[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2741 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 2741

 To amend the Internal Revenue Code of 1986 to provide for disability 
               savings accounts, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 11, 2008

   Mr. Dodd 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 provide for disability 
               savings accounts, 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.

    This Act may be cited as the ``Disability Savings Act of 2008''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Disability is a natural part of the human experience. 
        Individuals with disabilities have the right to live 
        independently, to exert control and choice over their own 
        lives, and to fully participate in and contribute to their 
        communities through full integration and inclusion in the 
        economic, political, social, cultural, and educational 
        mainstream of American society.
            (2) Americans with disabilities are more likely to live in 
        poverty than those without disabilities. According to the World 
        Institute on Disability, over one-third of adults with 
        disabilities live in households with income of $15,000 or less 
        compared to only 12 percent of those without disabilities. 
        According to the 2005 American Community Survey, median annual 
        earnings for individuals without a disability were $25,000 
        compared with $12,800 for those with a severe disability.
            (3) Families often provide the primary financial assistance 
        necessary for individuals with significant disabilities who 
        cannot support themselves. Families supporting members with 
        disabilities often experience substantial negative effects on 
        the vocational and economic health of the family.
            (4) Individuals with disabilities often incur significant 
        additional costs related to services and supports necessary to 
        maintain the health and independence needed to fully 
        participate in society.
            (5) Throughout the years policymakers have provided 
        incentives to Americans to save money for purposes such as home 
        ownership, education and retirement. Many of these benefits do 
        not meet the savings needs of individuals with disabilities and 
        their families.
            (6) Encouraging individuals with disabilities and their 
        families to save funds will allow them to achieve greater 
        control, choice, participation in community, security, and 
        independence in their lives.

SEC. 3. PURPOSES.

    The purposes of this Act are as follows:
            (1) To encourage and assist individuals and families in 
        saving private funds for the purpose of supporting individuals 
        with disabilities to maintain health, independence, and quality 
        of life.
            (2) To provide secure funding for disability-related 
        expenses on behalf of designated beneficiaries with 
        disabilities that will supplement, but not supplant, benefits 
        provided through private insurance, the Medicaid program under 
        title XIX of the Social Security Act, the supplemental security 
        income program under title XVI of such Act, the beneficiary's 
        employment, and other sources.

SEC. 4. DISABILITY 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:

                 ``PART IX--DISABILITY SAVINGS ENTITIES

``Sec. 530A. Disability savings accounts.

``SEC. 530A. DISABILITY SAVINGS ACCOUNTS.

