which
satisfies certain requirements and under which a person may
purchase tuition credits or certificates on behalf of a
designated beneficiary that entitle the beneficiary to the
waiver or payment of qualified higher education expenses of the
beneficiary (a ``prepaid tuition program''). Section 529\1\
provides specified income tax and transfer tax rules for the
treatment of accounts and contracts established under qualified
tuition programs.\2\ In the case of a program established and
maintained by a State or agency or instrumentality thereof, a
qualified tuition program also includes a program under which a
person may make contributions to an account that is established
for the purpose of satisfying the qualified higher education
expenses of the designated beneficiary of the account, provided
it satisfies certain specified requirements (a ``savings
account program''). Under both types of qualified tuition
programs, a contributor establishes an account for the benefit
of a particular designated beneficiary to provide for that
beneficiary's higher education expenses.
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\1\Except where otherwise specified, all section references are to
the Internal Revenue Code of 1986, as amended (the ``Code'').
\2\For purposes of this description, the term ``account'' is used
interchangeably to refer to a prepaid tuition benefit contract or a
tuition savings account established pursuant to a qualified tuition
program.
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For this purpose, qualified higher education expenses means
tuition, fees, books, supplies, and equipment required for the
enrollment or attendance of a designated beneficiary at an
eligible educational institution, and expenses for special
needs services in the case of a special needs beneficiary that
are incurred in connection with such enrollment or attendance.
Qualified higher education expenses generally also include room
and board for students who are enrolled at least half-time.
Contributions to a qualified tuition program must be made
in cash. Section 529 does not impose a specific dollar limit on
the amount of contributions, account balances, or prepaid
tuition benefits relating to a qualified tuition account;
however, the program is required to have adequate safeguards to
prevent contributions in excess of amounts necessary to provide
for the beneficiary's qualified higher education expenses.
Contributions generally are treated as a completed gift
eligible for the gift tax annual exclusion. Contributions are
not tax deductible for Federal income tax purposes, although
they may be deductible for State income tax purposes. Amounts
in the account accumulate on a tax-deferred basis (i.e., income
on accounts in the plan is not subject to current income tax).
A qualified tuition program may not permit any contributor
to, or designated beneficiary under, the program to direct
(directly or indirectly) the investment of any contributions
(or earnings thereon), and must provide separate accounting for
each designated beneficiary. A qualified tuition program may
not allow any interest in an account or contract (or any
portion thereof) to be used as security for a loan.
Distributions from a qualified tuition program are
excludable from the distributee's gross income to the extent
that the total distribution does not exceed the qualified
higher education expenses incurred for the beneficiary. If a
distribution from a qualified tuition program exceeds the
qualified higher education expenses incurred for the
beneficiary, the portion of the excess that is treated as
earnings generally is subject to income tax and an additional
10-percent tax. Amounts in a qualified tuition program may be
rolled over without income tax liability to another qualified
tuition program for the same beneficiary or for a member of the
family of that beneficiary.
In general, prepaid tuition contracts and tuition savings
accounts established under a qualified tuition program involve
prepayments or contributions made by one or more individuals
for the benefit of a designated beneficiary. Decisions with
respect to the contract or account are made by an individual
who is not the designated beneficiary. Qualified tuition
accounts or contracts generally require the designation of a
person (generally referred to as an ``account owner'')\3\ whom
the program administrator (oftentimes a third party
administrator retained by the State or by the educational
institution that established the program) may look to for
decisions, recordkeeping, and reporting with respect to the
account established for a designated beneficiary. The person or
persons who make the contributions to the account need not be
the same person who is regarded as the account owner for
purposes of administering the account. Under many qualified
tuition programs, the account owner generally has control over
the account or contract, including the ability to change
designated beneficiaries and to withdraw funds at any time and
for any purpose. Thus, in practice, qualified tuition accounts
or contracts generally involve a contributor, a designated
beneficiary, an account owner (who oftentimes is not the
contributor or the designated beneficiary), and an
administrator of the account or contract.
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\3\Section 529 refers to contributors and designated beneficiaries,
but does not define or otherwise refer to the term ``account owner,''
which is a commonly used term among qualified tuition programs.
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Treatment of savings accounts under Federal means-tested programs
Means-tested programs typically include income and
resources limits designed to properly target benefits to
individuals with limited income and other financial resources
on which to depend for support. Income is the money an
individual receives in a month from wages and other sources
while resources are savings and other items of significant
value that individuals may own, such as a home or vehicle.
Income and resources limits vary from program to program and
sometimes from State to State for State-administered programs
such as Medicaid. The SSI program is federally-administered and
has a $2,000 resource limit for individuals. In most States,
SSI receipt confers Medicaid eligibility. When SSI recipients
have income and resources over the limit, their SSI benefits
are suspended but they remain eligible for Medicaid.
Use of a trust to provide for the needs of a disabled person
In general
A specially designed trust, sometimes referred to as
special needs trusts or supplemental needs trust, may be used
to provide financial assistance to a disabled person (the trust
beneficiary) without disqualifying the beneficiary for certain
government benefits, such as Medicaid or SSI. The trust may be
established using the disabled person's own funds (a self-
settled trust) or the funds of a third party who does not have
a legal obligation to support the trust beneficiary (a third-
party trust).
The assets of a properly drafted third-party trust
generally are not counted when determining the beneficiary's
eligibility for Medicaid. Assets held in a self-settled trust,
however, generally are counted when determining Medicaid
eligibility, unless for example the trust is described in
section 1917(d)(4)(A) of the Social Security Act. That section
describes a trust: (1) containing the assets of an individual
who is disabled (within the meaning of section 1614(a)(3) of
the Social Security Act); (2) which is established for the
benefit of the individual by a parent, grandparent, legal
guardian, or a court; and (3) pursuant to the terms of which
the State will be reimbursed upon the individual's death for
the total amount of medical assistance paid on behalf of the
individual under the State's Medicaid plan, up to the amount of
the assets remaining in the trust upon the death of the
individual. For SSI, trusts that are irrevocable, meaning the
value cannot be turned into a liquid resource, are not counted
toward the asset test, but any amounts that are removed are
counted as income in the month received, which may reduce the
individual's monthly benefit amount.
Income tax provisions related to qualified disability
trusts
Under present law, a qualified disability trust is allowed
a deduction for a personal exemption equal to that of an
unmarried individual (for 2014, $3,950 subject to phaseout if
adjusted gross income exceeds $254,200).\4\
---------------------------------------------------------------------------
\4\Sec. 642(b)(2)(C). The exemption amount of a trust generally is
either $100 or $300 (if required to distribute all its income
currently).
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In addition, amounts distributed to a child who is a
beneficiary of a qualified disability trust are treated as
earned income for purposes of the ``kiddie'' tax and thus are
not taxed at parents' tax rates.\5\
---------------------------------------------------------------------------
\5\Sec. 1(g)(4)(C).
