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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 456 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 456

To provide for the establishment of demonstration projects designed to 
determine the social, psychological, and economic effects of providing 
to individuals with limited means an opportunity to accumulate assets, 
and to determine the extent to which an asset-based welfare policy may 
be used to enable individuals with low income to achieve economic self-
                              sufficiency.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 6, 1993

Mr. Hall of Ohio (for himself and Mr. Emerson) introduced the following 
 bill; which was referred jointly to the Committees on Ways and Means 
                        and Education and Labor

_______________________________________________________________________

                                 A BILL

 
To provide for the establishment of demonstration projects designed to 
determine the social, psychological, and economic effects of providing 
to individuals with limited means an opportunity to accumulate assets, 
and to determine the extent to which an asset-based welfare policy may 
be used to enable individuals with low income to achieve economic self-
                              sufficiency.

    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 ``Individual Development Account 
Demonstration Act''.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) traditional welfare programs in the United States have 
        provided millions of low-income persons with critically needed 
        food, health, and cash benefits, and such programs should be 
        improved and continued;
            (2) while such programs have sustained millions of low-
        income persons, too rarely have such programs been successful 
        in promoting and supporting the transition to economic self-
        sufficiency;
            (3) millions of Americans continue to live in poverty and 
        continue to receive public assistance;
            (4) in addition to the social costs of poverty, the 
        economic costs to the Federal Government to provide basic 
        necessities to the poor exceeds $120,000,000,000 each year;
            (5) poverty is a loss of human resources and an assault on 
        human dignity;
            (6) poverty rates remain high and welfare dependency 
        continues, in part, because welfare theory has taken for 
        granted that a certain level of income or consumption is 
        necessary for one's economic well-being when, in fact, very few 
        people manage to spend or consume their way out of poverty;
            (7) economic well-being does not come primarily through 
        income, spending, and consumption, but is instead achieved 
        through savings, investment, and accumulation of assets, since 
        assets can improve economic stability, connect people with a 
        viable and hopeful future, stimulate development of human and 
        other capital, enable people to focus and specialize, yield 
        personal, social, and political dividends, and enhance the 
        welfare of offspring;
            (8) income-based welfare policy should be complemented with 
        asset-based welfare policy, because while income-based policies 
        ensure that present consumption needs (such as food, child 
        care, rent, clothing, and health care) are met, asset-based 
        policies can provide the means to achieve economic self-
        sufficiency and, accordingly, to leave public assistance;
            (9) the Federal Government spends more than 
        $100,000,000,000 each year to provide middle- and upper-income 
        persons with many incentives to accumulate savings and assets 
        (especially tax subsidies for home equity accumulation and 
        retirement pension accounts), but such benefits are beyond the 
        reach of most low-income persons;
            (10) under current welfare policies, poor families must 
        deplete most of their assets before qualifying for public 
        assistance;
            (11) the Federal Government should develop policies that 
        promote higher rates of personal savings and net private 
        domestic investment, both of which fall behind the levels 
        attained in other highly developed industrial nations; and
            (12) the Federal Government should undertake an asset-based 
        welfare policy demonstration project to determine the social, 
        psychological, and economic effects of asset accumulation 
        opportunities for low-income persons and to determine if such a 
        policy could provide a new foundation for anti-poverty policies 
        and programs in the United States.

SEC. 3. INDIVIDUAL DEVELOPMENT ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 220 as 
section 221 and by inserting after section 219 the following new 
section:

