Roth Account for Youth

(a)

In general

Section 408A of the Internal Revenue Code of 1986 (relating to Roth IRAs) is amended by adding at the end the following:

(g)

Roth Account for Youth

(1)

In general

In the case of a dependent of a taxpayer to whom this paragraph applies for the taxable year and with respect to whom an election for the taxable year is in effect under paragraph (3)(B), the limitation of subsection (c)(2) shall be equal to the sum of— (A)the contribution limit determined under this section (before the application of this subsection) with respect to the dependent, plus (B) (i)the dollar amount determined (before the application of this subsection) under subsection (c)(2) for the taxable year with respect to such taxpayer, without regard to section 219(b)(5)(B), reduced by (ii)the sum of— (I)all prior contributions to all other Roth IRAs maintained on behalf of all other dependents of such taxpayer for the taxable year, determined by taking into account the order elected by the taxpayer under paragraph (3)(B), plus (II)the aggregate amount of contributions to all individual retirement plans and Roth IRAs maintained on behalf of the taxpayer for the taxable year. (2)

Maximum contribution

In no case shall the aggregate amount of contributions to all individual retirement plans and Roth IRAs maintained on behalf of a dependent in a taxable year exceed the deductible amount determined under section 219(b)(5)(A). (3)

Ordering rules

(A)

Taxpayer’s own IRAs

Subsection (c)(2) shall apply with respect to all individual retirement plans maintained for the benefit of the taxpayer before paragraph (1) applies with respect to a dependent of the taxpayer. (B)

Election of order in the case of more than 1 dependent

For purposes of determining the contribution limit under paragraph (1) for more than 1 dependent, paragraph (1)(B)(ii) shall apply with respect to dependents of the taxpayer in the order elected by the taxpayer. (4)

Dependent to whom paragraph (1) applies

Paragraph (1) shall apply to any dependent of a taxpayer if— (A)the taxpayer is allowed a deduction under section 151 for the dependent for the taxable year, (B)in the case of a taxpayer who is married, the taxpayer files a joint return for the taxable year, and (C)the amount of compensation (if any) includible in the dependent’s gross income for the taxable year is less than the compensation includible in the gross income of the taxpayer for the taxable year. (5)

Special rule for divorced parents, etc

For purposes of paragraph (3), rules similar to the rules of section 152(e) shall apply. (6)

Compensation

For purposes of this subsection, the term compensation has the meaning given such term by section 219(f)(1).

(b)

Conforming amendment

Section 408A(d)(2)(B) of the Internal Revenue Code of 1986 is amended by striking Roth IRA) and by inserting Roth IRA or a contribution is made to a dependent’s Roth IRA under subsection (g)) after such individual’s spouse. (c)

Income Disregard Under Federal Means-Tested Benefit Programs

The amount in a Roth Account for Youth established pursuant to section 408A(g) of the Internal Revenue Code of 1986 shall be disregarded as income or resources for purposes of determining eligibility for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal benefit program that is means-tested. (d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2014.