---------------------------------------------------------------------------
For these purposes a qualified disability trust means a
disability trust described in section 1917(c)(2)(B)(iv) of the
Social Security Act\6\ all the beneficiaries of which are
determined to be disabled (within the meaning of section
1614(a)(3) of that Act).
---------------------------------------------------------------------------
\6\Section 1917(c)(2)(B)(iv) of the Social Security Act describes
trusts, including disability trusts described in section 1917(d)(4) of
that Act, established solely for the benefit of an individual under 65
years of age who is disabled (within the meaning of section 1614(a)(3)
of that Act).
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REASONS FOR CHANGE
The Committee recognizes the special financial burdens
borne by families raising children with disabilities and the
fact that increased financial needs generally continue
throughout the child's lifetime. Present law provides for
various types of tax-advantaged savings arrangements; however,
none of these arrangements adequately serves the goal of
promoting saving for these financial needs. The creation of
qualified ABLE programs with tax-favored treatment of ABLE
accounts for eligible beneficiaries will assist families and
disabled individuals in meeting their financial needs.
EXPLANATION OF PROVISION
In general
The provision provides rules for a new type of tax-
advantaged savings program, a qualified ABLE program. A
qualified ABLE program is a program established and maintained
by a State or agency or instrumentality thereof. A qualified
ABLE program must meet the following conditions: (1) under the
provisions of the program, contributions may be made to an
account (an ``ABLE account''), established for the purpose of
meeting the qualified disability expenses of the designated
beneficiary of the account; (2) the program must limit a
designated beneficiary to one ABLE account; (3) the program
must allow for the establishment of ABLE accounts only for
designated beneficiaries who are either residents of the State
maintaining such ABLE program (a ``program State'') or
residents of a State that has not established an ABLE program
(a ``contracting State'') which has entered into a contract
with a program State to provide the contracting State's
residents with access to the program State's ABLE program; and
(4) the program must meet certain other requirements discussed
below. A qualified ABLE program is generally exempt from income
tax, but is otherwise subject to the taxes imposed on the
unrelated business income of tax-exempt organizations.
A designated beneficiary of an ABLE account must be an
eligible individual (defined below) who is designated at the
commencement of participation in the qualified ABLE program as
the beneficiary of amounts paid (or to be paid) into the
program. Additionally, a designated beneficiary may be a
brother, sister, stepbrother or stepsister of the former
designated beneficiary of the ABLE account, provided such new
designated beneficiary is also an eligible individual.
Contributions to an ABLE account must be made in cash and
are not deductible for Federal income tax purposes. Under the
provision, except in the case of a rollover contribution from
another account, an ABLE account must provide that it may not
receive aggregate contributions during a taxable year in excess
of the annual gift tax exclusion amount ($14,000 for 2014).\7\
Additionally, a qualified ABLE program must provide adequate
safeguards to ensure that ABLE account contributions do not
exceed the limit imposed on accounts under the qualified
tuition program of the State maintaining the qualified ABLE
program, taking into account contributions under any prior
qualified ABLE program. Amounts in the account accumulate on a
tax-deferred basis (i.e., income on accounts in the plan is not
subject to current income tax).
---------------------------------------------------------------------------
\7\Sec. 2503(b). This amount is indexed for inflation. In the case
that contributions to an ABLE account exceed the annual limit, an
excise tax in the amount of six percent of the excess contribution to
such account is imposed on the designated beneficiary. Such tax does
not apply in the event that the trustee of such account makes a
corrective distribution of such excess amounts within the taxable year.
---------------------------------------------------------------------------
A qualified ABLE program may not permit any contributor to,
or designated beneficiary under, the program to direct
(directly or indirectly) the investment of any contributions
(or earnings thereon), which shall be implemented in the same
manner as section 529 qualified tuition programs. A qualified
ABLE program must also provide separate accounting for each
designated beneficiary and may not allow any interest in the
program (or any portion thereof) to be used as security for a
loan.
Amounts distributed from a qualified ABLE account are
includible in the gross income of the distributee as provided
in section 72 (relating to annuities) to the extent not
otherwise excluded from gross income. If the distributions from
a qualified ABLE account do not exceed the qualified
distribution expenses of the designated beneficiary, no amount
is includible in gross income. If the distributions exceed the
qualified distribution expenses, the amount otherwise
includible in gross income is reduced by an amount which bears
the same ratio to the distributed amount as the qualified
disability expenses bear to that amount. The portion of any
distribution that is includible in gross income is subject to
an additional 10-percent tax unless made after the death of the
beneficiary.
For example, assume a qualified ABLE account with a balance
of $100,000 (of which $50,000 consists of contributions)
distributes $10,000 to a beneficiary who has incurred $6,000 of
qualified disability expenses. Under section 72, one-half of
the distribution ($5,000) is includible in gross income. Under
the bill, the $5,000 amount otherwise includible in gross
income is reduced by $3,000 ($6,000/$10,000 multiplied by
$5,000) to $2,000. An additional tax of $200 (ten percent of
$2,000) is imposed on the distribution.
Amounts in an ABLE account may be rolled over without
income tax liability to another ABLE account for the same
beneficiary\8\ or another ABLE account for the designated
beneficiary's brother, sister, stepbrother or stepsister who is
also an eligible individual.
---------------------------------------------------------------------------
\8\Such circumstances could arise, for instance, if an eligible
individual were to relocate to a different State.
---------------------------------------------------------------------------
Under the provision, if, during any taxable year of an
eligible individual, more than one ABLE account exists for such
individual, each such ABLE account other than the earliest
established ABLE account shall cease to be an ABLE account as
of the first day of such taxable year. In this case, the
designated beneficiary of the nonqualifying ABLE account shall
be treated as having received a distribution of the fair market
value of all the non-qualifying ABLE account's assets on the
first day of such taxable year. The provision provides the
Secretary of the Treasury (``Secretary'') with the authority to
prescribe regulations to enforce the one ABLE account
limitation. Within those regulations, Treasury should establish
a method for allowing individuals to verify the existence of
accounts in order to prevent individuals from unknowingly
having nonqualifying ABLE accounts.
Under the provision, a contribution to an ABLE account is
treated as a completed gift of a present interest to the
beneficiary of the account. Thus, the contribution qualifies
for the per-donee annual gift tax exclusion ($14,000 for 2014)
and, to the extent of the exclusion, is exempt from the
generation skipping transfer (``GST'') tax. A distribution from
an ABLE account generally is not subject to gift tax or GST
tax. These taxes may apply, however, to a change of designated
beneficiary during any taxable year unless, as of the beginning
of the year, the new beneficiary is both an eligible individual
for the taxable year and a brother, sister, stepbrother or
stepsister of the former beneficiary.
Eligible individuals
As described above, a qualified ABLE program may provide
for the establishment of ABLE accounts only if those accounts
have as their designated beneficiary an eligible individual.