``SEC. 220. INDIVIDUAL DEVELOPMENT ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an eligible individual, 
there shall be allowed as a deduction the sum of amounts paid in cash 
(other than assistance provided under section 4(g) of the Individual 
Development Account Demonstration Act) during the taxable year by or on 
behalf of such individual to an individual development account 
established for the purpose of accumulating funds to pay the qualified 
expenses of such individual.
    ``(b) Limitations.--
            ``(1) Account may not be established for benefit of more 
        than 1 individual.--An individual development account may not 
        be established for the benefit of more than 1 individual.
            ``(2) Eligible individual treated as eligible individual 
        only with respect to 1 account.--If, at any time during a 
        calendar year, 2 or more individual development accounts are 
        maintained for the benefit of an eligible individual, such 
        individual shall be treated as an eligible individual for the 
        calendar year only with respect to the 1st of such accounts.
            ``(3) Maximum deduction per account.--The amount allowable 
        as a deduction under subsection (a) to an eligible individual 
        for amounts paid to an individual development account for any 
        taxable year shall not exceed $2,000.
            ``(4) Adjustment of dollar amount limitations for 
        inflation.--
                    ``(A) In general.--If this paragraph applies to any 
                calendar year, then each applicable dollar amount for 
                any taxable year beginning in the adjustment period for 
                such calendar year shall be equal to the sum of--
                            ``(i) such applicable dollar amount for 
                        taxable years beginning in such calendar year, 
                        plus
                            ``(ii) $500.
                    ``(B) Years to which applicable.--This paragraph 
                shall apply to any calendar year if the excess (if any) 
                of--
                            ``(i) $2,000, increased by the cost-of-
                        living adjustment for such calendar year, over
                            ``(ii) the applicable dollar amount in 
                        effect for such calendar year,
                is equal to or greater than $500.
                    ``(C) Cost-of-living adjustment.--For purposes of 
                this paragraph--
                            ``(i) In general.--The cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which--
                                    ``(I) the CPI for such calendar 
                                year, exceeds
                                    ``(II) the CPI for 1991.
                            ``(ii) CPI for any calendar year.--The CPI 
                        for any calendar year shall be determined in 
                        the same manner as under section 1(f)(4).
                    ``(D) Applicable dollar amount.--For purposes of 
                this paragraph, the term `applicable dollar amount' 
                means the dollar amount in effect under paragraph (3) 
                and subsection (c)(3)(A).
                    ``(E) Adjustment period.--For purposes of this 
                paragraph, the term `adjustment period' means, with 
                respect to any calendar year to which this subsection 
                applies, the period--
                            ``(i) beginning on the 1st day of the 
                        calendar year following such calendar year, and
                            ``(ii) ending on the last day of the next 
                        calendar year to which this paragraph applies.
            ``(5) Denial of deduction for amounts transferred from 
        another ida.--No deduction shall be allowed under this section 
        with respect to any amount paid into an individual development 
        account pursuant to subsection (c)(1)(E).
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified expenses.--The term `qualified expenses' 
        means 1 or more of the following, as provided by the 
        organization providing assistance to the individual under 
        section 4(g) of the Individual Development Account 
        Demonstration Act:
                    ``(A) Post-secondary education expenses.--Post-
                secondary educational expenses paid from an individual 
                development account directly to an eligible educational 
                institution. For purposes of this subparagraph--
                            ``(i) In general.--The term `post-secondary 
                        educational expenses' means--
                                    ``(I) tuition and fees required for 
                                the enrollment or attendance of a 
                                student at an eligible educational 
                                institution,
                                    ``(II) fees, books, supplies, and 
                                equipment required for courses of 
                                instruction at an eligible educational 
                                institution, and
                                    ``(III) a reasonable allowance for 
                                meals, lodging, transportation, and 
                                child care, while attending an eligible 
                                educational institution.
                            ``(ii) Eligible educational institution.--
                        The term `eligible educational institution' 
                        means the following:
                                    ``(I) Institution of higher 
                                education.--An institution described in 
                                section 481(a)(1) or 1201(a) of the 
                                Higher Education Act of 1965 (20 U.S.C. 
                                1088(a)(1) or 1141(a)), as such 
                                sections are in effect on the date of 
                                the enactment of this section.
                                    ``(II) Postsecondary vocational 
                                education school.--An area vocational 
                                education school (as defined in 
                                subparagraph (C) or (D) of section 
                                521(4) of the Carl D. Perkins 
                                Vocational and Applied Technology 
                                Education Act (20 U.S.C. 2471(4))) 
                                which is in any State (as defined in 
                                section 521(33) of such Act), as such 
                                sections are in effect on the date of 
                                the enactment of this section.
                    ``(B) First-home purchase.--Qualified acquisition 
                costs with respect to a qualified principal residence 
                for a qualified first-time homebuyer, if paid from an 
                individual development account directly to the persons 
                to whom the amounts are due. For purposes of this 
                subparagraph--
                            ``(i) Qualified acquisition costs.--The 
                        term `qualified acquisition costs' means the 
                        costs of acquiring, constructing, or 
                        reconstructing a residence. The term includes 
                        any usual or reasonable settlement, financing, 
                        or other closing costs.
                            ``(ii) Qualified principal residence.--The 
                        term `qualified principal residence' means a 
                        principal residence (within the meaning of 
                        section 1034), the qualified acquisition costs 
                        of which do not exceed 110 percent of the 
