[Congressional Record Volume 154, Number 41 (Tuesday, March 11, 2008)]
[Senate]
[Pages S1878-S1882]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD:
  S. 2741. A bill to amend the Internal Revenue Code of 1986 to provide 
for disability savings accounts, and for other purposes; to the 
Committee on Finance.
  Mr. DODD. Mr. President, I rise today to introduce the Disability 
Savings Act of 2008. This important legislation is designed to help 
individuals with disabilities live full and productive lives for all 
their years.
  As we all know, disability is a part of human experience. The U.S. 
Census Bureau reports nearly 20 percent of Americans have some level of 
disability while 12.5 percent reported a severe disability. We should 
do what we can to make it possible for these Americans to live 
independently, exert control and choice over their lives, and fully 
participate in their communities. One of the key ways we can accomplish 
this goal is to help individuals with disabilities and their families 
save money for disability related expenses, especially those expected 
over the course of full life.
  Over the years, Congress has provided incentives to American families 
to save for various long term goals: college education, home ownership, 
and retirement. These incentives have given families the tools to help 
their children, well after they have left the home.
  But for families who have a child with a disability, particularly a 
cognitive disability, these goals may not match their needs. Many of 
these children will depend on Medicaid, Social Security Disability 
Insurance, and Supplemental Security Income. They cannot risk losing 
these benefits. And they may never get to the point where they can 
consider college or home ownership.
  These individuals will frequently incur significant additional costs 
related to services and supports necessary to maintain health and 
independence. Parents also have to worry about what will happen to 
their children after they are gone.
  The World Institute on Disability reports that over 1/3 of adults 
with disabilities live in households with income of $15,000 or less. 
According to the 2005 American Community Survey, median earnings for 
individuals with disabilities were a little more than half of the 
median income of those without disabilities.
  It is common for families to provide for individuals with significant 
disabilities who cannot support themselves. These families often do 
this at great cost to themselves both financially and emotionally. They 
do it out of love, and they do not ask to be relieved of their burdens. 
But they are hoping that we can provide the tools to help them ensure 
their loved ones can lead full lives for many years.
  That is why I am introducing the Disability Savings Act of 2008. This 
bill

[[Page S1879]]

will encourage individuals with disabilities and their families to save 
money for their unique disability-related needs in Disability Savings 
Accounts. These accounts will provide a tax-advantaged mechanism for 
individuals with disabilities to save money.
  The interest on these accounts, with a balance of up to $250,000, 
will be tax free. Expenditures from the accounts for specific qualified 
services such as education, medical services, employment training and 
support, and transportation, will not be subject to income tax. The 
accounts will be easier to manage, and use than other existing savings 
mechanisms for individuals with disabilities. To be sure these accounts 
are available to low and moderate income earners, there will be a 
refundable matching tax credit of up to $1000 for contributions. 
Account holders can even roll funds from college savings plans and 
special needs trusts for the same beneficiary into the Disability 
Savings Account without penalty. These accounts will supplement, not 
supplant, benefits provided by other, sources such as Medicaid, private 
insurance, and Supplemental Security Income, SSI, and the assets held 
within them will not be counted against eligibility for those programs.
  In order to be eligible to have a Disability Savings Account, 
beneficiaries must be determined to be blind or disabled by the Social 
Security Administration or the Disability Determination Service of a 
state, and be under the age of 65. The accounts can be held and managed 
through a financial institution by the beneficiary, their spouse or 
family member, or a legal guardian.
  I hope that my colleagues will see the benefit of this approach and 
join me in this effort. I urge them to cosponsor this legislation and 
work with me to give individuals with disabilities and their families 
the tools they need to live healthy independent lives.
  Mr. President, I ask unanimous consent that the text of the bill and 
a letter of support be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2741

       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

[[Page S1880]]

     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:

[[Page S1881]]



 
                                                    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.''.

[[Page S1882]]

       (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).
                                  ____



                                                 Easter Seals,

                                   Washington, DC, March 10, 2008.
     Hon. Chris Dodd,
     U.S. Senate,
     Washington, DC.
       Dear Senator Dodd: Easter Seals has long been concerned 
     that individuals with disabilities and their families have 
     too few options to save for the future. Currently, 
     individuals must have exceptionally low incomes in order to 
     access essential public services and supports. In those 
     situations in which an individual's family wants to save for 
     the future, a complicated web of state rules that guide 
     special needs trust must be followed, and in nearly every 
     circumstance, families cannot navigate the system without the 
     assistance of an attorney.
       For these reasons, Easter Seals is pleased to support the 
     Disability Savings Act of 2008. This legislation clearly 
     identifies the essential need to establish new protocols that 
     enable families with limited incomes to effectively save 
     financial resources to meet the future needs of their family 
     member with a disability. Such protocols must be easy for a 
     family to navigate without a lawyer and must not impose 
     barriers to future benefits such as those available through 
     the Medicaid program. Easter Seals looks forward to working 
     with you to see that legislation that can help these families 
     is enacted in 2008.
       As the leading non-profit provider of services for 
     individuals with autism, developmental disabilities, physical 
     and mental disabilities, and other special needs, Easter 
     Seals works to ensure that individuals with disabilities can 
     live, learn, work and play in their communities. Thank you 
     for considering our views.
           Sincerely,
                                               Katherine Beh Neas,
     Vice President, Government Relations.

                          ____________________