1.This Act may be cited as the
Catastrophe Savings Accounts Act of
2006
.
2.Catastrophe Savings
Accounts
(a)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:
IXCatastrophe
Savings Accounts
530A.Catastrophe Savings
Accounts
(a)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 AccountFor 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)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)For purposes of this section—
(1)Qualified
catastrophe expensesThe 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)With respect to an
individual, the term qualified deductible
means the annual
deductible for the individual’s homeowners’ insurance policy.
(3)Qualified
rollover contributionThe
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)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)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 expensesIf 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 expensesThe 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)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
accountsRules 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)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)Section 4973 of
such Code is amended by adding at the end the following new subsection:
(h)Excess
contributions to Catastrophe Savings AccountsFor 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)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)The amendments made by
this section shall apply to taxable years beginning after December 31,
2006.