                        average area purchase price applicable to such 
                        residence (determined in accordance with 
                        paragraphs (2) and (3) of section 143(e)).
                            ``(iii) Qualified first-time homebuyer.--
                                    ``(I) In general.--The term 
                                `qualified first-time homebuyer' means 
                                a taxpayer (and, if married, the 
                                taxpayer's spouse) who has no present 
                                ownership interest in a principal 
                                residence during the 3-year period 
                                ending on the date of acquisition of 
                                the principal residence to which this 
                                subparagraph applies.
                                    ``(II) Date of acquisition.--The 
                                term `date of acquisition' means the 
                                date on which a binding contract to 
                                acquire, construct, or reconstruct the 
                                principal residence to which this 
                                subparagraph applies is entered into.
                    ``(C) Business capitalization.--Amounts paid from 
                an individual development account directly to a 
                business capitalization account which is established in 
                a federally insured financial institution and is 
                restricted to use solely for business capitalization 
                expenses. For purposes of this subparagraph--
                            ``(i) Qualified business capitalization 
                        expenses.--The term `qualified business 
                        capitalization expenses' means qualified 
                        expenses for the capitalization of a qualified 
                        business pursuant to a qualified plan.
                            ``(ii) Qualified expenses.--The term 
                        `qualified expenses' means expenses included in 
                        a qualified plan, including capital plant, 
                        equipment, working capital, and inventory 
                        expenses.
                            ``(iii) Qualified business.--The term 
                        `qualified business' means any business that 
                        does not contravene any law or public policy 
                        (as determined by the Secretary).
                            ``(iv) Qualified plan.--The term `qualified 
                        plan' means a business plan which--
                                    ``(I) is approved by a financial 
                                institution, or by a nonprofit loan 
                                fund having demonstrated fiduciary 
                                integrity,
                                    ``(II) includes a description of 
                                services or goods to be sold, a 
                                marketing plan, and projected financial 
                                statements, and
                                    ``(III) may require the eligible 
                                individual to obtain the assistance of 
                                an experienced entreprenurial advisor.
                    ``(D) Retirement expenses.--Expenses for which 
                amounts may be distributed from an individual 
                retirement plan, subject to the same requirements and 
                limitations as apply to such amounts.
                    ``(E) Transfers to ida's of family members.--
                Amounts paid from an individual development account 
                directly into another such account established for the 
                benefit of an eligible individual who is--
                            ``(i) the taxpayers spouse, or
                            ``(ii) any dependent of the taxpayer with 
                        respect to whom the taxpayer is allowed a 
                        deduction under section 151.
            ``(2) Eligible individual.--The term `eligible individual' 
        means an individual for whom assistance is (or at any prior 
        time was) provided under section 4(g) of the Individual 
        Development Account Demonstration Act.
            ``(3) Individual development account.--The term `individual 
        development account' means a trust created or organized in the 
        United States exclusively for the purpose of paying the 
        qualified expenses of an eligible individual, but only if the 
        written governing instrument creating the trust meets the 
        following requirements:
                    ``(A) No contribution will be accepted unless it is 
                in cash.
                    ``(B) The trustee is a federally insured financial 
                institution.
                    ``(C) The assets of the account will be invested in 
                accordance with the direction of the eligible 
                individual, within the guidelines established pursuant 
                to section 4(j)(1)(A)(ii) of the Individual Development 
                Account Demonstration Act.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(E) Except as provided in subparagraph (F), any 
                amount in the account which is attributable to 
                assistance provided under section 4(g) of the 
                Individual Development Account Demonstration Act may be 
                paid or distributed out of the account only for the 
                purpose of paying the qualified expenses of the 
                eligible individual.
                    ``(F) Any balance in the account on the day after 
                the date on which the individual for whose benefit the 
                trust is established dies will be distributed within 30 
                days of such date as directed by such individual to 
                another individual development account established for 
                the benefit of an eligible individual.
            ``(4) Time when contributions deemed made.--A taxpayer 
        shall be deemed to have made a contribution on the last day of 
        the preceding taxable year if the contribution is made on 
        account of such taxable year and is made not later than the 
        time prescribed by law for filing the return for such taxable 
        year (including extensions thereof).
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount paid or distributed out of an individual 
        development account shall be included in gross income of the 
        payee or distributee for the taxable year in which the payment 
        or distribution is received to the extent such amount is not 
        the return of a contribution for which no deduction was allowed 
        under subsection (a).
            ``(2) Distribution used to pay qualified expenses.--
        Paragraph (1) shall not apply to any payment or distribution 
        out of an individual development account to the extent such 
        payment or distribution is used exclusively to pay the 
        qualified expenses incurred by the eligible individual for 
        whose benefit the account is established.
    ``(e) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--An individual development 
        account is exempt from taxation under this subtitle unless such 
        account has ceased to be an individual development account by 
        reason of paragraph (2). Notwithstanding the preceding 
        sentence, any such account is subject to the taxes imposed by 
        section 511 (relating to imposition of tax on unrelated 
        business income of charitable, etc. organizations).
            ``(2) Loss of exemption of account where individual engages 
        in prohibited transaction.--
                    ``(A) In general.--If the individual for whose 
                benefit an individual development account is 
