[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1013 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1013

To amend the Internal Revenue Code of 1986 to promote lifetime savings 
by allowing people to establish child savings accounts within Roth IRAs 
 and by allowing the savings to be used for education, first-time home 
 purchases, and retirement, to expand the availability of Roth IRAs to 
 all Americans and to protect their contributions from inflation, and 
                          for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 11, 1999

   Mr. Frist introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to promote lifetime savings 
by allowing people to establish child savings accounts within Roth IRAs 
 and by allowing the savings to be used for education, first-time home 
 purchases, and retirement, to expand the availability of Roth IRAs to 
 all Americans and to protect their contributions from inflation, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Child Savings 
Account Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

           TITLE I--SAVINGS INCENTIVES FOR AMERICA'S CHILDREN

SEC. 101. ESTABLISHMENT OF CHILD SAVINGS ACCOUNTS WITHIN ROTH IRAS.

    (a) In General.--Section 408A (relating to Roth IRAs) is amended by 
adding at the end the following new subsection:
    ``(g) Child Savings Account.--
            ``(1) In general.--If the individual on whose behalf a Roth 
        IRA was established has not attained the age of 17 before the 
        close of any calendar year--
                    ``(A) the Roth IRA shall be treated as a Child 
                Savings Account for the taxable year, and
                    ``(B) this section shall be applied to the Roth IRA 
                for the taxable year with the modifications provided in 
                paragraphs (2) and (3).
            ``(2) Waiver of earned income requirement.--For purposes of 
        subsection (c)(2)(A), the maximum amount allowable as a 
        deduction under section 219 shall be computed without regard to 
        the compensation limitation of section 219(b)(1)(B).
            ``(3) Rollover where account holder dies before age 30.--If 
        an individual on whose behalf a Roth IRA was established dies 
        before attaining the age of 30--
                    ``(A) the transfer of the individual's interest in 
                a Roth IRA to a member of the individual's family 
                (within the meaning of section 529(e)(2)) shall not be 
                considered a taxable transfer for purposes of this 
                title, and
                    ``(B) such interest shall, on and after the date of 
                the transfer, be treated as a Roth IRA maintained for 
                the benefit of the family member and not of the 
                individual.''
    (b) Conforming Amendments.--
            (1) Section 408(a)(1) is amended by striking ``or 
        403(b)(8)'' and inserting ``, 403(b)(8), or 408A(g)(3)''.
            (2) Section 408(d)(3)(C)(ii)(II) is amended by inserting 
        ``or in the case of a Roth IRA, a member of the same family of 
        such other individual''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 102. ADDITIONAL CHILD CREDIT FOR CONTRIBUTIONS TO CHILD SAVINGS 
              ACCOUNTS BY TAXPAYERS NOT ELIGIBLE FOR ENTIRE CHILD 
              CREDIT.

    (a) In General.--Section 24 (relating to child tax credit) is 
amended by adding at the end the following new subsection:
    ``(g) Additional Refundable Credit for Contributions to Child 
Savings Accounts.--
            ``(1) In general.--The aggregate credits allowed under 
        subpart C shall be increased by the lesser of--
                    ``(A) the credit which would be allowed under this 
                section without regard to this subsection and 
                subsection (d) and the limitation under section 26(a), 
                or
                    ``(B) the amount of the contributions to child 
                savings accounts of qualifying children of the taxpayer 
                for the taxable year to the extent such contributions 
                do not exceed $100 multiplied by the number of 
                qualifying children.
            ``(2) Limitation.--In no event shall the amount of the 
        increase under paragraph (1) exceed--
                    ``(A) the aggregate amount of credits allowed by 
                this subpart in excess of the limitation imposed by 
                section 26(a), reduced by
                    ``(B) any additional credits allowed by subsection 
                (d).
            ``(3) Coordination.--The credit under this subsection shall 
        not be taken into account in applying subsection (d) and 
        section 32(n) (relating to supplemental child credit).''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 103. TAX-FREE DISTRIBUTIONS FOR ELEMENTARY, SECONDARY, AND COLLEGE 
              EDUCATION.