    ``(a) Disability Savings Account Defined.--For purposes of this 
section, the term `disability savings account' means a trust created or 
organized in the United States by a qualified individual exclusively 
for the benefit of a qualified beneficiary, but only if the written 
governing instrument creating the trust meets the following 
requirements:
            ``(1) No contribution shall be accepted--
                    ``(A) unless it is in cash, or
                    ``(B) if such contribution would result in the 
                total aggregate contributions to such account exceeding 
                $1,000,000.
            ``(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) A qualified individual is designated for the purpose 
        of administering requests for distributions from the trust.
            ``(4) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(5) The assets of the trust shall not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(6) Except as provided in subsection (c)(6), in the case 
        that the qualified beneficiary dies or ceases to be a qualified 
        beneficiary, all amounts remaining in the trust up to an amount 
        equal to the total medical assistance paid for the qualified 
        beneficiary under any State Medicaid plan established under 
        title XIX of the Social Security Act shall be distributed to 
        each such State.
    ``(b) Tax Treatment of Income.--
            ``(1) In general.--A disability savings account which has a 
        value of $250,000 or less for any taxable year shall be exempt 
        from taxation under this subtitle. Notwithstanding the 
        preceding sentence, a disability savings account shall be 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable 
        organizations).
            ``(2) Taxable accounts.--Any disability savings account 
        which is not exempt from tax under paragraph (1) shall be taxed 
        in the same manner as a qualified disability trust (as defined 
        in section 642(b)(2)(C)(ii)).
            ``(3) Determination of value.--The value of a disability 
        savings account shall be deemed to be in excess of $250,000 for 
        a taxable year if the daily balance of such account (determined 
        as of the close of business on any business day) exceeds 
        $250,000 for the majority of business days during such taxable 
        year.
    ``(c) Tax Treatment of Distributions.--
            ``(1) In general.--Any distribution from a disability 
        savings account shall be included in the gross income of the 
        qualified beneficiary in the manner provided in section 72.
            ``(2) Distributions for qualified services or products.--
                    ``(A) In general.--No amount shall be included in 
                gross income under paragraph (1) if such amount is 
                distributed--
                            ``(i) for a qualified service or product, 
                        and
                            ``(ii) except as otherwise provided by the 
                        Secretary, by means of an electronic fund 
                        transfer to the person who provided the 
                        qualified service or product.
                    ``(B) Qualified service or product.--
                            ``(i) In general.--The term `qualified 
                        service or product' means any service or 
                        product which is provided to a qualified 
                        beneficiary on account of such beneficiary's 
                        disability.
                            ``(ii) Certain services and products 
                        included.--Such term shall include preschool 
                        education, postsecondary education, tutoring, 
                        special education services, training, 
                        employment supports, personal assistance 
                        supports, community-based supports, respite 
                        care, clothing, assistive technology, home 
                        modifications, therapy, nutritional management, 
                        out-of-pocket medical, vision, or dental 
                        expenses, transportation services, vehicle 
                        purchases or modifications, insurance premiums, 
                        habilitation and rehabilitation services, 
                        funeral and burial expenses, and any other 
                        service or product consistent with the purposes 
                        of this section and allowed under regulations 
                        established by the Secretary, in consultation 
                        with the Secretary of Health and Human 
                        Services.
                            ``(iii) Prohibited services and products.--
                        Such term shall not include any service or 
                        product paid for by a third-party payer, such 
                        as private insurance or a Medicaid program 
                        under title XIX of the Social Security Act (42 
                        U.S.C. 1396 et seq.).
                    ``(C) Disallowance of excluded amounts as 
                deduction, credit, or exclusion.--No deduction, credit, 
                or exclusion shall be allowed to the taxpayer under any 
                other section of this chapter for any qualified service 
                or product to the extent taken into account in 
                determining the amount of exclusion under this 
                paragraph.
            ``(3) Exception for distributions returned before certain 
        date.--Paragraph (1) shall not apply to any distribution made 
        from a disability savings account during a taxable year on 
        behalf of the qualified beneficiary if the qualified 
        beneficiary makes a contribution to such disability savings 
        account in an amount equal to the amount of such distribution 
        before the date that is 180 days after such distribution was 
        made.
            ``(4) Additional tax for distributions not used for 
        qualified services or products.--The tax imposed by this 
        chapter for any taxable year on any taxpayer who receives a 
        payment or distribution from an disability savings account 
        which is includible in gross income shall be increased by 10 
        percent of the amount which is so includible.
            ``(5) Rollover contributions.--Paragraph (1) shall not 
        apply to any amount paid or distributed from a disability 
        savings account to the extent that the amount received is paid, 
        not later than the 60th day after the date of such payment or 
        distribution, into--
                    ``(A) another disability savings account for the 
                benefit of--
                            ``(i) the same qualified beneficiary, or
                            ``(ii) an individual who--
                                    ``(I) is the spouse of the 
                                qualified beneficiary or bears a 
                                relationship to the qualified 
                                beneficiary which is described in 
                                section 152(d)(2), and
                                    ``(II) is a qualified beneficiary, 
                                or
                    ``(B) any trust which is described in subparagraph 
                (A) or (C) of section 1917(d)(4) of the Social Security 
                Act and which is for the benefit of and individual 
                described in clause (i) or (ii) of subparagraph (A).
        The preceding sentence shall not apply to any payment or 
        distribution if it applied to any prior payment or distribution 
        during the 12-month period ending on the date of the payment or 
        distribution.
            ``(6) Change in beneficiary.--Any change in the beneficiary 
        of a disability savings account shall not be treated as a 
        distribution for purposes of paragraph (1) if the new 