                established or any individual who contributes to such 
                account engages in any transaction prohibited by 
                section 4975 with respect to the account, the account 
                shall cease to be an individual development account as 
                of the 1st day of the taxable year (of the individual 
                so engaging in such transaction) during which such 
                transaction occurs.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                an individual development account by reason of 
                subparagraph (A) as of the 1st day of any taxable 
                year--
                            ``(i) all assets in the account on such 1st 
                        day which are attributable to assistance 
                        provided under section 4(g) of the Individual 
                        Development Account Demonstration Act shall be 
                        paid into the general fund of the Treasury of 
                        the United States, and
                            ``(ii) paragraph (1) of subsection (d) 
                        shall apply as if there was a distribution on 
                        such 1st day in an amount equal to the fair 
                        market value of all other assets in the account 
                        on such 1st day.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit an 
        individual development account is established, or any 
        individual who contributes to such account, uses the account or 
        any portion thereof as security for a loan--
                    ``(A) an amount equal to the part of the portion so 
                used which is attributable to assistance provided under 
                section 4(g) of the Individual Development Account 
                Demonstration Act shall be paid into the general fund 
                of the Treasury of the United States, and
                    ``(B) the remaining part of the portion so used 
                shall be treated as distributed to the individual so 
                using such portion.
    ``(f) Additional Tax on Certain Amounts Included in Gross Income.--
            ``(1) Distribution not used for qualified expenses.--In the 
        case of any payment or distribution to which subsection (d)(1) 
        applies, the tax liability of each payee or distributee under 
        this chapter for the taxable year in which the payment or 
        distribution is received shall be increased by an amount equal 
        to 10 percent of the amount of the distribution which is 
        includible in the gross income of such payee or distributee for 
        such taxable year.
            ``(2) Disqualification cases.--If an amount is includible 
        in the gross income of an individual for a taxable year because 
        such amount is required to be treated as a distribution under 
        paragraph (2) or (3) of subsection (e), such individual's tax 
        liability under this chapter for such taxable year shall be 
        increased by an amount equal to 10 percent of such amount 
        required to be treated as a distribution and included in such 
        individual's gross income.
            ``(3) Disability or death cases.--Paragraphs (1) and (2) 
        shall not apply if the payment or distribution is made after 
        the individual for whose benefit the individual development 
        account becomes disabled within the meaning of section 72(m)(7) 
        or dies.
    ``(g) Community Property Laws.--This section shall be applied 
without regard to any community property laws.
    ``(h) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if the assets of such 
account are held by a bank (as defined in section 408(n)) or another 
person who demonstrates, to the satisfaction of the Secretary, that the 
manner in which he will administer the account will be consistent with 
the requirements of this section, and if the custodial account would, 
except for the fact that it is not a trust, constitute an individual 
development account described in subsection (c)(2). For purposes of 
this title, in the case of a custodial account treated as a trust by 
reason of the preceding sentence, the custodian of such account shall 
be treated as the trustee thereof.
    ``(i) Reports.--The trustee of an individual development account 
shall--
            ``(1) prepare reports regarding the account with respect to 
        contributions, distributions, and any other matter required by 
        the Secretary under regulations, and
            ``(2) submit such reports, at the time and in the manner 
        prescribed by the Secretary in regulations, to--
                    ``(A) the individual for whose benefit the account 
                is maintained,
                    ``(B) the organization providing assistance to the 
                individual under section 4(g) of the Individual 
                Development Account Demonstration Act, and
                    ``(C) the Secretary.''
    (b) Deduction Allowed in Arriving at Adjusted Gross Income.--
Paragraph (7) of section 62(a) of such Code (relating to retirement 
savings) is amended--
            (1) by inserting ``or individual development'' after 
        ``Retirement'' in the heading of such paragraph, and
            (2) by inserting before the period at the end the 
        following: ``and the deduction allowed by section 220 (relating 
        to individual development accounts)''.
    (c) Contribution Not Subject to Gift Tax.--Section 2503 of such 
Code (relating to taxable gifts) is amended by adding at the end the 
following new subsection:
    ``(h) Individual Development Accounts.--Any contribution made by an 
individual to an individual development account described in section 
220(c)(3) which is allowable as a deduction under section 220 shall not 
be treated as a transfer of property by gift for purposes of this 
chapter.''
    (d) Tax on Prohibited Transactions.--Section 4975 of such Code 
(relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for individual development accounts.--An 
        individual for whose benefit an individual development account 
        is established and any contributor to such account shall be 
        exempt from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be an individual development 
        account by reason of the application of section 220(e)(2)(A) to 
        such account.'', and
            (2) by inserting ``, an individual development account 
        described in section 220(c)(3),'' in subsection (e)(1) after 
        ``described in section 408(a)''.
    (e) Failure To Provide Reports on Individual Development 
Accounts.--Section 6693 of such Code (relating to failure to provide 
reports on individual retirement accounts or annuities) is amended--
            (1) by inserting ``or on individual development accounts'' 
        after ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following 
        new sentence: ``The person required by section 220(i) to file a 
        report regarding an individual development account at the time 
        and in the manner required by such section shall pay a penalty 
        of $50 for each failure, unless it is shown that such failure 
        is due to reasonable cause.''
    (f) Special Rule for Determining Amounts of Support for 
Dependent.--Subsection (b) of section 152 of such Code (relating to 
definition of dependent) is amended by adding at the end the following 
new paragraph:
            ``(6) A distribution from an individual development account 
        described in section 220(c)(3) to the individual for whose 
        benefit such account has been established shall not be taken 
        into account in determining support for purposes of this 
        section to the extent such distribution is excluded from gross 
        income of such individual under section 220(d)(2).''
    (g) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 220 and inserting the following new items:

                              ``Sec. 220. Individual development 
                                        accounts.
                              ``Sec. 221. Cross references.''
            (2) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by striking the item relating to section 
        6693 and inserting the following new item:

                              ``Sec. 6693. Failure to provide reports 
                                        on individual retirement 
                                        accounts or annuities or on 
                                        individual development 
                                        accounts.''
    (h) Effective Date.--The amendments made by this section shall 
apply to contributions made after June 30, 1992.

SEC. 4. INDIVIDUAL DEVELOPMENT ACCOUNT DEMONSTRATION PROJECTS.

    (a) Purpose.--The purpose of this section is to provide for the 
establishment of demonstration projects designed to determine--
            (1) the social, psychological, and economic effects of 
        providing to individuals with limited means an opportunity to 
        accumulate assets; and
            (2) the extent to which an asset-based welfare policy may 
        be used to enable individuals with low income to achieve 
        economic self-sufficiency.
    (b) Applications.--
            (1) Submission.--Not later than April 1, 1992, any 
        organization may submit to the Secretary of the Treasury (in 
        this section referred to as the ``Secretary'') an application 
        to conduct a demonstration project under this section.
            (2) Contents.--The application shall contain--
                    (A) a description of the demonstration project;
                    (B) information about the ability of the 
                organization to--
                            (i) assist project participants in 
                        achieving economic self-sufficiency through the 
                        project; and
                            (ii) administer the project;
                    (C) a commitment made to the organization by the 
                State in which the project is to be conducted that the 
                State will provide a specified amount of funds to the 
                organization for the project, and any similar 
                commitment made to the organization by any other non-
                Federal public entity or by any private entity; and
                    (D) a plan to provide the organization evaluating 
                the project with such information with respect to the 
                project as may be required for the evaluation.
            (3) Criteria.--In considering whether or not to approve any 
        application to conduct a demonstration project under this 
        section, the Secretary shall assess the following:
                    (A) Sufficiency of project.--The degree to which 
                the project described in the application appears likely 
                to aid project participants in achieving economic self-
                sufficiency through activities requiring qualified 
                expenses (as defined in section 220(c)(1) of the 
                Internal Revenue Code of 1986). In making such 
                assessment, the Secretary shall consider the overall 
                quality of project activities and shall not consider 
                aid in making any particular kind or combination of 
                qualified expenses (as so defined) to be an essential 
                feature of any project.
                    (B) Administrative ability.--The ability of the 
                applicant to responsibly administer the project.
                    (C) Commitment of non-federal funds.--The aggregate 
                amount of funds from non-Federal sources that are 
                committed to the project.
                    (D) Adequacy of plan for providing information for 
                evaluation.--The adequacy of the plan for providing 
                information relevant to an evaluation of the project.
            (4) Approval.--Not later than June 1, 1994, the Secretary 
        shall, on a competitive basis, approve such applications to 
        conduct demonstration projects under this section as the 
        Secretary deems appropriate, taking into account the assessment 
        required by paragraph (3).
    (c) Demonstration Authority; Annual Grants.--
            (1) Demonstration authority.--If the Secretary approves an 
        application to conduct a demonstration project under this 
        section, the Secretary shall, not later than July 1, 1994, 
        authorize the applicant to conduct the project for 5 project 
        years in accordance with the approved application therefor and 
        this section.
            (2) Grant authority.--For each project year of a 
        demonstration project conducted under this section, the 
        Secretary shall make a grant to the organization authorized to 
        conduct the project, on the first day of the project year.
            (3) Limitations on grant amounts.--
                    (A) Maximum.--The amount of each grant under 
                paragraph (2) shall be not more than $20,000,000.
                    (B) First year grant level assured.--The amount of 
                each grant to an organization under paragraph (2) after 
                the first such grant shall be not less than the amount 
                of such first grant.
                    (C) Grants reduced, if necessary, in proportion to 
                any reductions in appropriations after first year.--If 
                the amount appropriated to carry out this section for 
                any particular fiscal year after fiscal year 1994 is 
                less than the amount so appropriated for fiscal year 
                1994, then the limitations of subparagraphs (A) and (B) 
                shall each be reduced for the particular fiscal year in 
                equal proportion to the reduction of such 
                appropriations, but only to the extent that the 
                reduction of such limitations is made necessary by the 
                reduction in such appropriations.
    (d) Reserve Fund.--
            (1) Establishment.--Each organization authorized to conduct 
        a demonstration project under this section shall establish a 
        Reserve Fund which shall be used in accordance with this 
        subsection.
            (2) Amounts in reserve fund.--
                    (A) In general.--As soon after receipt as is 
                practicable, the organization shall place in the 
                Reserve Fund established under paragraph (1)--
                            (i) all funds provided to the organization 
                        by any public or private entity to conduct the 
                        demonstration project;
                            (ii) the proceeds of any investment made 
                        under paragraph (3)(B).
                    (B) Individual development account penalties.--
                            (i) Penalty amounts authorized to be 
                        appropriated for payment to the reserve fund.--
                        For payment to the Reserve Fund established by 
                        an organization that provides financial 
                        assistance under subsection (g) of this section 
                        to any individual who pays, or from whose 
                        individual development account is paid, a 
                        penalty amount, there is authorized to be 
                        appropriated to the Secretary, without fiscal 
                        year limitation, an amount equal to the penalty 
                        amount.
                            (ii) Payment to reserve fund of penalty 
                        amounts appropriated therefor.--The Secretary 
                        shall immediately pay to the Reserve Fund any 
                        amount appropriated pursuant to clause (i) for 
                        payment to the Reserve Fund.
                    (C) Uniform accounting regulations.--The Secretary 
                shall prescribe regulations with respect to accounting 
                for amounts in Reserve Funds.
            (3) Use of reserve fund.--
                    (A) In general.--The organization shall use the 
                amounts in the Reserve Fund established under paragraph 
                (1) to--
                            (i) assist participants in the 
                        demonstration project in obtaining the skills 
                        and information necessary to achieve economic 
                        self-sufficiency through activities requiring 
                        qualified expenses (as defined in section 
                        220(c)(1) of the Internal Revenue Code of 
                        1986);
                            (ii) provide financial assistance in 
                        accordance with subsection (g) to individuals 
                        selected by the organization to participate in 
                        the project;
                            (iii) administer the project; and
                            (iv) provide the organization evaluating 
                        the project under a contract entered into under 
                        subsection (m) with such information with 
                        respect to the project as may be required for 
                        the evaluation.
                    (B) Authority to invest funds.--The organization 
                shall invest such amounts in the Reserve Fund as are 
                not immediately needed to carry out subparagraph (A) of 
                this paragraph, in accordance with guidelines which 
                shall--
                            (i) be developed by the panel established 
                        pursuant to subsection (k); and
                            (ii) require such investments to be highly 
                        liquid and of low risk.
                    (C) Limitation on administrative expenses.--Not 
                more than 10 percent of the amounts provided to the 
                organization under subsection (c)(2) may be used to 
                administer, or notify the public about, the 
                demonstration project, without the approval of the 
                panel established pursuant to subsection (k).
            (4) Unused federal grant funds transferred to the secretary 
        when project terminates.--Notwithstanding paragraph (3), upon 
        the termination of any demonstration project authorized under 
        this section, the organization conducting the project shall 
        transfer to the Secretary an amount equal to--
                    (A) the amounts in the Reserve Fund at time of the 
                termination; multiplied by
                    (B) a percentage equal to--
                            (i) the aggregate amount of grants made to 
                        the organization under subsection (c)(2); 
                        divided by
                            (ii) the aggregate of the amounts provided 
                        to the organization by all entities to conduct 
                        the project.
    (e) Eligibility for Assistance.--Any individual who is a member of 
a household that meets the following requirements shall be eligible for 
assistance under a demonstration project conducted under this section:
            (1) Income test.--The income of the household for the 
        immediately preceding calendar year is not more than 200 
        percent of the poverty threshold for such period.
            (2) Net worth test.--The net worth of the household, as of 
        the close of such immediately preceding calendar year, is not 
        more than $20,000.
    (f) Selection of Individuals to Receive Assistance.--From among the 
individuals eligible for assistance under a demonstration project 
conducted under this section, the organization authorized to conduct 
the project shall select the individuals--
            (1) whom the organization deems to be best suited to 
        receive such assistance; and
            (2) to whom the organization will provide financial 
        assistance in accordance with subsection (g).
    (g) Provision of Financial Assistance.--Each organization to which 
a grant is made under subsection (c)(2) of this section for a project 
year shall, during the project year, deposit directly into the 
individual development account of any individual selected by the 
organization under subsection (f) of this section an amount determined 
in accordance with the following table:

      

