II 

109TH CONGRESS 

2D SESSION S. 3115 

To amend the Internal Revenue Code of 1986 to create Catastrophe Savings 

Accounts. 

IN THE SENATE OF THE UNITED STATES 

MAY 25, 2006 

Mr. NELSON of Florida introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to create 

Catastrophe Savings Accounts. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Catastrophe Savings 

5 Accounts Act of 2006’’. 

6 SEC. 2. CATASTROPHE SAVINGS ACCOUNTS. 

7 (a) IN GENERAL.—Subchapter F of Chapter 1 of the 

8 Internal Revenue Code of 1986 (relating to exempt organi9 zations) is amended by adding at the end the following 

10 new part: 


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1 ‘‘PART IX—CATASTROPHE SAVINGS ACCOUNTS 

2 ‘‘SEC. 530A. CATASTROPHE SAVINGS ACCOUNTS. 

3 ‘‘(a) GENERAL RULE.—A Catastrophe Savings Ac4 count shall be exempt from taxation under this subtitle. 

5 Notwithstanding the preceding sentence, such account 

6 shall be subject to the taxes imposed by section 511 (relat7 ing to imposition of tax on unrelated business income of 

8 charitable organizations). 

9 ‘‘(b) CATASTROPHE SAVINGS ACCOUNT.—For pur10 poses of this section, the term ‘Catastrophe Savings Ac11 count’ means a trust created or organized in the United 

12 States for the exclusive benefit of an individual or his 

13 beneficiaries and which is designated (in such manner as 

14 the Secretary shall prescribe) at the time of the establish15 ment of the trust as a Catastrophe Savings Account, but 

16 only if the written governing instrument creating the trust 

17 meets the following requirements: 

18 ‘‘(1) Except in the case of a qualified rollover 

19 contribution— 

20 ‘‘(A) no contribution will be accepted un21 less it is in cash, and 

22 ‘‘(B) contributions will not be accepted in 

23 excess of the account balance limit specified in 

24 subsection (c). 

25 ‘‘(2) The trustee is a bank (as defined in sec26 tion 408(n)) or another person who demonstrates to 


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1 the satisfaction of the Secretary that the manner in 

2 which that person will administer the trust will be 

3 consistent with the requirements of this section. 

4 ‘‘(3) The interest of an individual in the bal5 ance of his account is nonforfeitable. 

6 ‘‘(4) The assets of the trust shall not be com7 mingled with other property except in a common 

8 trust fund or common investment fund. 

9 ‘‘(c) ACCOUNT BALANCE LIMIT.—The aggregate ac10 count balance for all Catastrophe Savings Accounts main11 tained for the benefit of an individual (including qualified 

12 rollover contributions) shall not exceed— 

13 ‘‘(1) in the case of an individual whose qualified 

14 deductible is not more than $1,000, $2,000, and 

15 ‘‘(2) in the case of an individual whose qualified 

16 deductible is more than $1,000, the amount equal to 

17 the lesser of— 

18 ‘‘(A) $15,000, or 

19 ‘‘(B) twice the amount of the individual’s 

20 qualified deductible. 

21 ‘‘(d) DEFINITIONS.—For purposes of this section— 

22 ‘‘(1) QUALIFIED CATASTROPHE EXPENSES.— 

23 The term ‘qualified catastrophe expenses’ means ex24 penses paid or incurred by reason of a major dis25 aster that has been declared by the President under 


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1 section 401 of the Robert T. Stafford Disaster Relief 

2 and Emergency Assistance Act. 

3 ‘‘(2) QUALIFIED DEDUCTIBLE.—With respect 

4 to an individual, the term ‘qualified deductible’ 

5 means the annual deductible for the individual’s 

6 homeowners’ insurance policy. 