For these purposes, an eligible individual is an individual
either (1) for whom a disability certification has been filed
with the Secretary for the taxable year, or (2) who has been
determined, for purposes of Social Security Disability
Insurance benefits or SSI benefits\9\ to meet the requirements
relating to disability or blindness described below. For the
purposes of determining eligibility for SSI, the eligible
individual is the owner of the account. All rules for the
counting and deeming of income and resources should apply. A
disability certification means a certification to the
satisfaction of the Secretary, made by the eligible individual
or the parent or guardian of the eligible individual, that the
individual meets the requirements relating to disability or
blindness described below and that includes a copy of the
individual's diagnosis relating to the individual's relevant
impairment or impairments, signed by a licensed physician.\10\
---------------------------------------------------------------------------
\9\These are benefits, respectively, under Title II or Title XVI of
the Social Security Act.
\10\No inference may be drawn from a disability certification for
purposes of eligibility for Social Security, SSI or Medicaid benefits.
---------------------------------------------------------------------------
Treasury is responsible for maintaining the list of
eligible individuals, including those who have a Social
Security disability determination, so that States and the IRS
need to contact only one entity to confirm an individual's
eligibility status. The SSA is responsible for providing
confirmation of disability determination in the manner
specified by Treasury. This process does not violate the Health
Insurance Portability and Accountability Act of 1996
(``HIPAA'') because no diagnosis information should be
exchanged, only binary information on the result of a
disability determination or certification for a given tax year.
For purposes of the requirements relating to disability or
blindness, the definitions of blind and disabled under the SSI
program apply (``SSI definitions'').\11\ In general, an
individual must be either blind or disabled, and the blindness
or disability must have occurred before the date on which the
individual attained age 26. This does not require SSA to make
additional disability determinations beyond what is needed to
administer its programs, but means that if a positive
disability determination was made prior to the individual's
turning 26, it can be used. An individual who has not reached
age 19 during the taxable year may be blind or disabled under
the SSI definition applicable to an individual under the age of
18. This is meant to allow for additional processing time on a
pending age-18 redetermination.
---------------------------------------------------------------------------
\11\Section 1614(a)(2) and (a)(3) of the Social Security Act. Under
the applicable definition, an individual is generally disabled if
unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to
last for a continuous period of at least 12 months. An individual under
the age of 18 is disabled if having a medically determinable physical
or mental impairment that results in marked and severe functional
limitations and that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of at least
12 months.
---------------------------------------------------------------------------
As discussed further below, the provision provides that,
not later than six months after the date of enactment, the
Secretary shall develop regulations or other guidance on
certain aspects of the provision. Among these aspects are
regulations or guidance, to be developed in consultation with
the Commissioner of Social Security, relating to disability
certifications and determinations of disability including those
conditions which are deemed to have occurred prior to age 26.
It is intended that individuals with those conditions shall be
required to present only limited (or no) evidence demonstrating
that the condition occurred prior to age 26. This list of
conditions should operate in a manner similar to the SSA's
Compassionate Allowances, which targets the most obviously
disabled individuals for allowances based on objective medical
information that can be obtained quickly. Compassionate
Allowances are selected using information received at public
outreach hearings, comments received from the Social Security
and Disability Determination Services communities, the counsel
of medical and scientific experts, and research conducted by
the National Institutes of Health.
Qualified disability expenses
As described above, the earnings on distributions from an
ABLE account are excluded from income only to the extent total
distributions do not exceed the qualified disability expenses
of the designated beneficiary. For these purposes, qualified
disability expenses are any expenses related to the eligible
individual's blindness or disability which are made for the
benefit of the designated beneficiary. Such expenses include
the following expenses: education, housing, transportation,
employment training and support, assistive technology and
personal support services, health, prevention and wellness,
financial management and administrative services, legal fees,
expenses for oversight and monitoring, funeral and burial
expenses, and other expenses, which are approved by the
Secretary under regulations and consistent with the purposes of
this section.
Reporting requirements
Under the provision, each officer or employee having
control of the qualified ABLE program (or their designee) is
required to make reports to the Secretary and to the designated
beneficiaries of ABLE accounts. Such reports must provide
information with respect to contributions, distributions, the
return of excess contributions, and other matters as required
by the Secretary. In addition, for research purposes, the
Secretary, with assistance from SSA, shall make available to
the public reports containing aggregate information, by
diagnosis and other relevant characteristics, on contributions
and distributions in order to monitor take-up and identify
gaps. However, an item of information may not be made
publically available if it can be associated with, or otherwise
identify, directly or indirectly, a particular individual.
Given SSA's research capabilities, SSA will be an important
partner in developing, creating, and publishing the required
research tables. In this case, these tables will not violate
HIPAA because data is de-identified and presented in the
aggregate.
The provision also requires that the trustee of an ABLE
account submit a notice to the Secretary upon the establishment
of the ABLE account. The notice shall contain the name and
State of residence of the beneficiary, and other such
information as the Secretary may require. These reports and
notices must be filed at such time and in such manner as
required by the Secretary. A penalty of $50 may apply with
respect to any failure to provide a required report or notice.
Additionally, for purposes of the rules relating to
eligibility for SSI (discussed below), States having control of
a qualified ABLE program must submit statements on
distributions and account balances of all ABLE accounts to the
Commissioner of Social Security. States should work with the
Commissioner during implementation to identify data elements to
include in their electronic statements that would allow SSA to
electronically make accurate and timely SSI determinations on a
monthly basis. This would include but not be limited to the
name, date of birth, and SSN of the beneficiary, balance
information as of the first moment of the month (i.e., 12:00
a.m. on the first of the month); and, regarding distributions,
the recipient of the distribution, whether it is a distribution
for a qualified or non-qualified expense, and if for a
qualified expense, the type of qualified expense (e.g.,
housing). To comply with the requirements for notice and appeal
in the Computer Matching and Privacy Protection Act, SSA should
work with States to address issues so that information can be
processed as efficiently as possible. In doing so, options such
as providing immediate notice when an individual indicates a
withdrawal is for a housing expense or when the account balance
reaches $100,000 should be considered.
Transfer to State
Under the provision, in the event that the designated
beneficiary dies, subject to any outstanding payments due for
qualified disability expenses incurred by the designated
beneficiary, all amounts remaining in the deceased
beneficiary's ABLE account not in excess of the amount equal to
the total medical assistance paid for such individual after
establishment of the account under any State Medicaid plan
established under title XIX of the Social Security Act shall be
distributed to such State upon filing of a claim for payment by
such State. Such repaid amounts shall be net of any premiums
paid from the account or by or on behalf of the beneficiary to
a Medicaid Buy-In program.