----------------------------------------------------------------------------------------------------------------
                                                                    The amount is not to exceed the lesser of:  
                                                                 -----------------------------------------------
       If the income of the individual for the applicable period   The following percentage               The   
         is the following percentage of the poverty threshold:     of the qualified savings            following
                                                                  of the individual for the     OR       dollar 
                                                                           period:                      amount: 
----------------------------------------------------------------------------------------------------------------
      Not more than 50 percent..................................                        900  or......    $1,800
      More than 50 percent but not more than 85 percent.........                        500  or......    $1,650
      More than 85 percent but not more than 125 percent........                        200  or......    $1,400
      More than 125 percent but not more than 160 percent.......                         50  or......      $700
      More than 160 percent but not more than 200 percent.......                         20  or......      $350.
----------------------------------------------------------------------------------------------------------------

    (h) Local Control Over Demonstration Projects.--Each organization 
authorized to conduct a demonstration project under this section shall, 
subject to subsections (j) and (l), have sole authority over the 
administration of the project. The Secretary may prescribe only such 
regulations with respect to demonstration projects under this section 
as are necessary to ensure compliance with the approved applications 
therefor and this section.
    (i) Semiannual Progress Reports.--
            (1) In general.--Each organization authorized to conduct a 
        demonstration project under this section shall prepare 10 
        semiannual reports on the progress of the project, including--
                    (A) information on participation of individuals in 
                the project;
                    (B) information on amounts in the Reserve Fund 
                established with respect to the project;
                    (C) information on amounts in the individual 
                development accounts of the individuals to whom 
                assistance is provided under the project; and
                    (D) such other information as the panel established 
                pursuant to subsection (k) may require to assess the 
                project.
            (2) Submission of reports.--The organization shall submit 
        each report required to be prepared under paragraph (1) with 
        respect to a demonstration project to--
                    (A) the panel established pursuant to subsection 
                (k);
                    (B) the Secretary; and
                    (C) the Treasurer (or equivalent official) of the 
                State in which the project is conducted.
            (3) Timing.--The first report required by paragraph (1) 
        shall be submitted at the end of the 6-month period beginning 
        on the date the Secretary authorized the organization to 
        conduct the demonstration project, and subsequent reports shall 
        be submitted 6 months apart.
    (j) Oversight.--
            (1) Establishment of panel.--The Secretary shall establish 
        a panel pursuant to subsection (k) of this section to--
                    (A) develop guidelines governing the investment 
                of--
                            (i) funds in the Reserve Funds established 
                        under subsection (d) of this section; and
                            (ii) funds in individual development 
                        accounts established under section 220 of the 
                        Internal Revenue Code of 1986;
                    (B) monitor the progress of the projects;
                    (C) make recommendations with respect to projects 
                that do not progress adequately or are not conducted in 
                substantial compliance with the approved application 
                therefor and this section; and
                    (D) determine the percentage of the amounts 
                appropriated to carry out this section that are to be 
                used for evaluations under subsection (m) of this 
                section, subject to the requirement that such 
                percentage shall be not less than 3 percent nor more 
                than 8 percent.
            (2) Recommendations by panel.--The panel shall make 
        recommendations to any organization conducting a demonstration 
        project under this section on measures to be taken to ensure 
        that the project progresses adequately and is conducted in 
        substantial compliance with the approved application therefor 
        and this section. The panel shall transmit copies of such 
        recommendations to the Secretary and the Treasurer (or 
        equivalent official) of the State in which the project is 
        conducted.
            (3) Panel to review implementation of recommendations.--
        After a reasonable time has elapsed since the organization 
        conducting a demonstration project under this section has been 
        provided recommendations made by the panel, the panel shall--
                    (A) determine whether or not the organization has 
                implemented the recommendations; and
                    (B) if the panel finds that the organization has 
                failed to implement the recommendations, immediately 
                notify the Secretary of such failure.
    (k) Oversight Panel.--
            (1) Membership.--
                    (A) In general.--
                            (i) 8 federal members.--The Secretary shall 
                        appoint to the panel 8 members who shall be 
                        officers or employees of the Federal 
                        Government. Such members may vote on any matter 
                        before the panel.
                            (ii) 2 rotating state members.--The 
                        Secretary, in consultation with the Treasurer 
                        (or equivalent official) of each State in which 
                        a demonstration project is conducted under this 
                        section, shall appoint to the panel 2 members 
                        from each such State who are representatives of 
                        the government of the State. The members 
                        appointed under this clause from a State may 
                        vote only on the matters before the panel 
                        relating to demonstration projects conducted 
                        under this section in the State.
                            (iii) 5 private members.--The Secretary 
                        shall appoint to the panel 5 members who shall 
                        be business leaders and welfare and social 
                        policy innovators. Such members may vote on any 
                        matter before the panel.
                    (B) Qualifications.--Each member of the panel shall 
                be qualified to review the conduct of demonstration 
                projects conducted under this section by virtue of the 
                education, training, or experience of the member.
                    (C) Political affiliation.--Not more than 50 
                percent of the members of the panel may be of the same 
                political party.
            (2) Terms.--
                    (A) General rule.--Except as provided in 
                subparagraph (B), each member of the panel shall be 
                appointed for the life of the panel.
                    (B) Special rule.--Any individual who is appointed 
                to the panel because of the status of the individual as 
                an officer or employee of a government or because of 
                the status of the individual as not an officer or 
                employee of any government, and whose status changes, 
                may not continue as a member of the panel.
                    (C) Vacancies.--A vacancy in the panel shall be 
                filled in the manner in which the original appointment 
                was made.
            (3) Compensation.--
