[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1859 Introduced in House (IH)]

<DOC>






116th CONGRESS
  1st Session
                                H. R. 1859

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 25, 2019

Mr. Katko (for himself and Mr. Brindisi) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to provide for parent 
               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 ``Working Parents Flexibility Act of 
2019''.

SEC. 2. PARENTAL LEAVE SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 224 
as section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. PARENTAL LEAVE SAVINGS ACCOUNTS.

    ``(a) Allowance of Deduction.--
            ``(1) In general.--In the case of an individual who is an 
        eligible individual for any month during the taxable year, 
        there shall be allowed as a deduction for the taxable year an 
        amount equal to the aggregate amount paid in cash during such 
        taxable year by such individual to a parental leave savings 
        account of such individual.
    ``(b) Limitations.--
            ``(1) Annual limitation for any year.--The amount allowable 
        as a deduction under subsection (a) to an eligible individual 
        for the taxable year shall not exceed $6,750.
            ``(2) Overall limitation.--The aggregate amounts 
        contributed to a parental leave savings account for all taxable 
        years shall not exceed $24,000.
            ``(3) Adjusted gross income limitation.--In the case of a 
        taxpayer whose adjusted gross income exceeds $250,000 for the 
        taxable year, the dollar limitation under paragraph (1) for 
        such taxable year shall be zero.
            ``(4) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual with 
        respect to whom a deduction under section 151 is allowable to 
        another taxpayer for a taxable year beginning in the calendar 
        year in which such individual's taxable year begins.
            ``(5) Coordination with employer contributions.--The 
        limitation which would (but for this paragraph) apply under 
        this subsection to an individual for any taxable year shall be 
        reduced (but not below zero) by the aggregate amount 
        contributed to a parental leave savings account of such 
        individual which is excludable from the taxpayer's adjusted 
        gross income for such taxable year under section 139G (and such 
        amount shall not be allowed as a deduction under subsection 
        (a)).
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means, with respect to any month, any individual 
who has earned income from employment during the 12 months preceding 
the month in which the parental leave savings account is established.
    ``(d) Parental Leave Savings Account.--For purposes of this 
section:
            ``(1) In general.--The term `parental leave savings 
        account' means a trust created or organized in the United 
        States exclusively for the purpose of making distributions for 
        the care of a child of the account owner, but only if the 
        written governing instrument creating the trust meets the 
        following requirements:
                    ``(A) Except in the case of a rollover contribution 
                described in subsection (e)(3), no contribution will be 
                accepted--
                            ``(i) unless it is in cash, or
                            ``(ii) to the extent such contribution--
                                    ``(I) when added to previous 
                                contributions to the trust for the 
                                calendar year, exceeds the dollar 
                                amount in effect under subsection 
                                (b)(1), or
                                    ``(II) when added to all previous 
                                contributions to the trust, exceeds the 
                                limit under subsection (b)(2).
                    ``(B) 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 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(E) The interest of an individual in the balance 
                in his account is nonforfeitable.
            ``(2) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 219(d)(2) (relating to no deduction 
                for rollovers).
                    ``(B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                    ``(C) Except as provided in section 106(d), section 
                219(f)(5) (relating to employer payments).
                    ``(D) Section 408(g) (relating to community 
                property laws).
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        distribution from a parental leave savings account shall be 
        included in the gross income of the account owner.
            ``(2) Early parenthood payments or immediate return of 
        contributions.--
                    ``(A) In general.--Any amount paid or distributed 
                out of a parental leave savings account which--
                            ``(i) is made pursuant to a request by the 
                        account owner and not later than 1 year after 
                        the birth or adoption of a child of the account 
                        owner, or
                            ``(ii) is not more than the amount of 
                        contributions made to the account during the 
                        30-day period ending on the date of such 
                        distribution,
                shall not be included in gross income. Clause (ii) 
                shall not apply if a deduction is allowed with respect 
                to such contribution.
                    ``(B) Return of contribution not taken into account 
                in determining deduction.--The amount allowed as a 
                deduction under subsection (a) for the taxable year 
                (determined without regard to this subparagraph) shall 