Regulations
The Secretary is directed to issue regulations or other
guidance as the Secretary determines is necessary or
appropriate to carry out the purposes of the qualified ABLE
program rules, including regulations (1) to enforce the one
ABLE account per eligible individual limit; (2) providing for
the information required to be presented to open an ABLE
account; (3) to generally define disability expenses; (4)
relating to disability certifications and determinations of
disability, to be developed in consultation with the
Commissioner of Social Security, as discussed above; (5) to
prevent fraud and abuse with respect to amounts claimed as
qualified disability expenses; (6) under the estate tax, gift
tax, and generation-skipping transfer tax provisions of the
Code; and (7) to allow for transfers from one ABLE account to
another ABLE account in cases in which an eligible individual
has a change in State of residence. The Secretary is directed
to issue such regulations or other guidance no later than six
months after the date of enactment.
Treatment of ABLE accounts under Federal programs
Under the provision, any amount in an ABLE account, and any
distribution for qualified disability expenses, shall be
disregarded for purposes of determining eligibility to receive,
or the amount of, any assistance or benefit authorized by any
Federal means-tested program. However, in the case of the SSI
program, a distribution for housing expenses is not
disregarded, nor are amounts in an ABLE account in excess of
$100,000. In the case that an individual's ABLE account balance
exceeds $100,000, the individual's SSI benefits shall not be
terminated, but instead shall be suspended until such time as
the individual's resources fall below $100,000. However, the
suspension shall not apply for purposes of Medicaid
eligibility.
EFFECTIVE DATE
The provision relating to the establishment of ABLE
programs is effective for taxable years beginning after
December 31, 2014. The directive that the Secretary issue
regulations within six months and the disregard of ABLE
accounts and distributions from such accounts in the case of
certain means-tested Federal programs are effective on the date
of enactment.
III. Votes of the Committee
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 647 the ``Achieving A Better Life
Experience Act of 2014 (`ABLE Act of 2014'),'' on July 31,
2014:
MOTION TO REPORT RECOMMENDATIONS
The bill, H.R. 647, was ordered favorably reported as
amended by voice vote (with a quorum being present).
IV. Budget Effects of the Bill
A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 647, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal budget receipts for fiscal years 2014-2024:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal years--[millions of dollars]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Item 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-19 2014-24
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues........................................................ ...... -1 -4 -10 -24 -49 -82 -117 -158 -203 -249 -89 -898
Outlays\1\...................................................... ...... -1 -12 -31 -47 -78 -109 -150 -202 -243 -280 -170 -1,153
Net Total................................................... ...... -2 -16 -41 -71 -127 -191 -267 -360 -446 -529 -259 -2,051
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details may not add to total due to rounding.
\1\Estimated outlay effects provided by the Congressional Budget Office.
B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET
AUTHORITY
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves new or increased budget authority. The Committee
further states that the revenue-reducing tax provisions involve
increased tax expenditures. (See amounts in table in Part
IV.A., above.)
C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 27, 2014.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 647, the Achieving
a Better Life Experience Act of 2014.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is David
Rafferty.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 647--Achieving a Better Life Experience Act of 2014
Summary: H.R. 647 would allow for the creation of a new
type of tax-favored account--an ABLE account--for the benefit
of individuals with disabilities. Assets in an ABLE account and
distributions from the account for qualifying expenses would be
disregarded when determining the beneficiary's eligibility for
most federal means-tested benefits.
CBO estimates that enacting H.R. 647 would increase direct
spending by $1.2 billion over the 2015-2024 period.
Additionally, the staff of the Joint Committee on Taxation
(JCT) estimates that enacting H.R. 647 would decrease revenues
by $0.9 billion over the 2015-2024 period. In total, CBO and
JCT estimate that enacting the bill would increase deficits by
$2.1 billion over the next 10 years. Pay-as-you-go procedures
apply because enacting the legislation would affect direct
spending and revenues.
CBO has determined that the nontax provisions of the bill
contain no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act (UMRA). Similarly,
JCT has determined that the tax provisions of the bill contain
no intergovernmental or private-sector mandates as defined in
UMRA.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 647 is shown in the following table.
The costs of this legislation fall within budget functions 550
(health), 570 (Medicare), and 600 (income security).
TABLE 1. SUMMARY OF ESTIMATED BUDGETARY EFFECTS OF H.R. 647
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------------
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-2019 2015-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Estimated Budget Authority..................... 1 12 31 47 78 109 150 202 243 280 170 1,153
Estimated Outlays.............................. 1 12 31 47 78 109 150 202 243 280 170 1,153
CHANGES IN REVENUES
Estimated Revenues............................. -1 -4 -10 -24 -49 -82 -117 -158 -203 -249 -89 -898
NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Impact on Deficit.............................. 2 16 41 71 127 191 267 360 446 529 259 2,051
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: CBO and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.
Basis of estimate: For this estimate, CBO assumes that the
bill will be enacted near the beginning of fiscal year 2015.
CBO also assumes that, under the bill, states would establish
qualifying ABLE programs during the 2015-2017 period.
The ABLE Act would amend section 529 of the Internal
Revenue Code to permit individuals to establish ``ABLE
accounts'' for disabled beneficiaries that resemble the
qualified tuition programs--often called ``529 accounts''--that
have been established under that section of the tax code since
1996. Earnings on an ABLE account would not count as taxable
income of the contributor to the account or the eligible
beneficiary; because earnings on assets in other accounts would
generally be taxed under current law, the legislation would
reduce tax revenues. Moreover, assets in an ABLE account and
distributions from the account for qualified disability
expenses would be disregarded when determining the qualified
beneficiary's eligibility for most federal means-tested
benefits. Thus, the legislation would increase the number of
beneficiaries of federal means-tested programs and federal
spending from such programs.
Key characteristics of ABLE accounts: ABLE accounts would
have the following features--
Any contributor--such as a family member, a
friend, or the disabled person--could establish an ABLE
account for an eligible beneficiary. An eligible
beneficiary could have only one ABLE account, which
must be established in the state in which he resides
(or in a state that provides ABLE account services for
his home state).
An ABLE account may not receive annual
contributions exceeding the annual gift-tax exemption.
Additionally, a state must provide adequate safeguards
to ensure aggregate contributions to an ABLE account do
not exceed the state-based limits for 529 accounts.
An eligible beneficiary would be a child who
meets the Supplemental Security Income (SSI) program's
disability standard for children or an adult who meets
the SSI program's disability standard for adults,
provided that the adult's disability occurred before he
reached age 26.
Qualified disability expenses would be any
expenses made for the benefit of the disabled
beneficiary related to education; housing;
transportation; employment training and support;
assistive technology and personal support services;
health, prevention, and wellness; financial management
and administrative services; legal fees; expenses for
oversight and monitoring; funeral and burial expenses;
and any other expenses approved by the Secretary of the
Treasury under regulations.
Earnings on an ABLE account and
distributions from the account for qualified disability
expenses would not count as taxable income of the
contributor or the eligible beneficiary. Contributions
to an ABLE account would have to be made in cash from
the contributor's after-tax income.