                    (A) Basic pay.--
                            (i) General rule.--Except as provided in 
                        clause (ii), each member of the panel shall be 
                        entitled to receive not more than the daily 
                        equivalent of the maximum annual rate of basic 
                        pay payable for grade GS-18 of the General 
                        Schedule for each day (including travel time) 
                        during which the member is engaged in the 
                        actual performance of duties of the panel.
                            (ii) Prohibition against compensation of 
                        federal officers or employees.--Members of the 
                        panel who are full-time officers or employees 
                        of the United States may not receive additional 
                        pay, allowances, or benefits by reason of their 
                        service on the panel.
                    (B) Travel expenses.--Each member of the panel 
                shall receive travel expenses, including per diem in 
                lieu of subsistence, in accordance with sections 5702 
                and 5703 of title 5, United States Code.
            (4) Procedure.--
                    (A) Quorum.--51 percent of the members of the panel 
                who may vote on a matter shall constitute a quorum with 
                respect to the matter but a lesser number may hold 
                hearings.
                    (B) Chairperson.--The Chairperson of the panel 
                shall be elected by the members of the panel appointed 
                under paragraph (1)(A)(i).
                    (C) Meetings.--
                            (i) How called.--The panel shall meet on a 
                        matter relating to a demonstration project 
                        conducted under this section in a State, at the 
                        call of the Chairperson or of a majority of the 
                        members of the panel who may vote on the 
                        matter.
                            (ii) Frequency.--
                                    (I) General oversight.--The panel 
                                shall meet not less frequently than 
                                twice yearly with respect to the 
                                monitoring of the progress of 
                                demonstration projects conducted under 
                                this section.
                                    (II) Review of problem projects.--
                                The panel shall meet as necessary with 
                                respect to projects that do not 
                                progress adequately or are not 
                                conducted in substantial compliance 
                                with the approved application therefor 
                                and this section.
            (5) Powers.--
                    (A) Hearings and sessions.--The panel may, for the 
                purpose of carrying out this subsection, hold hearings, 
                sit and act at times and places, take testimony, and 
                receive evidence as the panel considers appropriate. 
                The panel may administer oaths or affirmations to 
                witnesses appearing before it.
                    (B) Powers of members and agents.--Any member or 
                agent of the panel who is not an officer or employee of 
                a State government may, if authorized by the panel, 
                take any action which the panel is authorized to take 
                by this section.
                    (C) Obtaining official data.--Subject to other law, 
                the panel may secure directly from any department or 
                agency of the United States information necessary to 
                enable it to carry out any duty of the panel under this 
                section. Upon request of the Chairperson of the panel, 
                the head of that department or agency shall furnish 
                that information to the panel.
                    (D) Mail.--The panel may use the United States mail 
                in the same manner and under the same conditions as 
                other departments and agencies of the United States.
            (6) Administrative support.--Upon request of the panel, the 
        Secretary may detail any of the personnel of the Department of 
        the Treasury to the panel to assist it in carrying out its 
        duties under this section.
            (7) Termination.--The panel shall terminate on a date 
        designated by the Secretary.
    (l) Sanctions.--
            (1) Authority to revoke demonstration authority.--If the 
        Secretary receives a notice under subsection (j)(3)(B) with 
        respect to a demonstration project, the Secretary may revoke 
        the original authorization to conduct the project.
            (2) Actions required upon revocation.--If the Secretary 
        revokes the original authorization to conduct a demonstration 
        project, the Secretary--
                    (A) shall suspend the project;
                    (B) shall take control of the Reserve Fund 
                established pursuant to subsection (d) as part of the 
                project;
                    (C) shall make every effort to find another 
                organization willing and able to conduct the project in 
                accordance with the approved application therefor (as 
                modified, if necessary, to incorporate the 
                recommendations) and this section;
                    (D) may obtain the assistance of the panel to find 
                such an organization;
                    (E) if the Secretary finds such an organization, 
                shall--
                            (i) authorize the organization to conduct 
                        the project in accordance with the approved 
                        application therefor (as modified, if 
                        necessary, to incorporate the recommendations) 
                        and this section;
                            (ii) transfer to the organization control 
                        over the Reserve Fund established pursuant to 
                        subsection (d) as part of the project; and
                            (iii) for purposes of this section, 
                        consider--
                                    (I) such other organization to be 
                                the organization originally authorized 
                                to conduct the project; and
                                    (II) the date of such authorization 
                                to be the date of the original 
                                authorization; and
                    (F) if, by the end of the 1-year period beginning 
                on the date of such revocation, the Secretary has not 
                found such an organization, shall--
                            (i) terminate the project; and
                            (ii) from the Reserve Fund established as 
                        part of the project, remit to each entity that 
                        has provided amounts to the organization 
                        originally authorized to conduct the project, 
                        an amount equal to that percentage of the 
                        aggregate of the amounts so provided by all 
                        entities that is represented by the amount so 
                        provided by such entity.
    (m) Evaluations.--
            (1) In general.--Not later than July 1, 1994, the panel 
        established pursuant to subsection (k) shall enter into a 
        contract with an independent research organization that 
        requires the organization, in accordance with this subsection, 
        to evaluate the demonstration projects conducted under this 
        section, individually and as a group.
            (2) Research questions.--In evaluating any demonstration 
        project conducted under this section, the research organization 
        shall address the following questions:
                    (A) What types of information and public education 
                efforts are successful in attracting project 
                participants?
                    (B) How can participation in the demonstration 
                project be made as easy and accessible as possible for 
                participants?
                    (C) What level of financial incentives is required 