                be reduced by the amount of distributions made during 
                the taxable year under subparagraph (A)(ii).
                    ``(C) Coordination with dependent care tax 
                credit.--The employment-related expenses (as defined in 
                section 21(b)(2)) taken into account with respect to 
                any child of the taxpayer in determining the credit 
                under section 21 for the taxable year (determined 
                without regard to this subparagraph) shall be reduced 
                by any amounts excluded from gross income for the 
                taxable year under subparagraph (A)(i) with respect to 
                such child.
            ``(3) Rollover contributions.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount paid or distributed from a parental leave 
                savings account to the account owner if--
                            ``(i) the entire amount received is paid 
                        into an individual retirement account or 
                        individual retirement annuity (other than an 
                        endowment contract) for the benefit of such 
                        individual not later than the 60th day after 
                        the day on which he receives the payment or 
                        distribution, or
                            ``(ii) the entire amount received is paid 
                        into an eligible retirement plan for the 
                        benefit of such individual not later than the 
                        60th day after the date on which the payment or 
                        distribution is received, except the maximum 
                        amount which may be paid into such plan may not 
                        exceed the portion of the amount received which 
                        is includible in gross income (determined 
                        without regard to this paragraph).
                For purposes of clause (ii), the term `eligible 
                retirement plan' means an eligible retirement plan 
                described in clause (iii), (iv), (v), or (vi) of 
                section 402(c)(8)(B).
                    ``(B) Limitation.--This paragraph does not apply to 
                any amount described in subparagraph (A)(i) received by 
                an individual from a parental leave savings account if 
                at any time during the 1-year period ending on the day 
                of such receipt such individual received any other 
                amount described in that subparagraph from a parental 
                leave savings account which was not includible in his 
                gross income because of the application of this 
                paragraph.
                    ``(C) Special rule for 529 and 529a funding 
                distributions.--
                            ``(i) In general.--A plan shall not fail to 
                        be treated as a parental leave savings account 
                        under this section solely because the account 
                        provides for distributions from a parental 
                        leave savings account to a qualified tuition 
                        program (as defined in section 529(b)) or a 
                        qualified ABLE program (as defined in section 
                        529A(b)) of the taxpayer or a child of the 
                        taxpayer (as defined in section 529(e)).
                            ``(ii) Tax treatment.--Paragraph (1) shall 
                        not apply to so much of any such distribution 
                        as is allocable to earnings on the amounts 
                        contributed by the taxpayer to the parental 
                        leave savings account.
            ``(4) Additional tax for distributions not used for early 
        parenthood payments.--The tax imposed by this chapter on the 
        account owner for any taxable year in which there is a payment 
        or distribution from a parental leave savings account of such 
        account owner which is includible in gross income under 
        subparagraph (1) shall be increased by 20 percent of the amount 
        which is so includible. The preceding sentence shall not apply 
        to the portion of a distribution described in subparagraph 
        (C)(i) that is so includible.
            ``(5) Excess contributions returned before due date of 
        return.--
                    ``(A) In general.--If any excess contribution is 
                contributed for a taxable year to any parental leave 
                savings account of an individual, paragraph (1) shall 
                not apply to distributions from the parental leave 
                savings account of such individual (to the extent such 
                distributions do not exceed the aggregate excess 
                contributions to the account of such individual for 
                such year) if--
                            ``(i) such distribution is received by the 
                        individual on or before the last day prescribed 
                        by law (including extensions of time) for 
                        filing such individual's return for such 
                        taxable year, and
                            ``(ii) such distribution is accompanied by 
                        the amount of net income attributable to such 
                        excess contribution.
                Any net income described in clause (ii) shall be 
                included in the gross income of the individual for the 
                taxable year in which it is received.
                    ``(B) Excess contribution.--For purposes of 
                subparagraph (A), the term `excess contribution' means 
                any contribution (other than a rollover contribution 
                described in paragraph (3)) which is neither excludable 
