1.This Act may be cited as the
Lifetime Savings Account Act of
2005
.
2.Lifetime 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:
IXLifetime Savings
Accounts
530A.Lifetime Savings Accounts
(a)A Lifetime 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)For purposes of this section, the term
Lifetime 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 Lifetime 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 described in subsection (d)—
(A)no contribution
will be accepted unless it is in cash, and
(B)contributions
will not be accepted for the calendar year in excess of the contribution limit
specified in subsection (c)(1).
(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
or who has so demonstrated with respect to any individual retirement
plan.
(3)No part of the
trust assets will be invested in life insurance contracts.
(4)The interest of
an individual in the balance of his account is nonforfeitable.
(5)The assets of the
trust shall not be commingled with other property except in a common trust fund
or common investment fund.
(c)Treatment of
contributions and distributions
(1)
(A)The aggregate amount of contributions (other than
qualified rollover contributions described in subsection (d)) for any calendar
year to all Lifetime Savings Accounts maintained for the benefit of an
individual shall not exceed $5,000.
(B)Cost-of-living
adjustment
(i)In the case of any calendar year after 2006, the $5,000
amount under subparagraph (A) shall be increased by an amount equal to—
(I)such dollar
amount, multiplied by
(II)the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year, determined by substituting calendar year 2005
for
calendar year 1992
in subparagraph (B) thereof.
(ii)If any amount after adjustment under clause (i) is not a
multiple of $500, such amount shall be rounded to the next lower multiple of
$500.
(2)Any
distribution from a Lifetime Savings Account shall not be includible in gross
income.
(d)Qualified
rollover contributionFor purposes of this section, the term
qualified rollover contribution means a contribution to a Lifetime
Savings Account—
(1)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,
(2)from a Lifetime
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, and
(3)before January 1,
2007, from—
(A)a qualified
tuition program pursuant to section 529(c)(3)(E), or
(B)a Coverdell
education savings account pursuant to section 530(d)(9).
(e)Loss of
taxation exemption of account where beneficiary engages in prohibited
transactionRules similar to the rules of paragraph (2) of
section 408(e) shall apply to any Lifetime Savings Account.
(f)For purposes of this section, a custodial account or an
annuity contract issued by an insurance company qualified to do business in a
State shall be treated as a trust under this section if—
(1)the custodial
account or annuity contract would, except for the fact that it is not a trust,
constitute a trust which meets the requirements of subsection (b), and
(2)in the case of a
custodial account, the assets of such account are held by a bank (as defined in
section 408(n)) or another person who demonstrates, to the satisfaction of the
Secretary, that the manner in which he will administer the account will be
consistent with the requirements of this section.
For
purposes of this title, in the case of a custodial account or annuity contract
treated as a trust by reason of the preceding sentence, the person holding the
assets of such account or holding such annuity contract shall be treated as the
trustee thereof.(g)The
trustee of a Lifetime Savings Account shall make such reports regarding such
account to the Secretary and to the beneficiary of the account with respect to
contributions, distributions, and such other matters as the Secretary may
require. The reports required by this subsection 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.
.
(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 Lifetime
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 Lifetime Savings AccountsFor purposes of this
section—
(1)In the case of Lifetime Savings Accounts (within the
meaning of section 530A), the term excess contributions means the
sum of—
(A)the amount by
which the amount contributed for the calendar year to such accounts (other than
qualified rollover contributions (as defined in section 530A(d))) exceeds the
contribution limit under section 530A(c)(1), and
(B)the amount
determined under this subsection for the preceding calendar year, reduced by
the excess (if any) of the maximum amount allowable as a contribution under
section 530A(c)(1) for the calendar year over the amount contributed to the
accounts for the calendar year.
(2)A contribution shall not be taken into account under
paragraph (1) if such contribution (together with the amount of net income
attributable to such contribution) is returned to the beneficiary before July 1
of the year following the year in which the contribution is made.
.
(c)Failure to
provide reports on Lifetime Savings AccountsParagraph (2) of
section 6693(a) of the Internal Revenue Code of 1986 (relating to failure to
provide reports on individual retirement accounts or annuities) is amended by
striking and
at the end of subparagraph (D), by striking the
period at the end of subparagraph (E) and inserting , and
, and
by adding at the end the following new subparagraph:
(F)section 530A(g)
(relating to Lifetime Savings Accounts).
.
(d)Rollovers from
certain other Tax-Free accounts
(1)Qualified State
tuition plansParagraph (3) of section 529(c) of the Internal
Revenue Code of 1986 (relating to distributions) is amended by adding at the
end the following new subparagraph:
(E)Rollovers to
Lifetime Savings Accounts
(i)Subparagraph (A) shall not apply to the qualified portion
of any distribution which, before January 1, 2007, and within 60 days of such
distribution, is transferred to a Lifetime Savings Account (within the meaning
of section 530A) of the designated beneficiary. This subparagraph shall only
apply to distributions in accordance with the previous sentence from an account
which was in existence with respect to such designated beneficiary on December
31, 2004.
(ii)For purposes of this subparagraph, the term
qualified portion means the amount equal to the sum of—
(I)the lesser of
$50,000 or the amount which is in the account of the designated beneficiary on
December 31, 2004,
(II)any
contributions to such account for the taxable year beginning after December 31,
2004, and before January 1, 2006, and
(III)any earnings of
such account for such year.
(iii)The
sum of the amounts taken into account under clause (ii)(II) with respect to all
accounts of the designated beneficiary plus any amounts with respect to such
designated beneficiary taken into account under section 530(d)(9)(B)(ii) shall
not exceed the sum of $5,000 plus the earnings attributable to such
amounts.
.
(2)Coverdell
education savings accountsSubsection (d) of section 530 of such
Code (relating to tax treatment of distributions) is amended by inserting at
the end the following new paragraph:
(9)Rollovers to
Lifetime Savings Accounts
(A)Paragraph (1) shall not apply to the qualified portion of
any amount paid or distributed from a Coverdell education savings account to
the extent that the amount received is paid, before January 1, 2007, and not
later than the 60th day after the date of such payment or distribution, into a
Lifetime Savings Account (within the meaning of section 530A) for the benefit
of the same beneficiary. This paragraph shall only apply to amounts paid or
distributed in accordance with the preceding sentence from an account which was
in existence with respect to such beneficiary on December 31, 2004.
(B)For purposes of this paragraph, the term qualified
portion means the amount equal to the sum of—
(i)the amount which
is in the account of the beneficiary on December 31, 2004,
(ii)any
contributions to such account for the taxable year beginning after December 31,
2004, and before January 1, 2006 and
(iii)any earnings of
such account for such year.
(C)The
sum of the amounts taken into account under subparagraph (B)(ii) with respect
to all accounts of the beneficiary plus any amounts with respect to such
beneficiary taken into account under section 529(c)(3)(E)(ii)(II) shall not
exceed the sum of $5,000 plus the earnings attributable to such amounts.
.
(e)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. Lifetime Savings
Accounts
.
(f)The amendments made by this section shall apply to taxable
years beginning after December 31, 2005.