                to stimulate participation in the demonstration 
                project, and does this vary among different 
                populations?
                    (D) What program features in conjunction with 
                individual development accounts (such as peer support, 
                structured planning exercises, mentoring, and case 
                management) increase the rate and consistency of 
                participation in the demonstration project?
                    (E) What are the economic, psychological, and 
                social effects of asset accumulation, and for whom? To 
                what extent, under what circumstances, and for whom 
                does asset accumulation under the demonstration project 
                lead to any or all of the following:
                            (i) A greater sense of security and 
                        control?
                            (ii) Greater stability in the household?
                            (iii) A more positive future outlook?
                            (iv) More long-term planning?
                            (v) Increased efforts to maintain and 
                        develop assets?
                            (vi) Greater knowledge about savings, 
                        investments, and other financial matters?
                            (vii) Increased effort and success in 
                        educational achievement (including those of 
                        parents working to provide for the education of 
                        their children)?
                            (viii) Increased specialization in career 
                        development?
                            (ix) Greater self-esteem and personal 
                        efficacy?
                            (x) Improved social status?
                            (xi) Increased political participation?
                            (xii) Increased community involvement?
                            (xiii) Increased labor earnings in the long 
                        term?
                            (xiv) Decreased reliance on traditional 
                        forms of public assistance in the long term?
            (3) Methodological requirements.--In evaluating any 
        demonstration project conducted under this section, the 
        research organization shall--
                    (A) use control groups to compare participants with 
                nonparticipants as much as possible;
                    (B) before, during, and after the project, obtain 
                such quantitative data as are necessary to thoroughly 
                evaluate the project; and
                    (C) develop a qualitative assessment, derived from 
                sources such as in depth interviews, of how asset 
                accumulation affects individuals and families.
            (4) Staffing requirements.--In evaluating any demonstration 
        project conducted under this section, the research organization 
        shall use skilled, professional, and independent staff.
    (n) Definitions.--As used in this section:
            (1) Applicable period.--The term ``applicable period'' 
        means, with respect to amounts to be paid from a grant made for 
        a project year, the calendar year immediately preceding the 
        calendar year in which the grant is made.
            (2) Household.--The term ``household'' means all 
        individuals who share use of a dwelling unit as primary 
        quarters for living and eating separate from other individuals.
            (3) Household net worth.--
                    (A) In general.--The term ``net worth'' means, with 
                respect to a household, the aggregate market value of 
                all assets not excluded under subparagraph (B) that are 
                owned in whole or in part by any member of the 
                household, minus the obligations or debts of any member 
                of the household.
                    (B) Assets excluded.--The following assets (and 
                obligations or debts with respect thereto) shall be 
                excluded in determining the net worth of any household:
                            (i) $35,000 of home equity.--The lesser 
                        of--
                                    (I) the equity of the members of 
                                the household in the dwelling unit in 
                                which the members reside; or
                                    (II) $35,000.
                            (ii) Motor vehicle.--The most valuable 
                        motor vehicle owned by any member of the 
                        household.
                            (iii) Furniture; appliances; clothing.--All 
                        furniture, appliances, and clothing used by any 
                        member of the household in the course of daily 
                        living.
                            (iv) Art objects.--All art objects 
                        displayed in the dwelling unit in which the 
                        members of the household reside.
                            (v) Jewelry.--All jewelry owned by any 
                        member of the household.
            (4) Individual development account.--The term ``individual 
        development account'' has the same meaning given such term in 
        section 220 of the Internal Revenue Code of 1986.
            (5) Penalty amount.--The term ``penalty amount'' means any 
        of the following:
                    (A) Financial assistance forfeited.--Any amount 
                paid into the general fund of the Treasury of the 
                United States under section 220(e) of the Internal 
                Revenue Code of 1986.
                    (B) 10 percent addition to tax.--Any additional tax 
                imposed by section 220(f) of the Internal Revenue Code 
                of 1986.
                    (C) Other penalty taxes.--Any tax imposed with 
                respect to an individual development account by section 
                4973, 4975, or 6693 of the Internal Revenue Code of 
                1986.
            (6) Poverty threshold.--The term ``poverty threshold'' 
        means, with respect to a calendar year, the Federal poverty 
        line for the calendar year for the relevant family size, as 
        defined annually by the Bureau of the Census.
            (7) Project year.--The term ``project year'' means, with 
        respect to a demonstration project, any of the 5 consecutive 
        12-month periods beginning on the date the project is 
        originally authorized to be conducted.
            (8) Qualified savings of the individual for the period.--
        The term ``qualified savings of the individual for the period'' 
        means the aggregate of the amounts contributed by the 
        individual to the individual development account of the 
        individual during the period.
    (o) Limitations on Authorization of Appropriations.--
            (1) In general.--To carry out this section, there are 
        authorized to be appropriated to the Secretary of the Treasury 
        not to exceed $100,000,000 for each of fiscal years 1994, 1995, 
        1996, 1997, and 1998.
            (2) Certain amounts to be used for evaluations.--To obtain 
        evaluations of the projects in accordance with subsection (m), 
        the Secretary shall expend an amount equal to the amounts 
        appropriated pursuant to paragraph (1) of this subsection for 
        any fiscal year, multiplied by the percentage determined by the 
        panel established pursuant to subsection (k).

SEC. 5. FUNDS IN INDIVIDUAL DEVELOPMENT ACCOUNTS OF DEMONSTRATION 
              PROJECT PARTICIPANTS DISREGARDED FOR PURPOSES OF ALL 
              MEANS-TESTED FEDERAL PROGRAMS.

    Notwithstanding any Federal law (other than the Internal Revenue 
Code of 1986) that requires consideration of 1 or more financial 
circumstances of an individual, for the purpose of determining 
eligibility to receive, or the amount of, any assistance or benefit 
authorized by such law to be provided to or for the benefit of such 
individual, funds (including interest accruing) in an individual 
development account (as defined in section 220 of the Internal Revenue 
Code of 1986) shall be disregarded for such purpose with respect to any 
period during which such individual participates in a demonstration 
project conducted under section 4 of this Act (or would be 
participating in such a project but for the suspension of the project).

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