7 ‘‘(3) QUALIFIED ROLLOVER CONTRIBUTION.— 

8 The term ‘qualified rollover contribution’ means a 

9 contribution to a Catastrophe Savings Account— 

10 ‘‘(A) from another such account of the 

11 same beneficiary, but only if such amount is 

12 contributed not later than the 60th day after 

13 the distribution from such other account, and 

14 ‘‘(B) from a Catastrophe Savings Account 

15 of a spouse of the beneficiary of the account to 

16 which the contribution is made, but only if such 

17 amount is contributed not later than the 60th 

18 day after the distribution from such other ac19 count. 

20 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.— 

21 ‘‘(1) IN GENERAL.—Any distribution from a 

22 Catastrophe Savings Account shall be includible in 

23 the gross income of the distributee in the manner as 

24 provided in section 72. 


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1 ‘‘(2) DISTRIBUTIONS FOR QUALIFIED CATAS2 TROPHE EXPENSES.— 

3 ‘‘(A) IN GENERAL.—No amount shall be 

4 includible in gross income under paragraph (1) 

5 if the qualified catastrophe expenses of the dis6 tributee during the taxable year are not less 

7 than the aggregate distributions during the tax8 able year. 

9 ‘‘(B) DISTRIBUTIONS IN EXCESS OF EX10 PENSES.—If such aggregate distributions ex11 ceed such expenses during the taxable year, the 

12 amount otherwise includible in gross income 

13 under paragraph (1) shall be reduced by the 

14 amount which bears the same ratio to the 

15 amount which would be includible in gross in16 come under paragraph (1) (without regard to 

17 this subparagraph) as the qualified catastrophe 

18 expenses bear to such aggregate distributions. 

19 ‘‘(3) ADDITIONAL TAX FOR DISTRIBUTIONS NOT

20 USED FOR QUALIFIED CATASTROPHE EXPENSES.— 

21 The tax imposed by this chapter for any taxable 

22 year on any taxpayer who receives a payment or dis23 tribution from a Catastrophe Savings Account which 

24 is includible in gross income shall be increased by 10 

25 percent of the amount which is so includible. 


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1 ‘‘(4) RETIREMENT DISTRIBUTIONS.—No 

2 amount shall be includible in gross income under 

3 paragraph (1) (or subject to an additional tax under 

4 paragraph (3)) if the payment or distribution is 

5 made on or after the date on which the distributee 

6 attains age 62. 

7 ‘‘(f) TAX TREATMENT OF ACCOUNTS.—Rules similar 

8 to the rules of paragraphs (2) and (4) of section 408(e) 

9 shall apply to any Catastrophe Savings Account.’’. 

10 (b) TAX ON EXCESS CONTRIBUTIONS.— 

11 (1) IN GENERAL.—Subsection (a) of section 

12 4973 of the Internal Revenue Code of 1986 (relating 

13 to tax on excess contributions to certain tax-favored 

14 accounts and annuities) is amended by striking ‘‘or’’ 

15 at the end of paragraph (4), by inserting ‘‘or’’ at the 

16 end of paragraph (5), and by inserting after para17 graph (5) the following new paragraph: 

18 ‘‘(6) a Catastrophe Savings Account (as defined 

19 in section 530A),’’. 

20 (2) EXCESS CONTRIBUTION.—Section 4973 of 

21 such Code is amended by adding at the end the fol22 lowing new subsection: 

23 ‘‘(h) EXCESS CONTRIBUTIONS TO CATASTROPHE

24 SAVINGS ACCOUNTS.—For purposes of this section, in the 

25 case of Catastrophe Savings Accounts (within the meaning 


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1 of section 530A), the term ‘excess contributions’ means 

2 the amount by which the aggregate account balance for 

3 all Catastrophe Savings Accounts maintained for the ben4 efit of an individual exceeds the account balance limit de5 fined in section 530A(c)(1).’’. 

6 (c) CONFORMING AMENDMENT.—The table of parts 

7 for subchapter F of chapter 1 of the Internal Revenue 

8 Code of 1986 is amended by adding at the end the fol9 lowing new item: 

‘‘PART IX. CATASTROPHE SAVINGS ACCOUNTS’’. 

10 (d) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning after 

12 December 31, 2006. 

Æ 


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