Assets in an ABLE account and distributions
from the account for qualified disability expenses
would be disregarded when determining the qualified
beneficiary's eligibility for most federal means-tested
benefits. For SSI, only the first $100,000 in each ABLE
account would be disregarded.
Assets in an ABLE account could be rolled
over without penalty into another ABLE account for
either the qualified beneficiary or any of the
beneficiary's qualifying family members. Any assets
remaining in an ABLE account upon the death of the
qualified beneficiary could be used to reimburse a
state Medicaid agency for payments it made on behalf of
the beneficiary.
Effects on direct spending: CBO estimates that enacting
H.R. 647 would increase direct spending by $170 million over
the 2015-2019 period and by about $1,150 million over the 2015-
2024 period (see Table 2). The SSI and Medicaid programs would
each account for roughly half of the increase, with the
Medicare program experiencing a very small increase in outlays.
TABLE 2--ESTIMATED EFFECTS OF H.R. 647 ON DIRECT SPENDING, BY PROGRAM
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, outlays in millions of dollars--
-------------------------------------------------------------------------------------------
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-2019 2015-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Supplemental Security Income................................ * 5 15 25 45 60 80 110 125 135 90 600
Medicaid.................................................... 1 7 16 22 33 49 69 91 117 144 79 549
Medicare.................................................... 0 0 * * * * 1 1 1 1 1 4
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Total Changes........................................... 1 12 31 47 78 109 150 202 243 280 170 1,153
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Notes: Components may not sum to totals because of rounding.
* = less than $500,000.
Supplemental Security Income: CBO expects that the ABLE Act
would increase SSI caseloads for two distinct groups of
people--
Individuals whose eligibility for SSI
benefits was denied or interrupted because of excess
resources (defined as assets exceeding $2,000 for an
individual or $3,000 for a couple, excluding the value
of a home, a vehicle, and several other categories of
assets). Under current law, those individuals must
spend down their excess resources before gaining or
reestablishing eligibility for SSI. Under H.R. 647,
many such individuals could establish an ABLE account
more quickly than they could spend down excess
resources--accelerating their participation in SSI by
several months to several years. CBO anticipates that,
by the 10th year after enactment, about one-third of
the individuals who could accelerate their SSI
eligibility by establishing an ABLE account would do
so.
Individuals who do not apply for SSI under
current law because of excess resources, but who would
meet SSI's age or disability requirement and income
requirement. CBO anticipates that, by the 10th year
after enactment, about 10 percent of the individuals in
this group would establish an ABLE account.
Based on data from the Social Security Administration and
the Current Population Survey, CBO estimates that SSI outlays
would increase by roughly $600 million (or one-tenth of one
percent of benefit payments in that program) over the 2015-2024
period. CBO estimates that the average monthly SSI caseload
would increase by around 25,000 (or about one-quarter of one
percent) in 2024.
Medicaid: As discussed above, assets in an ABLE account
would be disregarded when determining a qualified beneficiary's
eligibility for most federal means-tested benefits. There are
several pathways to Medicaid eligibility for disabled adults
under the age of 65 that require individuals to meet both
income and asset tests. CBO expects that enacting H.R. 647
would increase the number of disabled adults under the age of
65 who enroll in Medicaid because they could hold cash assets
in an ABLE account that would not count against Medicaid
eligibility. Because a beneficiary of an ABLE account must have
a disability that occurred before he reached age 26, CBO does
not expect an increase in the number of elderly individuals who
enroll in Medicaid. Additionally, CBO does not expect that
establishment of ABLE accounts would increase the number of
children and nondisabled adults enrolled in Medicaid because
those individuals are not required to meet an asset test under
current law.
CBO estimates that enacting H.R. 647 would increase federal
spending for Medicaid by about $550 million over the 2015-2024
period. Many disabled adults who might have benefitted from the
current legislation in the absence of the Affordable Care Act
(ACA) are, or will soon become, eligible for Medicaid under
current law. Under the ACA, states are permitted to expand
their Medicaid programs to cover adults earning less than 138
percent of the federal poverty level. That pathway to Medicaid
eligibility has a higher income limit than most of the income
limits used to determine Medicaid eligibility for disabled
adults, and it does not require individuals to meet an asset
test. Therefore, CBO expects that enacting H.R. 647 would lead
to an increase in enrollment of disabled adults to only a small
degree in states that expand Medicaid eligibility under the ACA
and to a larger degree in states that do not. Altogether, CBO
estimates that enacting the bill would increase the number of
disabled adults under age 65 who are covered by Medicaid by
about 10,000 in 2024, or less than one-tenth of one percent of
the number of nonelderly disabled Medicaid beneficiaries in
that year.
Low-Income Subsidy under Medicare Part D: The Low-Income
Subsidy (LIS) under Medicare's prescription drug benefit
program (known as Part D) provides premium and cost-sharing
assistance to individuals whose income is up to 150 percent of
the federal poverty level and whose assets do not exceed
$13,440 per individual or $26,860 per couple in 2014. CBO
estimates that LIS spending would increase by less than $5
million over the 2015-2024 period. CBO expects that very few
Medicare beneficiaries would be permitted to establish ABLE
accounts because a beneficiary of an ABLE account must have a
disability that was diagnosed before he or she reached age 26.
Effects on revenues: H.R. 647 would allow for the creation
of a new type of tax-favored account--an ABLE account--for the
benefit of individuals with disabilities. Qualified
distributions from such accounts would include payments for
education, medical and dental care, housing, community-based
support services, moving, and funeral and burial services. For
purposes of this estimate, JCT assumes that the provision
allowing for the creation of ABLE accounts would be effective
for taxable years beginning after December 31, 2014. JCT
estimates that the resulting reduction in federal tax
collections would total $898 million over the 2015-2024 period.
JCT's estimate primarily reflects the revenue loss
attributable to savings by households with qualified disabled
dependents and incomes higher than $40,000. Under H.R. 647,
earnings on the assets deposited in ABLE accounts would be
untaxed; in contrast, earnings on assets in other accounts
would generally be taxed under current law. There would be an
additional, but much smaller, revenue loss stemming from
transfers from qualified disability trusts.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 647 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JULY 31, 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
By Fiscal Year, in Millions of Dollars--
--------------------------------------------------------------------------------------------------------------
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact........... 0 2 16 41 71 127 191 267 360 446 529 259 2,051
Memorandum:
Changes in Outlays................... 0 1 12 31 47 78 109 150 202 243 280 170 1,153
Changes in Revenues.................. 0 -1 -4 -10 -24 -49 -82 -117 -158 -203 -249 -89 -898
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intergovernmental and private-sector impact: CBO has
determined that the nontax provisions of the bill contain no
intergovernmental or private-sector mandates as defined in
UMRA. CBO estimates that the provisions in the bill that would
increase federal spending for Medicaid would similarly result
in $415 million of additional Medicaid spending by states over
the 2014-2024 period. Those provisions, however, would not be
intergovernmental mandates as defined by UMRA because Medicaid
provides states with significant flexibility to make
programmatic adjustments to accommodate the changes.
