A bill to amend the Internal Revenue Code of 1986 to create Catastrophe Savings Accounts.

Summary: Catastrophe Savings Accounts Act of 2006 - Amends the Internal Revenue Code to create tax-exempt catastrophe savings accounts (CSAs). Allows tax-free distributions from CSAs to pay expenses resulting from a presidentially declared major disaster. Limits CSA balances to: (1) $2,000 (for individuals with homeowner insurance deductibles of not more than $1,000); and (2) the lesser of $15,000 or twice a homeowner's insurance deductible (for individuals with deductibles of more than $1,000).

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),''.
            (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.