Catastrophe Savings Accounts

(a)

In general

Subchapter F of Chapter 1 of the Internal Revenue Code of 1986 (relating to exempt organizations) is amended by adding at the end the following new part:

Catastrophe Savings Accounts

530A.

Catastrophe Savings Accounts

(a)

General rule

A Catastrophe Savings Account shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such account shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). (b)

Catastrophe Savings Account

For purposes of this section, the term Catastrophe Savings Account means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries and which is designated (in such manner as the Secretary shall prescribe) at the time of the establishment of the trust as a Catastrophe Savings Account, but only if the written governing instrument creating the trust meets the following requirements: (1)Except in the case of a qualified rollover contribution— (A)no contribution will be accepted unless it is in cash, and (B)contributions will not be accepted in excess of the account balance limit specified in subsection (c). (2)The trustee is a bank (as defined in section 408(n)) or another person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section. (3)The interest of an individual in the balance of his account is nonforfeitable. (4)The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund. (c)

Account balance limit

The aggregate account balance for all Catastrophe Savings Accounts maintained for the benefit of an individual (including qualified rollover contributions) shall not exceed— (1)in the case of an individual whose qualified deductible is not more than $1,000, $2,000, and (2)in the case of an individual whose qualified deductible is more than $1,000, the amount equal to the lesser of— (A)$15,000, or (B)twice the amount of the individual’s qualified deductible. (d)

Definitions

For purposes of this section— (1)

Qualified catastrophe expenses

The term qualified catastrophe expenses means expenses paid or incurred by reason of a major disaster that has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. (2)

Qualified deductible

With respect to an individual, the term qualified deductible means the annual deductible for the individual’s homeowners’ insurance policy. (3)

Qualified rollover contribution

The term qualified rollover contribution means a contribution to a Catastrophe Savings Account— (A)from another such account of the same beneficiary, but only if such amount is contributed not later than the 60th day after the distribution from such other account, and (B)from a Catastrophe Savings Account of a spouse of the beneficiary of the account to which the contribution is made, but only if such amount is contributed not later than the 60th day after the distribution from such other account. (e)

Tax treatment of distributions

(1)

In general

Any distribution from a Catastrophe Savings Account shall be includible in the gross income of the distributee in the manner as provided in section 72. (2)

Distributions for qualified catastrophe expenses

(A)

In general

No amount shall be includible in gross income under paragraph (1) if the qualified catastrophe expenses of the distributee during the taxable year are not less than the aggregate distributions during the taxable year. (B)

Distributions in excess of expenses

If such aggregate distributions exceed such expenses during the taxable year, the amount otherwise includible in gross income under paragraph (1) shall be reduced by the amount which bears the same ratio to the amount which would be includible in gross income under paragraph (1) (without regard to this subparagraph) as the qualified catastrophe expenses bear to such aggregate distributions. (3)

Additional tax for distributions not used for qualified catastrophe expenses

The tax imposed by this chapter for any taxable year on any taxpayer who receives a payment or distribution from a Catastrophe Savings Account which is includible in gross income shall be increased by 10 percent of the amount which is so includible. (4)

Retirement distributions

No amount shall be includible in gross income under paragraph (1) (or subject to an additional tax under paragraph (3)) if the payment or distribution is made on or after the date on which the distributee attains age 62. (f)

Tax treatment of accounts

Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to any Catastrophe Savings Account.

(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)a Catastrophe Savings Account (as defined in section 530A),

(2)

Excess contribution

Section 4973 of such Code is amended by adding at the end the following new subsection:

(h)

Excess contributions to Catastrophe Savings Accounts

For purposes of this section, in the case of Catastrophe Savings Accounts (within the meaning of section 530A), the term excess contributions means the amount by which the aggregate account balance for all Catastrophe Savings Accounts maintained for the benefit of an individual exceeds the account balance limit defined in section 530A(c)(1).

(c)

Conforming amendment

The table of parts for subchapter F of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Part IX. Catastrophe Savings Accounts

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2006.