JCT has determined that the tax provisions of the bill
contain no intergovernmental or private-sector mandates as
defined in UMRA.
Previous CBO estimate: On May 9, 2014, CBO transmitted a
cost estimate for S. 313, the Achieving a Better Life
Experience Act of 2013, as introduced on February 13, 2013. The
text of S. 313 is identical to the text of H.R. 647 that also
was introduced on February 13, 2013. CBO and JCT estimated that
the introduced version of S. 313 would increase direct spending
by $17.5 billion and reduce revenues by $1.7 billion over the
2015-2024 period. S. 313 and H.R. 647 (as introduced) would
increase the deficit by significantly more than the version of
H.R. 647 that was ordered reported by the Ways and Means
Committee primarily for three reasons:
S. 313 would allow a beneficiary to have
multiple ABLE accounts. In contrast, the committee-
approved version of H.R. 647 would limit each
beneficiary to a single account.
S. 313 would allow effectively unlimited
contributions into a beneficiary's accounts. The
committee-approved version of H.R. 647 would limit
annual and aggregate contributions into a beneficiary's
account.
S. 313 would permit adults of any age to be
a beneficiary--even if they were retired or were
earning substantial income from work--provided they had
a marked and severe functional limitation (the SSI
program's disability standard for children). The
committee-approved version of H.R. 647 would limit
adult eligibility to those who are incapable of
engaging in substantial gainful (work) activity (the
SSI program's disability standard for adults) and whose
disability occurred before the age of 26.
Relative to the earlier cost estimate for S. 313 as
introduced, CBO and JCT estimate that those differences would
significantly reduce the number of individuals who would be
eligible to become beneficiaries of ABLE accounts, the amount
of assets that would receive tax-preferred treatment, and the
additional months of means-tested benefits received by those
whose assets were placed in an ABLE account.
Estimate prepared by: Federal Costs: Tom Bradley, Andrea
Noda, and David Rafferty; Federal Revenues: Staff of the Joint
Committee on Taxation; Impact on State, Local, and Tribal
Governments: J'nell L. Blanco; Impact on the Private Sector:
Sam Trachtman.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
D. MACROECONOMIC IMPACT ANALYSIS
In compliance with clause 3(h)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made by the Joint Committee on Taxation with respect to the
provisions of the bill amending the Internal Revenue Code of
1986: the effects of the bill on economic activity are so small
as to be incalculable within the context of a model of the
aggregate economy.
V. Other Matters To Be Discussed Under the Rules of the House
A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the provisions of H.R. 647 that the
Committee concluded that it is appropriate to report the bill,
as amended, favorably to the House of Representatives with the
recommendation that the bill do pass.
B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. INFORMATION RELATING TO UNFUNDED MANDATES
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. APPLICABILITY OF HOUSE RULE XXI 5(B)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. TAX COMPLEXITY ANALYSIS
The following statement is made pursuant to clause 3(h)(1)
of rule XIII of the Rules of the House of Representatives.
Section 4022(b) of the Internal Revenue Service Restructuring
and Reform Act of 1998 requires the staff of the Joint
Committee on Taxation (in consultation with the Internal
Revenue Service and the Treasury Department) to provide a tax
complexity analysis. The complexity analysis is required for
all legislation reported by the Senate Committee on Finance,
the House Committee on Ways and Means, or any committee of
conference if the legislation includes a provision that
directly or indirectly amends the Internal Revenue Code and has
widespread applicability to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Code and that
have ``widespread applicability'' to individuals or small
businesses, within the meaning of the rule.
F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF
BENEFITS
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. DUPLICATION OF FEDERAL PROGRAMS
In compliance with Sec. 3(j)(2) of H. Res. 5 (113th
Congress), the Committee states that the Government
Accountability Office has included programs related to benefits
for disabled Americans in a report to Congress pursuant to
section 21 of Public Law 111-139. The Committee also states
that the most recent Catalog of Federal Domestic Assistance,
published pursuant to the Federal Program Information Act
(Public Law 95-220, as amended by Public Law 98-169),
identified programs related to benefits for disabled Americans.
H. DISCLOSURE OF DIRECTED RULE MAKINGS
In compliance with Sec. 3(k) of H. Res. 5 (113th Congress),
the following statement is made concerning directed rule
making: The Committee estimates that the bill requires at most
one directed rule making within the meaning of such section
(related to the requirement that the Secretary prescribe
certain regulations to carry out the purposes of the proposal).
VI. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter A--Determination of Tax Liability
* * * * * * *
PART IV--CREDITS AGAINST TAX
* * * * * * *
Subpart A--Nonrefundable Personal Credits
* * * * * * *
SEC. 26. LIMITATION BASED ON TAX LIABILITY; DEFINITION OF TAX
LIABILITY.
(a) * * *
(b) Regular Tax Liability.--For purposes of this part--
(1) * * *
(2) Exception for certain taxes.--For purposes of
paragraph (1), any tax imposed by any of the following
provisions shall not be treated as tax imposed by this
chapter:
(A) * * *
* * * * * * *
(W) section 36(f) (relating to recapture of
homebuyer credit), [and]
(X) section 457A(c)(1)(B) (relating to
determinability of amounts of compensation)[.],
and
(Y) section 529A(c)(3)(A) (relating to
additional tax on ABLE account distributions
not used for qualified disability expenses).
* * * * * * *
Subchapter F--Exempt Organizations
* * * * * * *
[Part VIII. Higher Education Savings Entities.]
Part VIII. Certain Savings Entities.
* * * * * * *
PART VIII--[HIGHER EDUCATION] CERTAIN SAVINGS ENTITIES
Sec. 529. Qualified tuition programs.
Sec. 529A. Qualified ABLE programs.
* * * * * * *
SEC. 529A. QUALIFIED ABLE PROGRAMS.
(a) General Rule.--A qualified ABLE program shall be exempt
from taxation under this subtitle. Notwithstanding the
preceding sentence, such program shall be subject to the taxes
imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable organizations).
(b) Qualified ABLE Program.--For purposes of this section--
(1) In general.--The term ``qualified ABLE program''
means a program established and maintained by a State,
or agency or instrumentality thereof--
(A) under which a person may make
contributions for a taxable year, for the
benefit of an individual who is an eligible
individual for such taxable year, to an ABLE
account which is established for the purpose of
meeting the qualified disability expenses of
the designated beneficiary of the account,
(B) which limits a designated beneficiary to
1 ABLE account for purposes of this section,
(C) which allows for the establishment of an
ABLE account only for a beneficiary who is a
resident of such State or a resident of a
contracting State, and
(D) which meets the other requirements of
this section.