    (a) In General.--Section 408A(d)(5) (defining qualified special 
purpose distribution) is amended to read as follows:
            ``(5) Qualified special purpose distribution.--For purposes 
        of this section--
                    ``(A) In general.--The term `qualified special 
                purpose distribution' means any of the following 
                distributions:
                            ``(i) Distributions described in 
                        subparagraph (F) of section 72(t)(2) (relating 
                        to first home purchases).
                            ``(ii) Distributions to the extent such 
                        distributions do not exceed the qualified 
                        education expenses of the taxpayer for the 
                        taxable year.
                    ``(B) Qualified education expenses.--
                            ``(i) In general.--The term `qualified 
                        education expenses' means--
                                    ``(I) qualified higher education 
                                expenses (as defined in section 
                                72(t)(7)),
                                    ``(II) qualified elementary and 
                                secondary education expenses, and
                                    ``(III) amounts paid or incurred 
                                during the taxable year to purchase 
                                tuition credits or certificates, or to 
                                make contributions to an account, under 
                                a qualified State tuition program (as 
                                defined in section 529(b)) for the 
                                benefit of the beneficiary of the 
                                account, the beneficiary's spouse, or 
                                any child (as defined in section 
                                151(c)(3)) or grandchild of the 
                                beneficiary or spouse.
                            ``(ii) Limitation.--The aggregate amount 
                        treated as qualified education expenses for any 
                        taxable year shall not exceed an amount equal 
                        to the excess (if any) of--
                                    ``(I) ____ percent of the fair 
                                market value of the assets in the Roth 
                                IRA as of the close of the calendar 
                                year preceding the calendar year in 
                                which the taxable year begins, over
                                    ``(II) distributions described in 
                                subparagraph (F) of section 72(t)(2) 
                                (relating to first home purchases) for 
                                the taxable year.
                    ``(C) Qualified elementary and secondary education 
                expenses.--
                            ``(i) In general.--The term `qualified 
                        elementary and secondary education expenses' 
                        means--
                                    ``(I) expenses for tuition, fees, 
                                academic tutoring, special needs 
                                services, books, supplies, computer 
                                equipment (including related software 
                                and services), and other equipment 
                                which are incurred in connection with 
                                the enrollment or attendance of the 
                                designated beneficiary of the trust, or 
                                of the child or grandchild of the 
                                beneficiary of the account or 
                                beneficiary's spouse, as an elementary 
                                or secondary school student at a 
                                public, private, or religious school, 
                                or
                                    ``(II) expenses for room and board, 
                                uniforms, transportation, and 
                                supplementary items and services 
                                (including extended day programs) which 
                                are required or provided by a public, 
                                private, or religious school in 
                                connection with such enrollment or 
                                attendance.
                            ``(ii) Special rule for home-
                        schooling.--Such term shall include expenses 
                        described in clause (i) required for education 
                        provided for homeschooling if the requirements 
                        of any applicable State or local law are met 
                        with respect to such education.
                            ``(iii) School.--The term `school' means 
                        any school which provides elementary education 
                        or secondary education (kindergarten through 
                        grade 12), as determined under State law.''
    (b) Additional Tax Not To Apply to Education Expenses.--Section 
72(t)(2) is amended by adding at the end the following new 
subparagraph:
                    ``(G) Certain education expenses in case of a roth 
                ira.--Distributions to an individual from a Roth IRA 
                which are described in subclause (II) or (III) of 
                section 408A(d)(5)(B)(i). Distributions shall not be 
                taken into account under the preceding sentence if such 
                distributions are described in subparagraphs (A), (C), 
                (D), (E), or (F) or to the extent paragraph (1) does 
                not apply to such distributions by reason of 
                subparagraph (B).
    (c) Repeal of Education IRAs.--
            (1) In general.--Section 530 (relating to education 
        individual retirement accounts) is repealed.
            (2) Conforming amendments.--
                    (A) Section 25A(e) is amended to read as follows:
    ``(e) Election To Have Section Apply.--No credit shall be allowed 
under subsection (a) for a taxable year with respect to the qualified 
and tuition-related expenses of an individual unless the taxpayer 
elects to have this section apply to the individual for the taxable 
year.''
                    (B) Section 26(b)(2) is amended by striking 
                subparagraph (E) and by redesignating subparagraphs (F) 
                through (Q) as subparagraphs (E) through (P), 
                respectively.
                    (C) Section 72(e)(9) is amended to read as follows:
            ``(9) Extension of paragraph (2)(b) to qualified state 
        tuition programs.--Notwithstanding any other provision of this 
        subsection, paragraph (2)(B) shall apply to amounts received 
        under a qualified State tuition program (as defined in section 
        529(b)). The rule of paragraph (8)(B) shall apply for purposes 
        of this paragraph.''
                    (D) Section 135(c)(2)(C) is amended--
                            (i) by striking ``, or to an education 
                        individual retirement account (as defined in 
                        section 530) on behalf of an account 
                        beneficiary,'', and
                            (ii) by striking ``and education individual 
                        retirement accounts'' in the heading thereof.
                    (E) Section 135(d)(2) is amended by striking ``by--
                '' and all that follows and inserting ``by the amount 
                of such expenses which are taken into account in 
                determining the credit allowable to the taxpayer or any 
                other person under section 25A with respect to such 
                expenses.''
                    (F) Section 221(e)(2)(A) is amended by striking ``, 
                135, or 530'' and inserting ``or 135''.
                    (G) Section 4973(a) is amended by inserting ``or'' 
                at the end of paragraph (2), by striking ``or'' at the 
                end of paragraph (3), and by striking paragraph (4).
                    (H) Section 4973 is amended by striking subsection 
                (e) and by redesignating subsection (f) as subsection 
                (e).
                    (I) Section 4975(c) is amended by striking 
                paragraph (5).
                    (J) Section 4975(e)(1) is amended by inserting 
                ``or'' at the end of subparagraph (D), by striking 
                subparagraph (E), and by redesignating subparagraph (F) 
                as subparagraph (E).
                    (K) Section 6693(a)(2) is amended by inserting 
                ``and'' at the end of subparagraph (B), by striking ``, 
                and'' at the end of subparagraph (C) and inserting a 
                period, and by striking subparagraph (D).
                    (L) The table of sections for part VIII of 
                subchapter F of chapter 1 is amended by striking the 
                item relating to section 530.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to contributions for taxable years beginning after 
        December 31, 1999 (and earnings allocable thereto).
            (2) Rollovers from education iras to roth iras.--For 
        purposes of section 530(d)(5) of the Internal Revenue Code of 
        1986 (as in effect before its repeal by this section), any 
        amount received from an education individual retirement account 
        which is paid into a Roth IRA within the prescribed time shall 
        be treated as if it were paid into another education individual 
        retirement account.

