Matching payments for ABLE account contributions by certain individuals

(a)

In general

Subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by inserting after section 6433 the following new section:

6433A.

Matching payments for ABLE account contributions by certain individuals

(a)

In general

(1)

Allowance of match

Any individual who is the designated beneficiary of an ABLE account as of the last day of the taxable year and who makes qualified ABLE account contributions for such taxable year shall be allowed a matching contribution for such taxable year in an amount equal to the applicable percentage of so much of the qualified ABLE account contributions made by such individual for the taxable year as does not exceed $2,000.(2)

Payment of match

(A)

In general

Except as provided in subparagraph (B), the matching contribution under this section shall be allowed as a credit which shall be payable by the Secretary as a contribution (as soon as practicable after the individual has filed a tax return making a claim for such matching contribution for the taxable year) to the ABLE account of the individual.(B)

Exception

In the case of an individual who elects the application of this subparagraph and with respect to whom the matching contribution determined under paragraph (1) is greater than zero but less than $50 for the taxable year, subparagraph (A) shall not apply and such matching contribution shall be treated as a credit allowed by subpart C of part IV of subchapter A of chapter 1.(b)

Applicable percentage

For purposes of this section—(1)

In general

Except as provided in paragraph (2), the applicable percentage is 100 percent.(2)

Phaseout

The percentage under paragraph (1) shall be reduced (but not below zero) by the number of percentage points which bears the same ratio to 100 percentage points as—(A)the excess of— (i) the taxpayer's modified adjusted gross income for such taxable year, over (ii) the applicable dollar amount, bears to (B)$20,000.

If any reduction determined under this paragraph is not a whole percentage point, such reduction shall be rounded to the next lowest whole percentage point.

(3)

Applicable dollar amount

The applicable dollar amount is—(A)in the case of a joint return, $56,000,(B)in the case of a head of household (as defined in section 2(b)), 3/4 of the amount applicable under subparagraph (A), and(C)in any other case, 1/2 of the amount applicable under subparagraph (A).(c)

Qualified ABLE account contributions

For purposes of this section—(1)

In general

The term qualified ABLE account contributions means, with respect to any taxable year, the amount of contributions made by the individual to the ABLE account of which such individual is the designated beneficiary. Such term shall not include any amount attributable to a payment under subsection (a)(2).(2)

Reduction for certain distributions

(A)

In general

The qualified ABLE account contributions determined under paragraph (1) for a taxable year shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from the ABLE account.(B)

Testing period

For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes—(i)such taxable year,(ii)the 2 preceding taxable years, and(iii)the period after such taxable year and before the due date (including extensions) for filing the return of tax for such taxable year.(C)

Excepted distributions

There shall not be taken into account under subparagraph (A) the amount of distributions under a qualified ABLE program (within the meaning of section 529A) that is equal to amounts not included in gross income with respect to such distributions under section 529A(c)(1)(B) (relating to distributions for qualified disability expenses).(D)

Treatment of distributions received by spouse of individual

For purposes of determining distributions received by an individual under subparagraph (A) for any taxable year, any distribution received by the spouse of such individual shall be treated as received by such individual if such individual and spouse file a joint return for such taxable year and for the taxable year during which the spouse receives the distribution.(d)

ABLE account

For purposes of this section, the term ABLE account has the meaning given such term under section 529A.(e)

Other definitions and special rules

(1)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income determined without regard to sections 911, 931, and 933.(2)

Treatment of contributions

In the case of any contribution under subsection (a)(2), such contribution shall not be taken into account with respect to the limitation under section 529A(b)(2)(B).(3)

Erroneous credits

(A)

In general

If any contribution is erroneously paid under subsection (a)(2), including a payment that is not made to an ABLE account, the amount of such erroneous payment shall be treated as an underpayment of tax (other than for purposes of part II of subchapter A of chapter 68) for the taxable year in which the Secretary determines the payment is erroneous.(B)

Distribution of erroneous credits

In the case of a contribution to which subparagraph (A) applies, section 72 shall not apply to the distribution of such contribution (and any income attributable thereto) if such distribution is received not later than the day prescribed by law (including extensions of time) for filing the individual’s return for such taxable year.(4)

Exception from reduction or offset

Any payment made to any individual under this section shall not be—(A)subject to reduction or offset pursuant to subsection (c), (d), (e), or (f) of section 6402 or any similar authority permitting offset, or(B)reduced or offset by other assessed Federal taxes that would otherwise be subject to levy or collection.(5)

Election not to have section apply

A taxpayer may elect not to have this section apply for any taxable year.(f)

Inflation adjustments

(1)

In general

In the case of any taxable year beginning in a calendar year after 2027, the $56,000 amount in subsection (b)(3)(A) 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 the taxable year begins, determined by substituting calendar year 2026 for calendar year 2016 in subparagraph (A)(ii) thereof.(2)

Rounding

Any increase determined under paragraph (1) shall be rounded to the nearest multiple of $1,000.

(b)

Treatment of Certain Possessions

(1)

Payments to possessions with mirror code tax systems

The Secretary of the Treasury shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the amendments made by this section. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.(2)

Payments to other possessions

The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the amendments made by this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to its residents.(3)

Coordination with credit allowed against United States income taxes

No credit shall be allowed against United States income taxes under section 6433A of the Internal Revenue Code of 1986 (as added by this section) to any person—(A)to whom a credit is allowed against taxes imposed by the possession by reason of the amendments made by this section, or(B)who is eligible for a payment under a plan described in paragraph (2).(4)

Mirror code tax system

For purposes of this subsection, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.(5)

Treatment of payments

For purposes of section 1324 of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.(c)

Coordination with savers' credit

Section 25B(c)(1) of the Internal Revenue Code of 1986 is amended by inserting and such individual has made an election under section 6433A(e)(5) not to have section 6433A apply for such taxable year before the period at the end.(d)

Deficiencies

Section 6211(b)(4) of the Internal Revenue Code of 1986 is amended by striking and 6433 and inserting 6433, and 6433A.(e)

Payment authority

Section 1324(b)(2) of title 31, United States Code, is amended by striking or 6433 and inserting 6433, or 6433A.(f)

Clerical amendment

The table of sections for subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 6433 the following new item:

Sec. 6433A. Matching payments for ABLE account contributions by certain individuals.

(g)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2026.