(2) Cash contributions.--A program shall not be
treated as a qualified ABLE program unless it provides
that no contribution will be accepted--
(A) unless it is in cash, or
(B) except in the case of contributions under
subsection (c)(1)(C), if such contribution to
an ABLE account would result in aggregate
contributions from all contributors to the ABLE
account for the taxable year exceeding the
amount in effect under section 2503(b) for the
calendar year in which the taxable year begins.
For purposes of this paragraph, rules similar to the
rules of section 408(d)(4) (determined without regard
to subparagraph (B) thereof) shall apply.
(3) Separate accounting.--A program shall not be
treated as a qualified ABLE program unless it provides
separate accounting for each designated beneficiary.
(4) No investment direction.--A program shall not be
treated as a qualified ABLE program unless it provides
that any contributor to, or designated beneficiary
under, such program may not directly or indirectly
direct the investment of any contributions to the
program (or any earnings thereon).
(5) No pledging of interest as security.--A program
shall not be treated as a qualified ABLE program if it
allows any interest in the program or any portion
thereof to be used as security for a loan.
(6) Prohibition on excess contributions.--A program
shall not be treated as a qualified ABLE program unless
it provides adequate safeguards to prevent aggregate
contributions on behalf of a designated beneficiary in
excess of the limit established by the State under
section 529(b)(6). For purposes of the preceding
sentence, aggregate contributions include contributions
under any prior qualified ABLE program of any State or
agency or instrumentality thereof.
(c) Tax Treatment.--
(1) Distributions.--
(A) In general.--Any distribution under a
qualified ABLE program shall be includible in
the gross income of the distributee in the
manner as provided under section 72 to the
extent not excluded from gross income under any
other provision of this chapter.
(B) Distributions for qualified disability
expenses.--For purposes of this paragraph, if
distributions from a qualified ABLE program--
(i) do not exceed the qualified
disability expenses of the designated
beneficiary, no amount shall be
includible in gross income, and
(ii) in any other case, the amount
otherwise includible in gross income
shall be reduced by an amount which
bears the same ratio to such amount as
such expenses bear to such
distributions.
(C) Change in beneficiaries or programs.--
(i) Rollovers from able accounts.--
Subparagraph (A) shall not apply to any
amount paid or distributed from an ABLE
account to the extent that the amount
received is paid, not later than the
60th day after the date of such payment
or distribution, into another ABLE
account for the benefit of the same
beneficiary or an eligible individual
who is a family member of the
beneficiary.
(ii) Change in designated
beneficiaries.--Any change in the
designated beneficiary of an interest
in a qualified ABLE program during a
taxable year shall not be treated as a
distribution for purposes of
subparagraph (A) if the new beneficiary
is an eligible individual for such
taxable year and a member of the family
of the former beneficiary.
(iii) Limitation on certain
rollovers.--Clause (i) shall not apply
to any transfer if such transfer occurs
within 12 months from the date of a
previous transfer to any qualified ABLE
program for the benefit of the
designated beneficiary.
(D) Operating rules.--For purposes of
applying section 72--
(i) except to the extent provided by
the Secretary, all distributions during
a taxable year shall be treated as one
distribution, and
(ii) except to the extent provided by
the Secretary, the value of the
contract, income on the contract, and
investment in the contract shall be
computed as of the close of the
calendar year in which the taxable year
begins.
(2) Gift tax rules.--For purposes of chapters 12 and
13--
(A) Contributions.--Any contribution to a
qualified ABLE program on behalf of any
designated beneficiary--
(i) shall be treated as a completed
gift to such beneficiary which is not a
future interest in property, and
(ii) shall not be treated as a
qualified transfer under section
2503(e).
(B) Treatment of distributions.--Except as
provided in subparagraph (C), in no event shall
a distribution from a qualified ABLE program be
treated as a taxable gift.
(C) Treatment of designation of new
beneficiary.--The taxes imposed by chapters 12
and 13 shall apply to a transfer by reason of a
change in the designated beneficiary under the
program (or a contribution under paragraph
(1)(C) to the ABLE account of a new
beneficiary) during any taxable year unless, as
of the beginning of such taxable year, the new
beneficiary is both an eligible individual for
such taxable year and a member of the family of
the former beneficiary.
(3) Additional tax for distributions not used for
disability expenses.--
(A) In general.--The tax imposed by this
chapter for any taxable year on any taxpayer
who receives a distribution from a qualified
ABLE program which is includible in gross
income shall be increased by 10 percent of the
amount which is so includible.
(B) Exception.--Subparagraph (A) shall not
apply if the payment or distribution is made to
a beneficiary (or to the estate of the
designated beneficiary) on or after the death
of the designated beneficiary.
(C) Contributions returned before certain
date.--Subparagraph (A) shall not apply to the
distribution of any contribution made during a
taxable year on behalf of the designated
beneficiary if--
(i) such distribution is received on
or before the day prescribed by law
(including extensions of time) for
filing such designated beneficiary'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 gross income for the taxable
year in which such excess contribution was
made.
(4) Loss of able account treatment.--If, during any
taxable year of an eligible individual for whose
benefit any ABLE account is established, more than 1
ABLE account for the benefit of the eligible individual
exists at the same time, each such ABLE account other
than the earliest established ABLE account shall not be
treated as an ABLE account as of the first day of such
taxable year.
(d) Reports.--
(1) In general.--Each officer or employee having
control of the qualified ABLE program or their designee
shall make such reports regarding such program to the
Secretary and to designated beneficiaries with respect
to contributions, distributions, the return of excess
contributions, and such other matters as the Secretary
may require.
(2) Certain aggregated information.--For research
purposes, the Secretary shall make available to the
public reports containing aggregate information, by
diagnosis and other relevant characteristics, on
contributions and distributions from the qualified ABLE
program. In carrying out the preceding sentence an item
may not be made available to the public if such item
can be associated with, or otherwise identify, directly
or indirectly, a particular individual.
(3) Notice of establishment of able account.--The
trustee of an ABLE account shall submit a notice to the
Secretary upon the establishment of the ABLE account.
Such notice shall contain the name and State of
residence of the beneficiary and such other information
as the Secretary may require.
(4) Electronic distribution statements.--For purposes
of section 4 of the Achieving a Better Life Experience
Act of 2014, States shall submit electronically on a
monthly basis to the Commissioner of Social Security,
in the manner specified by the Commissioner, statements
on relevant distributions and account balances from all
ABLE accounts.
(5) Requirements.--The reports and notices required
by paragraphs (1), (2), and (3) 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.
(e) Other Definitions and Special Rules.--For purposes of
this section--
(1) Eligible individual.--
(A) In general.--An individual is an eligible
individual for a taxable year if during such
taxable year--
(i) a disability certification with
respect to such individual is filed
with the Secretary for such taxable
year, or
(ii) the individual has been
determined for purposes of section 223
or 1614 of the Social Security Act (42
U.S.C. 421, 1382c) to meet the criteria
of subparagraph (B) for such taxable
year.