        beneficiary is an individual described in paragraph (5)(A)(ii) 
        as of the date of the change.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified beneficiary.--The term `qualified 
        beneficiary' means any individual who--
                    ``(A) is under the age of 65, and
                    ``(B) has--
                            ``(i) been determined by the Commissioner 
                        of Social Security or the Disability 
                        Determination Service of a State to be--
                                    ``(I) blind (as determined under 
                                section 1614(a)(2) of the Social 
                                Security Act, but without regard to any 
                                income or asset eligibility 
                                requirements that apply under such 
                                title), or
                                    ``(II) disabled (as determined 
                                under section 1614(a)(3) of the Social 
                                Security Act, but without regard to any 
                                income or asset eligibility 
                                requirements that apply under such 
                                title, or under section 216(d) of such 
                                Act), and
                            ``(ii) not been determined by the 
                        Commissioner of Social Security or the 
                        Disability Determination Service of a State to 
                        be no longer blind or disabled (as so defined).
        The term `Disability Determination Service' means, with respect 
        to each State, the entity that has an agreement with the 
        Commissioner of Social Security to make disability 
        determinations for purposes of title II or XVI of the Social 
        Security Act.
            ``(2) Qualified individual.--The term `qualified 
        individual' means, with respect to any disability savings 
        account--
                    ``(A) the qualified beneficiary,
                    ``(B) any individual--
                            ``(i) who is the spouse of the qualified 
                        beneficiary or bears a relationship to the 
                        qualified beneficiary which is described in 
                        section 152(d)(2), or
                            ``(ii) provides over one half of such 
                        qualified beneficiary's support,
                    ``(C) the legal guardian of the qualified 
                beneficiary, or
                    ``(D) in the case of any qualified beneficiary who 
                is in the legal custody of a State or any agency 
                thereof, any individual appointed for purposes of this 
                paragraph by a court of competent jurisdiction.
            ``(3) Account terminations, etc.--
                    ``(A) Prohibited transactions.--If, during any 
                taxable year of the qualified individual designated 
                under subsection (a)(3), such qualified individual or 
                the qualified beneficiary of the disability savings 
                account engages in any transaction prohibited under 
                section 4975, such account ceases to be an disability 
                savings account as of the first day of such taxable 
                year.
                    ``(B) Effect of pledging account as security.--If, 
                during any taxable year of the qualified beneficiary, 
                the qualified beneficiary uses the account or any 
                portion thereof as security for a loan, the portion so 
                used is treated as distributed to the qualified 
                beneficiary.
            ``(4) Only 1 account per qualified beneficiary.--No 
        individual who is a qualified beneficiary may have more than 1 
        disability savings account. The Secretary may promulgate 
        regulations necessary to carry out the purposes of this 
        paragraph.
    ``(e) Reports.--The trustee of a disability savings account shall 
make such reports regarding such account to the Secretary and to the 
qualified individual designated under subsection (a)(3) with respect to 
contributions, distributions, fees (including the maximum, minimum, and 
average fees for such accounts), 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.
    ``(f) Regulations.--The Secretary, in consultation with the 
Secretary of Health and Human Services, shall prescribe such 
regulations as may be necessary to carry out the purposes of this 
section and to prevent the abuse of such purposes.''.
    (b) Rollovers From Qualified Tuition Programs.--Paragraph (3) of 
section 529(c) of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subparagraph:
                    ``(E) Rollovers to disability savings accounts.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply to that portion of any distribution 
                        which, within 60 days of such distribution, is 
                        transferred to a disability savings account 
                        with respect to which the designated 
                        beneficiary is the qualified beneficiary (as 
                        defined by section 530A(d)(1)).
                            ``(ii) Limitation.--Clause (i) shall not 
                        apply to any transfer if a prior transfer 
                        described in clause (i) has occurred at any 
                        time preceding such transfer.''.
    (c) Tax on Prohibited Transactions.--
            (1) In general.--Paragraph (1) of section 4975(e) of the 
        Internal Revenue Code of 1986 is amended by striking ``or'' at 
        the end of subparagraph (F), by redesignating subparagraph (G) 
        as subparagraph (F), and by inserting after subparagraph (F) 
        the following new subparagraph:
                    ``(G) a disability savings account described in 
                section 530A(a), or''.
            (2) Special rule.--Section 4975(c) of such Code is amended 
        by adding at the end the following new paragraph:
            ``(7) Special rule for disability savings accounts.--A 
        qualified beneficiary (as defined by section 530A(d)(1)) shall 
        be exempt from the tax imposed by this section with respect to 
        any transaction concerning a disability savings account (as 
        defined by section 530A(a)) which would otherwise be taxable 
        under this section if, with respect to such transaction, the 
        account ceases to be a disability savings account by reason of 
        the application of section 530A(d)(3)(A) to such account.''.
    (d) Failure To Provide Reports on Disability Savings Accounts.--
Paragraph (2) of section 6693(a) of the Internal Revenue Code of 1986 
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 inserting after subparagraph (E) the following new 
subparagraph:
                    ``(F) section 530A(e) (relating to disability 
                savings accounts).''.
    (e) Annual Reports to Congress.--The Secretary of the Treasury, in 
consultation with the Secretary of Health and Human Services and the 
Commissioner of Social Security, shall report annually to Congress on 
the usage of disability savings accounts.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated to the Commissioner of Social Security for fiscal years 
beginning with fiscal year 2007, such sums as may be necessary for 
certifying and recertifying individuals as qualified beneficiaries for 
purposes of section 530A(d)(1) of the Internal Revenue Code of 1986 (as 
added by subsection (a)). Amounts appropriated pursuant to the 
preceding sentence may be used by the Commissioner, as appropriate, for 
making payments to States for certifications and recertifications of 
individuals as such beneficiaries that are made under an agreement 
entered into between the Commissioner and by the Disability 
Determination Service for the State.
    (g) Clerical 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--Disability Savings Entities''.

