I 

110TH CONGRESS 

1ST SESSION H. R. 2370 

To amend the Internal Revenue Code of 1986 to provide for the establishment 

of financial security accounts for the care of family members with disabilities. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 17, 2007 

Mr. CRENSHAW (for himself, Mr. MEEK of Florida, Mr. CAMP of Michigan, 

Mr. SESSIONS, Mr. TOM DAVIS of Virginia, Mr. RAMSTAD, Mrs. BONO, 

Mr. MACK, Ms. CORRINE BROWN of Florida, Mr. PUTNAM, and Mr. 

WEXLER) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the establishment of financial security accounts for 

the care of family members with disabilities. 

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 ‘‘Financial Security Ac5 counts for Individuals with Disabilities Act of 2007’’. 


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1 SEC. 2. FINANCIAL SECURITY ACCOUNTS FOR INDIVIDUALS 

2 WITH DISABILITIES. 

3 (a) IN GENERAL.—Subchapter F of chapter 1 of the 

4 Internal Revenue Code of 1986 (relating to exempt organi5 zations) is amended by inserting after part VIII the fol6 lowing new part: 

7 ‘‘PART IX—SAVINGS FOR INDIVIDUALS WITH 

8 DISABILITIES 

‘‘Sec. 530A. Financial security accounts for individuals with disabilities. 

9 ‘‘SEC. 530A. FINANCIAL SECURITY ACCOUNTS FOR INDIVID10 UALS WITH DISABILITIES. 

11 ‘‘(a) GENERAL RULE.—A financial security account 

12 for an individual with a disability shall be exempt from 

13 taxation under this subtitle. Notwithstanding the pre14 ceding sentence, such account shall be subject to the taxes 

15 imposed by section 511 (relating to imposition of tax on 

16 unrelated business income of charitable organizations). 

17 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur18 poses of this section— 

19 ‘‘(1) FINANCIAL SECURITY ACCOUNT FOR AN

20 INDIVIDUAL WITH A DISABILITY.—The term ‘finan21 cial security account for an individual with a dis22 ability’ means a trust created or organized in the 

23 United States (and designated as a financial security 

24 account for an individual with a disability at the 

25 time created or organized) exclusively for the purVerDate Aug 31 2005 03:43 May 19, 2007 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2370.IH H2370

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1 pose of paying qualified disability expenses of an in2 dividual who is disabled and who is the designated 

3 beneficiary of the trust, but only if the written gov4 erning instrument creating the trust meets the fol5 lowing requirements: 

6 ‘‘(A) No contribution will be accepted— 

7 ‘‘(i) unless it is in cash, and 

8 ‘‘(ii) except in the case of rollover con9 tributions described in subsection (c)(4), if 

10 such contribution would result in aggregate 

11 contributions for the taxable year and all 

12 preceding taxable years exceeding 

13 $500,000. 

14 ‘‘(B) The trustee is a bank (as defined in 

15 section 408(n)), a parent or guardian of the 

16 designated beneficiary, a designee of a parent 

17 or guardian of the designated beneficiary, the 

18 designated beneficiary, or another person, who 

19 demonstrates to the satisfaction of the Sec20 retary that the manner in which that person 

21 will administer the trust will be consistent with 

22 the requirements of this section. 

23 ‘‘(C) No part of the trust assets will be in24 vested in life insurance contracts. 


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1 ‘‘(D) The assets of the trust shall not be 

2 commingled with other property except in a 

3 common trust fund or common investment 

4 fund. 

5 ‘‘(2) QUALIFIED DISABILITY EXPENSES.—The 

6 term ‘qualified disability expenses’ means, with re7 spect to an individual with a disability, amounts paid 

8 or incurred, not compensated for by insurance or 

9 otherwise, for— 

10 ‘‘(A) education, medical and dental care, 

11 community based support services, employment 

12 training and support, moving, and assistive 

13 technology, 

14 ‘‘(B) after the designated beneficiary has 

15 attained the age of 18, housing and transpor16 tation, and 

17 ‘‘(C) funeral and burial services and prop18 erty. 

19 ‘‘(3) INDIVIDUAL WITH A DISABILITY.—An in20 dividual is an individual with a disability if such in21 dividual is receiving supplemental security income 

22 benefits under title XVI of the Social Security Act 

23 or an individual otherwise eligible to receive such 

24 benefits notwithstanding the income and assets tests 

25 required for eligibility for such benefits. 


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1 ‘‘(4) RULES RELATING TO ESTATE AND GIFT

2 TAX.—Rules similar to the rules of paragraphs (2), 

3 (4), and (5) of section 529(c) shall apply for pur4 poses of this section. 

5 ‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.— 

6 ‘‘(1) IN GENERAL.—Except as otherwise pro7 vided in this subsection, any amount paid or distrib8 uted out of a financial security account for an indi9 vidual with a disability shall be included in gross in10 come by the payee or distributee, as the case may 

11 be, for the taxable year in which received in the 

12 manner as provided in section 72. 