              TITLE II--EXPANSION OF AVAILABILITY OF IRAS

SEC. 201. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT.

    (a) In General.--Section 219 is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(h) Cost-of-Living Adjustments.--In the case of any taxable year 
beginning in a calendar year after 1998, the $2,000 amount under 
subsection (b)(1)(A) shall be increased by an amount equal to the 
product of $2,000 and the cost-of-living adjustment determined under 
section 1(f)(3) for the calendar year in which the taxable year begins, 
except that subparagraph (B) thereof shall be applied by substituting 
`1998' for `1992'. If the amount to which $2,000 would be increased 
under the preceding sentence is not a multiple of $500, such amount 
shall be rounded to the next lower multiple of $500.''
    (b) Conforming Amendments.--
            (1) Section 408(a)(1) is amended by striking ``in excess of 
        $2,000 on behalf of any individual'' and inserting ``on behalf 
        of any individual in excess of the amount in effect for such 
        taxable year under section 219(b)(1)(A)''.
            (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
        and inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
            (3) Section 408(b) is amended by striking ``$2,000'' in the 
        matter following paragraph (4) and inserting ``the dollar 
        amount in effect under section 219(b)(1)(A)''.
            (4) Section 408(j) is amended by striking ``$2,000''.
            (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
        inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 202. REPEAL OF ADJUSTED GROSS INCOME LIMITATIONS ON CONTRIBUTIONS 
              AND ROLLOVERS TO ROTH IRAS.

    (a) In General.--Section 408A(c) is amended by striking paragraph 
(3) and by redesignating paragraphs (4) through (7) as paragraphs (3) 
through (6), respectively.
    (b) Repeal of Nondeductible Contributions.--
            (1) Subsection (f) of section 219 is amended by striking 
        paragraph (7).
            (2) Paragraph (5) of section 408(d) is amended by striking 
        the last sentence.
            (3) Section 408(o) is amended by adding at the end the 
        following new paragraph:
            ``(5) Termination.--This subsection shall not apply to any 
        designated nondeductible contribution for any taxable year 
        beginning after December 31, 1999.''
            (4) Subsection (b) of section 4973 is amended by striking 
        the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.
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