    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 5. MATCHING TAX CREDIT FOR CONTRIBUTIONS TO DISABILITY SAVINGS 
              ACCOUNTS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. DISABILITY SAVINGS ACCOUNT MATCHING CONTRIBUTIONS.

    ``(a) Allowance of Credit.--In the case of a qualified individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to 50 percent of so much 
of the qualified disability savings contributions made during the 
taxable year as do not exceed $2,000.
    ``(b) Limitations.--
            ``(1) Limitation based on modified adjusted gross income.--
                    ``(A) In general.--The amount which would (but for 
                this paragraph) be taken into account under subsection 
                (a) for the taxable year shall be reduced (but not 
                below zero) by the amount determined under subparagraph 
                (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph is the amount which bears the 
                same ratio to the amount which would be so taken into 
                account as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for the taxable 
                                year, over
                                    ``(II) the applicable amount, bears 
                                to
                            ``(ii) the phaseout amount.
                    ``(C) Applicable amount; phaseout amount.--For 
                purposes of subparagraph (B), the applicable amount and 
                the phaseout amount shall be determined as follows:


------------------------------------------------------------------------
                                                    The          The
                       ``                        applicable    phaseout
                                                 amount is:   amount is:
------------------------------------------------------------------------
In the case of a joint return.................      $60,000      $10,000
In the case of a head of household............      $45,000       $7,500
In any other case.............................      $30,000      $5,000.
------------------------------------------------------------------------