13 ‘‘(2) DISTRIBUTIONS FOR BENEFIT OF DES14 IGNATED BENEFICIARY.— 

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

16 includible in gross income under paragraph (1) 

17 if the qualified disability expenses of the des18 ignated beneficiary during the taxable year are 

19 not less than the aggregate distributions during 

20 the taxable year. 

21 ‘‘(B) DISTRIBUTIONS IN EXCESS OF EX22 PENSES.—If such aggregate distributions ex23 ceed such expenses during the taxable year, the 

24 amount otherwise includible in gross income 

25 under paragraph (1) shall be reduced by the 


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1 amount which bears the same ratio to the 

2 amount which would be includible in gross in3 come under paragraph (1) (without regard to 

4 this subparagraph) as the qualified disability 

5 expenses bear to such aggregate distributions. 

6 ‘‘(C) DISALLOWANCE OF EXCLUDED

7 AMOUNTS AS DEDUCTION, CREDIT, OR EXCLU8 SION.—No deduction, credit, or exclusion shall 

9 be allowed to the taxpayer under any other sec10 tion of this chapter for any qualified disability 

11 expenses to the extent taken into account in de12 termining the amount of the exclusion under 

13 this paragraph. 

14 ‘‘(3) ADDITIONAL TAX FOR DISTRIBUTIONS NOT

15 USED FOR BENEFIT OF DESIGNATED BENE16 FICIARY.— 

17 ‘‘(A) IN GENERAL.—The tax imposed by 

18 this chapter for any taxable year on any tax19 payer who receives a payment or distribution 

20 from a financial security account for an indi21 vidual with a disability shall be increased by 10 

22 percent of the amount thereof which is includ23 ible in gross income under paragraph (1). 

24 ‘‘(B) EXCEPTION.—Subparagraph (A) 

25 shall not apply if the payment or distribution is 


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1 made to a beneficiary (or to the estate of the 

2 designated beneficiary) on or after the death of 

3 the designated beneficiary. 

4 ‘‘(C) CONTRIBUTIONS RETURNED BEFORE

5 CERTAIN DATE.—Subparagraph (A) shall not 

6 apply to the distribution of any contribution 

7 made during a taxable year if— 

8 ‘‘(i) such distribution is made before 

9 the first day of the sixth month of the tax10 able year following the taxable year, and 

11 ‘‘(ii) such distribution is accompanied 

12 by the amount of net income attributable 

13 to such excess contribution. 

14 Any net income described in clause (ii) shall be 

15 included in gross income for the taxable year in 

16 which such excess contribution was made. 

17 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not 

18 apply to any amount paid or distributed from a fi19 nancial security account for an individual with a dis20 ability to the extent that the amount received is 

21 paid, not later than the 60th day after the date of 

22 such payment or distribution, into another financial 

23 security account for an individual with a disability 

24 for the benefit of the same beneficiary. The pre25 ceding sentence shall not apply to any payment or 


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1 distribution if it applied to any prior payment or dis2 tribution during the 12-month period ending on the 

3 date of the payment or distribution. 

4 ‘‘(5) CHANGE IN BENEFICIARY.—Any change in 

5 the beneficiary of a financial security account for an 

6 individual with a disability shall not be treated as a 

7 distribution for purposes of paragraph (1) if the new 

8 beneficiary is disabled and is a member of the family 

9 (as defined in section 529(e)(2)) of the old bene10 ficiary. 

11 ‘‘(d) TAX TREATMENT OF ACCOUNTS.—Rules similar 

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

13 shall apply to any financial security account for an indi14 vidual with a disability. 

15 ‘‘(e) COMMUNITY PROPERTY LAWS.—This section 

16 shall be applied without regard to any community property 

17 laws. 

18 ‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this 

19 section, a custodial account shall be treated as a trust if— 

20 ‘‘(1) the assets of such account are held by a 

21 bank (as defined in section 408(n) or another person 

22 who demonstrates, to the satisfaction of the Sec23 retary, that the manner in which he will administer 

24 the account will be consistent with the requirements 

25 of this section, and 


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1 ‘‘(2) the custodial account would, except for the 

2 fact that it is not a trust, constitute an account de3 scribed in subsection (c)(1). 

4 For purposes of this title, in the case of a custodial ac5 count treated as a trust by reason of the preceding sen6 tence, the custodian of such account shall be treated as 

7 the trustee thereof. 

8 ‘‘(g) REPORTS.—The trustee of a financial security 

9 account for an individual with a disability shall make such 

10 reports regarding such account to the Secretary and to 

11 the beneficiary of the account with respect to contribu12 tions, distributions, and such other matters as the Sec13 retary may require. The reports required by this sub14 section shall be filed at such time and in such manner 

15 and furnished to such individuals at such time and in such 

16 manner as may be required. 

17 ‘‘(h) COORDINATION WITH MEANS-TESTED PRO18 GRAMS.—Amounts held by, or paid or distributed from, 

19 a financial security account for an individual with a dis20 ability shall not be treated as income or assets, and shall 

21 not be taken into account in determining eligibility for, 

22 or the amount or extent of, benefits provided by any pro23 gram funded in whole or in part with Federal funds.’’. 