(B) Criteria.--An individual meets the
criteria of this subparagraph for a taxable
year if--
(i) in the case of an individual who
has not attained age 19 as of the close
of the taxable year, the individual is
either blind (within the meaning of
section 1614(a)(2) of the Social
Security Act (42 U.S.C. 1382c(a)(2)))
or disabled within the meaning of
section 1614(a)(3)(C) of such Act (42
U.S.C. 1382c(a)(3)(C)), or
(ii) the individual--
(I) is either blind (within
the meaning of section
1614(a)(2) of such Act (42
U.S.C. 1382c(a)(2))) or
disabled within the meaning of
section 1614(a)(3)(A) of such
Act, and
(II) such blindness or
disability occurred before the
date on which the individual
attained age 26.
(2) Disability certification.--
(A) In general.--The term ``disability
certification'' means, with respect to an
eligible individual, a certification to the
satisfaction of the Secretary by the eligible
individual or the parent or guardian of the
eligible individual that--
(i) the individual meets the criteria
described in paragraph (1)(B), and
(ii) includes a copy of the
individual's diagnosis relating to the
individual's relevant impairment or
impairments, signed by a physician
meeting the criteria of section
1861(r)(1) of the Social Security Act.
(B) Restriction on use of certification.--No
inference may be drawn from a disability
certification for purposes of establishing
eligibility for benefits under title II, XVI,
or XIX of the Social Security Act.
(3) Designated beneficiary.--The term ``designated
beneficiary'' in connection with an ABLE account
established under a qualified ABLE program means--
(A) the eligible individual designated at the
commencement of participation in the qualified
ABLE program as the beneficiary of amounts paid
(or to be paid) to the program, and
(B) in the case of a change in beneficiaries
described in subparagraph (C)(ii) of subsection
(c)(1), the individual who is the new
beneficiary.
(4) Member of family.--The term ``member of the
family'' means, with respect to any designated
beneficiary, an individual who bears a relationship to
such beneficiary which is described in subparagraph
section 152(d)(2)(B). For purposes of the preceding
sentence, a rule similar to the rule of section
152(f)(1)(B) shall apply.
(5) Qualified disability expenses.--The term
``qualified disability expenses'' means any expenses
related to the eligible individual's blindness or
disability which are made for the benefit of an
eligible individual who is the designated beneficiary,
including the following expenses: education, housing,
transportation, employment training and support,
assistive technology and personal support services,
health, prevention and wellness, financial management
and administrative services, legal fees, expenses for
oversight and monitoring, funeral and burial expenses,
and other expenses, which are approved by the Secretary
under regulations and consistent with the purposes of
this section.
(6) ABLE account.--The term ``ABLE account'' means an
account established and maintained under a qualified
ABLE program.
(7) Contracting state.--The term ``contracting
State'' means a State without a qualified ABLE program
which has entered into a contract with a State with a
qualified ABLE program to provide residents of the
contracting State access to a qualified ABLE program.
(f) Transfer to State.--Subject to any outstanding payments
due for qualified disability expenses, in the case that the
designated beneficiary dies, all amounts remaining in the
qualified ABLE account not in excess of the amount equal to the
total medical assistance paid for the designated beneficiary
after the establishment of the account, net of any premiums
paid from the account or paid by or on behalf of the
beneficiary to a Medicaid Buy-In program, under any State
Medicaid plan established under title XIX of the Social
Security Act shall be distributed to such State upon filing of
a claim for payment by such State. For purposes of this
paragraph, the State shall be a creditor of an ABLE account and
not a beneficiary. Subsection (c)(3) shall not apply to a
distribution under the preceding sentence.
(g) Regulations.--The Secretary shall prescribe such
regulations or other guidance as the Secretary determines
necessary or appropriate to carry out the purposes of this
section, including regulations--
(1) to enforce the 1 ABLE account per eligible
individual limit,
(2) providing for the information required to be
presented to open an ABLE account,
(3) to generally define qualified disability
expenses,
(4) developed in consultation with the Commissioner
of Social Security, relating to disability
certifications and determinations of disability,
including those conditions deemed to meet the
requirements of subsection (e)(1)(B)(ii),
(5) to prevent fraud and abuse with respect to
amounts claimed as qualified disability expenses,
(6) under chapters 11, 12, and 13 of this title, and
(7) to allow for transfers from one ABLE account to
another ABLE account in cases in which there is a
change in the State of residence of an eligible
individual.
* * * * * * *
Subtitle D--Miscellaneous Excise Taxes
* * * * * * *
CHAPTER 43--QUALIFIED PENSION, ETC., PLANS
* * * * * * *
SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO CERTAIN TAX-FAVORED ACCOUNTS
AND ANNUITIES.
(a) Tax Imposed.--In the case of--
(1) * * *
* * * * * * *
(4) a Coverdell education savings account (as defined
in section 530), [or]
(5) a health savings account (within the meaning of
section 223(d)), or
(6) an ABLE account (within the meaning of section
529A),
there is imposed for each taxable year a tax in an amount equal
to 6 percent of the amount of the excess contributions to such
individual's accounts or annuities (determined as of the close
of the taxable year). The amount of such tax for any taxable
year shall not exceed 6 percent of the value of the account or
annuity (determined as of the close of the taxable year). In
the case of an endowment contract described in section 408(b),
the tax imposed by this section does not apply to any amount
allocable to life, health, accident, or other insurance under
such contract. The tax imposed by this subsection shall be paid
by such individual.
* * * * * * *
(h) Excess Contributions to ABLE Account.--For purposes of
this section--
(1) In general.--In the case of an ABLE account
(within the meaning of section 529A), the term ``excess
contributions'' means the amount by which the amount
contributed for the taxable year to such account (other
than contributions under section 529A(c)(1)(C)) exceeds
the contribution limit under section 529A(b)(2)(B).
(2) Special rule.--For purposes of this subsection,
any contribution which is distributed out of the ABLE
account in a distribution to which the last sentence of
section 529A(b)(2) applies shall be treated as an
amount not contributed.
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE
PENALTIES
* * * * * * *
Subchapter B--Assessable Penalties
* * * * * * *
PART I--GENERAL PROVISIONS
* * * * * * *
SEC. 6693. FAILURE TO PROVIDE REPORTS ON CERTAIN TAX-FAVORED ACCOUNTS
OR ANNUITIES; PENALTIES RELATING TO DESIGNATED
NONDEDUCTIBLE CONTRIBUTIONS.
(a) Reports.--
(1) * * *
(2) Provisions.--The provisions referred to in this
paragraph are--
(A) * * *
* * * * * * *
(D) section 529(d) (relating to qualified
tuition programs), [and]
(E) section 529A(d) (relating to qualified
ABLE programs), and
[(E)] (F) section 530(h) (relating to
Coverdell education savings accounts).
This subsection shall not apply to any report which is an
information return described in section 6724(d)(1)(C)(i) or a
payee statement described in section 6724(d)(2)(X).
* * * * * * *
[all]