                    ``(D) Modified adjusted gross income.--For purposes 
                of this paragraph, the term `modified adjusted gross 
                income' means the adjusted gross income of the taxpayer 
                for the taxable year increased by any amount excluded 
                from gross income under section 911, 931, or 933.
                    ``(E) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2008, 
                each of the applicable amounts in the second column of 
                the table in subparagraph (C) 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 in which the taxable year begins, 
                        determined by substituting `calendar year 2007' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $500.
            ``(2) Earned income limitation.--The amount of the credit 
        allowable under subsection (a) to any taxpayer for any taxable 
        year shall not exceed the earned income (as defined by section 
        32(c)(2)) of such taxpayer for such taxable year.
    ``(c) Qualified Individual.--For purposes of this section, the term 
`qualified individual' means the individual designated as the qualified 
individual of the disability savings account (as defined in section 
530A(a)).
    ``(d) Qualified Disability Savings Contributions.--The term 
`qualified disability savings contributions' means, with respect to any 
taxable year, the aggregate contributions made by the taxpayer to the 
disability savings account (as so defined) with respect to which such 
taxpayer is the qualified individual.
    ``(e) Treatment of Contributions by Dependent.--If a deduction 
under section 151 with respect to an individual is allowed to another 
taxpayer for a taxable year beginning in the calendar year in which 
such individual's taxable year begins--
            ``(1) no credit shall be allowed under subsection (a) to 
        such individual for such individual's taxable year, and
            ``(2) any qualified disability savings contributions made 
        by such individual during such taxable year shall be treated 
        for purposes of this section as made by such other taxpayer.''.
    (b) Refundable Amount Credited to Individual Disability Account.--
            (1) Transfer of amount to disability savings accounts.--
        Section 6402 of the Internal Revenue Code of 1986 (relating to 
        authority to make credits or refunds) is amended by adding at 
        the end the following new subsection:
    ``(l) Special Rule for Overpayments Attributable to Credit for 
Contributions to Disability Savings Funds.--
            ``(1) In general.--In the case of any overpayment 
        attributable to the credit allowed under section 36, the 
        Secretary shall transfer such amount to the disability savings 
        account to which the taxpayer made a qualified disability 
        savings contribution.
            ``(2) Transfers to more than 1 account.--If the taxpayer 
        made qualified disability savings contributions to more than 1 
        disability savings account, the Secretary shall transfer the 
        overpayment described in paragraph (1) to each such disability 
        savings account in an amount that bears the same ratio to the 
        amount of such overpayment as--
                    ``(A) the amount of qualified disability savings 
                contributions made by such taxpayer to such disability 
                savings account, bears to
                    ``(B) the amount of qualified disability savings 
                contribution made by such taxpayer to all disability 
                savings accounts.
            ``(3) Qualified disability savings contribution.--For 
        purposes of this subsection, the term `qualified disability 
        savings contribution' has the meaning given such term by 
        section 36(d).''.
            (2) Separate accounting for refundable amounts.--
                    (A) In general.--Section 530A(a) of such Code, as 
                added by this Act, is amended by adding at the end the 
                following new paragraph:
            ``(7) The trust provides a separate accounting for 
        contributions transferred by the Secretary under section 
        6402(l).''.
                    (B) Special rules for contributions attributable to 
                disability savings account credit.--Section 530A of 
                such Code, as added by this Act, is amended by adding 
                at the end the following new subsection:
    ``(g) Special Rules for Contributions Attributable to Credit for 
Disability Savings Account Contributions.--
            ``(1) Increase in additional tax.--In the case of a 
        distribution which includes an amount transferred by the 
        Secretary under section 6402(l) (including any earnings 
        attributable to such amount) and which, but for this paragraph, 
        would be includible in gross income--
                    ``(A) such amount shall not be included in gross 
                income, and
                    ``(B) subsection (c)(4) shall be applied by 
                substituting `100 percent' for `10 percent'.
            ``(2) Ordering rules.--For purposes of applying this 
        subsection to any distribution from a disability savings 
        account--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), such distribution shall be treated as 
                made--
                            ``(i) first from amounts contributed to the 
                        account other than by reason of section 
                        6402(l), and
                            ``(ii) second from amounts transferred by 
                        the Secretary under section 6402(l).
                    ``(B) Exception for distributions for qualified 
                services or products.--In the case of a distribution 
                for qualified services or products, such distribution 
                shall be treated as made--
                            ``(i) first from amounts transferred by the 
                        Secretary under section 6402(l), and
                            ``(ii) second from other amounts 
                        contributed to the account.''.
    (c) Conforming Amendments.--
            (1) Section 1324(b)(2) of title 31, United States Code, is 
        amended by inserting before the period at the end ``, or 
        enacted by the Disability Savings Act of 2008''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the item relating to section 36 and 
        inserting the following:

``Sec. 36. Disability savings account matching contributions.
``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 6. CREDIT TO INSTITUTIONS FOR MAINTAINING DISABILITY SAVINGS 
              ACCOUNTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45O. DISABILITY SAVINGS ACCOUNT INVESTMENT CREDIT.