24 (b) CONFORMING AMENDMENTS.— 


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1 (1) PENALTY FOR FAILURE TO MEET MINIMUM

2 DISTRIBUTION REQUIREMENT.—Subsection (c) of 

3 section 4974 of such Code is amended by striking 

4 ‘‘or’’ at the end of paragraph (4), by striking the pe5 riod at the end of paragraph (5) and inserting ‘‘, 

6 or’’, and by inserting after paragraph (5) the fol7 lowing new paragraph: 

8 ‘‘(6) any financial security account for an indi9 vidual with a disability (as defined in section 

10 530A(b)).’’. 

11 (2) TAX ON PROHIBITED TRANSACTIONS.— 

12 (A) IN GENERAL.—Paragraph (1) of sec13 tion 4975(e) of such Code (defining plan) is 

14 amended by redesignating subparagraph (G) as 

15 subparagraph (H), by striking ‘‘or’’ at the end 

16 of subparagraph (F), and by adding after sub17 paragraph (F) the following: 

18 ‘‘(G) a financial security account for an in19 dividual with a disability described in section 

20 530A, or’’. 

21 (B) EXEMPTION.—Subsection (d) of sec22 tion 4975 of such Code (relating to exemptions) 

23 is amended by striking ‘‘or’’ at the end of para24 graph (22), by striking the period at the end of 


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1 paragraph (23) and inserting ‘‘; or’’, and by in2 serting after paragraph (23) the following: 

3 ‘‘(24) in the case of a financial security account 

4 for an individual with a disability, any transaction to 

5 provide housing or other services by a family mem6 ber to or for the designated beneficiary of the trust 

7 to the extent that such transaction does not exceed 

8 the fair market value of the housing or service (as 

9 the case may be) provided.’’. 

10 (C) SPECIAL RULE.—Subsection (c) of sec11 tion 4975 of such Code (relating to tax on pro12 hibited transactions) is amended by adding at 

13 the end the following new paragraph: 

14 ‘‘(7) SPECIAL RULE FOR FINANCIAL SECURITY

15 ACCOUNT FOR INDIVIDUALS WITH DISABILITIES.— 

16 An individual for whose benefit a financial security 

17 account for an individual with a disability is estab18 lished and any contributor to such account shall be 

19 exempt from the tax imposed by this section with re20 spect to any transaction concerning such account 

21 (which would otherwise be taxable under this sec22 tion) if section 530A(d) applies with respect to such 

23 transaction.’’. 

24 (3) ROLLOVERS FROM QUALIFIED TUITION

25 PROGRAMS AND EDUCATION SAVINGS ACCOUNTS.— 


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1 (A) QUALIFIED TUITION PROGRAMS.— 

2 Paragraph (3) of section 529(c) of such Code is 

3 amended by adding at the end the following 

4 new subparagraph: 

5 ‘‘(E) CONTRIBUTIONS TO FINANCIAL SE6 CURITY ACCOUNT FOR AN INDIVIDUAL WITH A

7 DISABILITY.—Subparagraph (A) shall not apply 

8 to that portion of any distribution which, within 

9 60 days of such distribution, is contributed to 

10 a financial security account for an individual 

11 with a disability for the benefit of the des12 ignated beneficiary.’’. 

13 (B) EDUCATION SAVINGS ACCOUNT.—Sub14 section (d) of section 530 of such Code is 

15 amended by adding at the end the following 

16 new paragraph: 

17 ‘‘(9) CONTRIBUTIONS TO FINANCIAL SECURITY

18 ACCOUNT FOR AN INDIVIDUAL WITH A DIS19 ABILITY.—Paragraph (1) shall not apply to any 

20 amount paid or distributed from a Coverdell edu21 cation savings account to the extent that the amount 

22 received is paid, not later than the 60th day after 

23 the date of such payment or distribution, into a fi24 nancial security account for an individual with a dis25 ability for the benefit of the same beneficiary.’’. 


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1 (4) REPORTS.—Paragraph (2) of section 

2 6693(a) of such Code is amended by striking ‘‘and’’ 

3 at the end of subparagraph (D), by striking the pe4 riod at the end of subparagraph (E) and inserting 

5 ‘‘and’’, and by inserting after subparagraph (E) the 

6 following new subparagraph: 

7 ‘‘(F) section 530A(g) (relating to financial 

8 security accounts for individuals with disabil9 ities).’’. 

10 (5) EXCLUSION FROM INCOME.—Subsection (b) 

11 of section 1612 of the Social Security Act (42 

12 U.S.C. 1382a) is amended by striking ‘‘or’’ at the 

13 end of paragraph (22), by striking the period at the 

14 end of paragraph (23) and inserting ‘‘; or’’, and by 

15 inserting after paragraph (23) the following: 

16 ‘‘(24) any contribution to a financial security 

17 account for an individual with a disability.’’. 

18 (c) CLERICAL AMENDMENT.—The table of parts for 

19 subchapter F of chapter 1 of such Code is amended by 

20 inserting after the item relating to part VIII the following 

21 new item: 

‘‘PART IX. SAVINGS FOR INDIVIDUALS WITH DISABILITIES.’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2006. 

Æ 


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