                from gross income under section 139G nor deductible 
                under this section.
            ``(6) Transfer of account incident to divorce.--The 
        transfer of an individual's interest in a parental leave 
        savings account to an individual's spouse or former spouse 
        under a divorce or separation instrument described in 
        subparagraph (A) of section 71(b)(2) shall not be considered a 
        taxable transfer made by such individual notwithstanding any 
        other provision of this subtitle, and such interest shall, 
        after such transfer, be treated as a parental leave savings 
        account with respect to which such spouse is the account owner.
            ``(7) Treatment after death of account owner.--
                    ``(A) Treatment if designated beneficiary is 
                spouse.--
                            ``(i) In general.--If a qualified 
                        individual acquires such owner's interest in a 
                        parental leave savings account by reason of 
                        being the designated beneficiary of such 
                        account at the death of the account owner, such 
                        parental leave savings account shall be treated 
                        as if the qualified individual were the account 
                        owner.
                            ``(ii) Qualified individual.--For purposes 
                        of clause (i), the term `qualified individual' 
                        means, with respect to any account owner--
                                    ``(I) the account owner's surviving 
                                spouse, or
                                    ``(II) any other person with 
                                custody of any child of the deceased 
                                account owner, but only if such death 
                                occurred not later than 1 year after 
                                the birth or adoption of such child by 
                                the deceased account owner.
                    ``(B) Other cases.--
                            ``(i) In general.--If, by reason of the 
                        death of the account owner, any person acquires 
                        the account owner's interest in a parental 
                        leave savings account in a case to which 
                        subparagraph (A) does not apply--
                                    ``(I) such account shall cease to 
                                be a parental leave savings account as 
                                of the date of death, and
                                    ``(II) an amount equal to the fair 
                                market value of the assets in such 
                                account on such date shall be 
                                includible if such person is not the 
                                estate of such owner, in such person's 
                                gross income for the taxable year which 
                                includes such date, or if such person 
                                is the estate of such owner, in such 
                                owner's gross income for the last 
                                taxable year of such owner.
                            ``(ii) Special rules.--An appropriate 
                        deduction shall be allowed under section 691(c) 
                        to any person (other than the decedent or the 
                        decedent's spouse) with respect to amounts 
                        included in gross income under clause (i) by 
                        such person.
    ``(f) Tax Treatment of Account.--
            ``(1) In general.--A parental leave savings account shall 
        be exempt from taxation under this subtitle. Notwithstanding 
        the preceding sentence, the parental leave savings account 
        shall be subject to the taxes imposed by section 511 (relating 
        to imposition of tax on unrelated business income of 
        charitable, etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to any 
        parental leave savings account.
    ``(g) One Account Per Individual.--An individual may not own more 
than one parental leave savings account. The Secretary shall prescribe 
such rules as are necessary to provide for liquidating an individual's 
parental leave savings account for transfer to a new parental leave 
savings account of the individual and for treating such amounts as a 
rollover distribution described in subsection (e)(3).
    ``(h) Reports.--The owner of a parental leave savings account shall 
make such reports regarding such account to the Secretary with respect 
to contributions, distributions, the return of excess contributions, 
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 by the Secretary.
    ``(i) Cost-of-Living Adjustment.--
            ``(1) In general.--In the case of taxable years beginning 
        in a calendar year after 2020, each dollar amount in 
        subsections (b)(1) and (b)(2) shall be increased by an amount 
        equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                such taxable year begins determined by substituting 
                `calendar year 2019' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.
            ``(2) Rounding.--If any increase under paragraph (1) is not 
        a multiple of $50, such increase shall be rounded to the 
        nearest multiple of $50.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Section 62(a) of such Code is amended by inserting after 
paragraph (21) the following new paragraph:
            ``(22) Parental leave savings accounts.--The deduction 
        allowed under section 224.''.
    (c) Exclusion for Employer Contributions to Parental Leave Savings 
Accounts.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        such Code is amended by inserting after section 139F the 
        following new section:

``SEC. 139G. CONTRIBUTIONS BY EMPLOYER TO PARENTAL LEAVE SAVINGS 
              ACCOUNTS.

    ``(a) In General.--Gross income of an employee does not include 
contributions by the employer to the parental leave savings account of 
the employee to the extent such amounts do not exceed the limitation 
under section 224(b)(1) (determined without regard to this section) 
which is applicable to such employee for such taxable year.
    ``(b) Parental Leave Savings Account.--For purposes of this 
section, the term `parental leave savings account' shall have the 
meaning given to such term by section 224.
    ``(c) Exclusion Not To Exceed Compensation.--
            ``(1) Employees.--The amount excluded from gross income by 
        subsection (a) with respect to an employee shall not exceed 
        such employee's wages, salaries, tips, and other employee 
        compensation which are attributable to such employee's 
        employment by the employer referred to in such subsection.
            ``(2) Self-employed individuals.--The amount excluded from 
        gross income by subsection (a) for contributions with respect 
        to an individual who is self-employed shall not exceed such 
        individual's earned income (as defined in section 401(c)(2)) 
        derived by the taxpayer from the trade or business with respect 
        to which the individual is self-employed.
            ``(3) Community property laws not to apply.--The 
        limitations under this subsection shall be determined without 
        regard to community property laws.''.
            (2) Conforming amendments.--
                    (A) Section 3121(a) of such Code is amended by 
                striking ``or'' at the end of paragraph (22), by 
                striking the period at the end of paragraph (23) and 
                inserting ``; or'', and by inserting after paragraph 
                (23) the following new paragraph:
            ``(24) any payment made to a parental leave savings account 
        (as defined in section 224) or an employee.''.
                    (B) Section 3231(e) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(13) Parental leave savings account contributions.--The 
        term `compensation' shall not include any payment made to a 
        parental leave savings account (as defined in section 224) of 
        an employee.''.
                    (C) Section 3306(b) of such Code is amended by 
                striking ``or'' at the end of paragraph (19), by 
                striking the period at the end of paragraph (20) and 
                inserting ``; or'', and by inserting after paragraph 
                (20) the following new paragraph:
            ``(21) any payment made to a parental leave savings account 
        (as defined in section 224) of an employee.''.
                    (D) Section 3401(a) of such Code is amended by 
                striking ``or'' at the end of paragraph (21), by 
                striking the period at the end of paragraph (22) and 
                inserting ``; or'', and by inserting after paragraph 
                (22) the following new paragraph:
            ``(23) any payment made to a parental leave savings account 
        (as defined in section 224) of an employee.''.
                    (E) Section 6051(a) of such Code is amended by 
                striking ``and'' at the end of paragraph (13), by 
                striking the period at the end of paragraph (14) and 
                inserting ``, and'', and by inserting after paragraph 
                (14) the following new paragraph:
            ``(15) the amount contributed to any parental leave savings 
        account (as defined in section 224) of such employee.''.
    (d) Prohibited Transactions.--
            (1) Exception for taxable distributions from parental leave 
        savings accounts.--Subsection (c) of section 4975 of such Code 
        (defining prohibited transaction) is amended by adding at the 
        end the following new paragraph:
            ``(7) Special rule for parental leave savings accounts.--An 
        individual for whose benefit a parental leave savings account 
        (with the meaning of section 224) is established and any 
        contributor to such account shall be exempt from the tax 
        imposed by this section with respect to any transaction 
        concerning such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the account 
        ceases to be a parental leave savings account by reason of the 
        application of section 224(f)(2) to such account.''.
            (2) Plan defined.--Section 4975(e)(1) of such Code is 
        amended by striking ``or'' at the end of subparagraph (F), by 
        redesignating subparagraph (G) as subparagraph (H), and by 
        inserting after subparagraph (F) the following new 
        subparagraph:
                    ``(G) a parental leave savings account described in 
                section 224, or''.
    (e) Penalty on Failure To Report.--Section 6693(a)(2) of such Code 
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 224(g) (relating to parental leave 
                savings accounts).''.
    (f) Conforming Amendment.--Section 26(b)(2) of such Code is amended 
by striking ``and'' at the end of subparagraph (X), by striking the 
period at the end of subparagraph (Y) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(Z) section 224(e)(4) (relating to additional tax 
                with respect to distributions not used for early 
                parenthood payment purposes).''.
    (g) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by redesignating the item 
        relating to section 224 as an item relating to section 225 and 
        by inserting after the item relating to section 223 the 
        following new item:

``Sec. 224. Parental leave savings accounts.''.
            (2) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 139F the following new item:

``Sec. 139G. Contributions by employer to parental leave savings 
                            accounts.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2019.
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