[Congressional Record Volume 152, Number 67 (Thursday, May 25, 2006)]
[Senate]
[Pages S5235-S5236]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. NELSON of Florida:
  S. 3115. A bill to amend the Internal Revenue Code of 1986 to create 
Catastrophe Savings Accounts; to the Committee on Finance.

                                S. 3115

       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 ``Catastrophe Savings Accounts 
     Act of 2006''.

     SEC. 2. CATASTROPHE 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--CATASTROPHE SAVINGS ACCOUNTS

     ``SEC. 530A. CATASTROPHE SAVINGS ACCOUNTS.

       ``(a) General Rule.--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 Account.--For 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) Account Balance Limit.--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) Definitions.--For purposes of this section--
       ``(1) Qualified catastrophe expenses.--The 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) Qualified deductible.--With respect to an individual, 
     the term `qualified deductible' means the annual deductible 
     for the individual's homeowners' insurance policy.
       ``(3) Qualified rollover contribution.--The 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) In general.--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) In general.--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 expenses.--If 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 expenses.--The 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) Retirement distributions.--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 Accounts.--Rules 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) In general.--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),''.

[[Page S5236]]

       (2) Excess contribution.--Section 4973 of such Code is 
     amended by adding at the end the following new subsection:
       ``(h) Excess Contributions to Catastrophe Savings 
     Accounts.--For 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) Conforming 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. Catastrophe Savings Accounts''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                 ______