    ``(a) Determination of Amount.--For purposes of section 38, the 
disability savings account investment credit determined under this 
section with respect to any eligible entity for any taxable year is an 
amount equal to the disability savings account investment provided by 
such eligible entity during the taxable year.
    ``(b) Disability Savings Account Investment.--For purposes of this 
section, the term `disability savings account investment' means an 
amount equal to $50 with respect to each disability savings account (as 
defined in section 530A(a)) maintained--
            ``(1) as of the end of such taxable year, but only if such 
        taxable year is within the 7-taxable-year period beginning with 
        the taxable year in which such Account is opened, and
            ``(2) with a balance of not less than $100 (other than the 
        taxable year in which such account is opened).
    ``(c) Eligible Entity.--For purposes of this section, except as 
provided in regulations, the term `eligible entity' means any entity 
which is the trustee of a disability savings account (as so defined).
    ``(d) Denial of Double Benefit.--
            ``(1) In general.--No deduction or credit (other than under 
        this section) shall be allowed under this chapter with respect 
        to any expense which is attributable to the maintenance of a 
        disability savings account.
            ``(2) Determination of amount.--Solely for purposes of 
        paragraph (1), the amount attributable to the maintenance of a 
        disability savings account shall be deemed to be the dollar 
        amount of the credit allowed under this section for each 
        taxable year such disability savings account is maintained.''.
    (b) Credit Treated as Business Credit.--Section 38(b) of such Code 
(relating to current year business credit) is amended by striking 
``plus'' at the end of paragraph (30), by striking the period at the 
end of paragraph (31) and inserting ``, plus'', and by adding at the 
end the following new paragraph:
            ``(32) the disability savings account investment credit 
        determined under section 45O(a).''.
    (c) Conforming Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45O. Disability savings account investment credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2007.

SEC. 7. TREATMENT OF DISABILITY SAVINGS ACCOUNTS UNDER CERTAIN FEDERAL 
              PROGRAMS.

    (a) Treatment as a Medicaid Excepted Trust.--Paragraph (4) of 
section 1917(d) of the Social Security Act (42 U.S.C. 1396p(d)(4)) is 
amended by adding at the end the following new subparagraph:
            ``(D) A trust which is a disability savings account 
        described in section 530A(a) of the Internal Revenue Code of 
        1986.''.
    (b) Account Funds Disregarded for Purposes of Certain Other Means-
Tested Federal Programs.--
            (1) In general.--For purposes of determining eligibility 
        for any applicable program, any amount (including earnings 
        thereon) in any disability savings account (as defined in 
        section 530A(a) of the Internal Revenue Code of 1986) 
        established for the benefit of such individual and any 
        distribution for qualified services or products (as defined in 
        section 530A(c)(2)(B)) from such account shall be disregarded 
        with respect to any period during which such individual 
        maintains, makes contributions to, or receives distributions 
        from such disability savings account.
            (2) Applicable program.--For purposes of this subsection, 
        the term ``applicable program'' means--
                    (A) the temporary assistance for needy families 
                program funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.);
                    (B) a State program funded under part B or E of 
                title IV of such Act (42 U.S.C. 621 et seq., 670 et 
                seq.);
                    (C) a State program funded under part D of title IV 
                of such Act (42 U.S.C. 651 et seq.);
                    (D) the supplemental security income program 
                established under title XVI of such Act (42 U.S.C. 1381 
                et seq.);
                    (E) the Medicaid program under title XIX of the 
                such Act (42 U.S.C. 1396 et seq.);
                    (F) the State children's health insurance program 
                under title XXI of such Act (42 U.S.C. 1397aa et seq.);
                    (G) the food stamp program established under the 
                Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.);
                    (H) the special supplemental nutrition program for 
                women, infants, and children established by section 17 
                of the Child Nutrition Act of 1966 (422 U.S.C. 1786);
                    (I) a child nutrition program, as defined in 
                section 25(b) of the Richard B. Russell National School 
                Lunch Act (42 U.S.C. 1769f(b)); and
                    (J) any Federal low-income housing assistance 
                program.

SEC. 8. MARKETING, OUTREACH, AND EDUCATION FOR DISABILITY SAVINGS 
              ACCOUNTS.

    (a) In General.--Not later than 180 days after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
establish a program for marketing, outreach, and education related to 
disability savings accounts (as defined in section 530A(a) of the 
Internal Revenue Code of 1986). Such program may utilize contracts with 
nonprofit organizations established for the purpose of assisting 
individuals with disabilities.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the program 
established under subsection (a).
                                 <all>