I 

111TH CONGRESS 

1ST SESSION H. R. 99 

To amend the Internal Revenue Code of 1986 to reduce taxes by providing 

an alternative determination of income tax liability for individuals, repealing the estate and gift taxes, reducing corporate income tax rates, reducing the maximum tax for individuals on capital gains and dividends 

to 10 percent, indexing the basis of assets for purposes of determining 

capital gain or loss, creating tax-free accounts for retirement savings, 

lifetime savings, and life skills, repealing the adjusted gross income 

threshold in the medical care deduction for individuals under age 65 

who have no employer health coverage, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 6, 2009 

Mr. DREIER 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 reduce 

taxes by providing an alternative determination of income 

tax liability for individuals, repealing the estate and gift 

taxes, reducing corporate income tax rates, reducing the 

maximum tax for individuals on capital gains and dividends to 10 percent, indexing the basis of assets for 

purposes of determining capital gain or loss, creating 

tax-free accounts for retirement savings, lifetime savings, 

and life skills, repealing the adjusted gross income 

threshold in the medical care deduction for individuals 


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under age 65 who have no employer health coverage, 

and for other purposes. 

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, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Fair and Simple Tax Act of 2009’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986. 

12 (c) TABLE OF CONTENTS.— 

Sec. 1. Short title, etc. 

Sec. 2. Simplified alternative determination of income tax liability for individuals. 

Sec. 3. Repeal of estate and gift taxes. 

Sec. 4. Alternative minimum tax exemption amounts indexed for inflation. 

Sec. 5. Maximum corporate income tax rate reduced to 25 percent. 

Sec. 6. 15 percent rate on dividends and capital gains of individuals reduced 

to 10 percent. 

Sec. 7. Indexing of certain assets for purposes of determining gain or loss. 

Sec. 8. Retirement savings accounts. 

Sec. 9. Lifetime savings accounts. 

Sec. 10. Lifetime skills accounts. 

Sec. 11. Expanded deduction for medical care expenses; expansion of individuals to whom health savings accounts may be passed on death. 

Sec. 12. Research credit made permanent. 

Sec. 13. Tax provisions of prior laws made permanent. 


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1 SEC. 2. SIMPLIFIED ALTERNATIVE DETERMINATION OF IN2 COME TAX LIABILITY FOR INDIVIDUALS. 

3 (a) IN GENERAL.—Subchapter A of chapter 1 (relat4 ing to determination of tax liability) is amended by adding 

5 at the end the following new part: 

6 ‘‘PART VIII—ALTERNATIVE DETERMINATION OF 

7 TAX LIABILITY FOR INDIVIDUALS 

‘‘Sec. 59B. Alternative determination of tax liability for individuals. 

8 ‘‘SEC. 59B. ALTERNATIVE DETERMINATION OF TAX LIABIL9 ITY FOR INDIVIDUALS. 

10 ‘‘(a) IN GENERAL.—In the case of an individual, the 

11 net income tax of the taxpayer shall be the tax determined 

12 under this section. 

13 ‘‘(b) DETERMINATION OF TAX.—The tax determined 

14 under this section is the amount equal to— 

15 ‘‘(1) the sum of— 

16 ‘‘(A) 10 percent of so much of simplified 

17 taxable income as does not exceed $40,000, 

18 ‘‘(B) 15 percent of so much of simplified 

19 taxable income as exceeds $40,000 but does not 

20 exceed $150,000, and 

21 ‘‘(C) 30 percent of so much of simplified 

22 taxable income as exceeds $150,000, reduced by 

23 ‘‘(2) the sum of the credits allowed by— 

24 ‘‘(A) section 31 (relating to tax withheld 

25 on wages), and 


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1 ‘‘(B) section 24 (relating to child tax cred2 it). 

3 ‘‘(c) SIMPLIFIED TAXABLE INCOME.—For purposes 

4 of this section, the term ‘simplified taxable income’ means 

5 the amount equal to— 

6 ‘‘(1) gross income, minus 

7 ‘‘(2) the sum of— 

8 ‘‘(A) the deduction for personal exemptions 

9 allowed by section 151, 

10 ‘‘(B) the deduction allowed by section 163 

11 for acquisition indebtedness (as defined in sec12 tion 163(h)(2)(B)) with respect to the principal 

13 residence (within the meaning of section 121) 

14 of the taxpayer, 

15 ‘‘(C) the deduction allowed by section 164 

16 for State and local income taxes, 

17 ‘‘(D) the deduction allowed by section 170 

18 (relating to charitable, etc., contributions and 

19 gifts), and 

20 ‘‘(E) the deduction allowed by section 213 

21 (relating to medical, dental, etc., expenses) to 

22 the extent such deduction is determined under 

23 section 213(a)(2) (relating to individuals who 

24 have not attained age 65 and are not covered 

25 under an employer health plan). 


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1 ‘‘(d) NET INCOME TAX.—For purposes of this sec2 tion, the term ‘net income tax’ means the sum of the reg3 ular tax liability and the tax imposed by section 55, re4 duced by the credits allowable under this part. 

5 ‘‘(e) ESTATE AND TRUSTS.—This section shall not 

6 apply to an estate or trust. 

7 ‘‘(f) SECTION TO BE ELECTIVE.—This section shall 

8 apply to a taxpayer for a taxable year only if elected by 

9 the taxpayer for such year. Such election, once made for 

10 a taxable year, shall be irrevocable without the consent 

11 of the Secretary.’’. 

12 (b) CLERICAL AMENDMENT.—The table of parts for 

13 such subchapter is amended by adding at the end the fol14 lowing new item: 

‘‘PART VIII. ALTERNATIVE DETERMINATION OF TAX LIABILITY FOR

INDIVIDUALS.’’. 

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2008. 

18 SEC. 3. REPEAL OF ESTATE AND GIFT TAXES. 

19 (a) IN GENERAL.—Subtitle B is hereby repealed. 

20 (b) EFFECTIVE DATE.—The repeal made by sub21 section (a) shall apply to the estates of decedents dying, 

22 and gifts and generation-skipping transfers made, after 

23 December 31, 2008. 


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1 SEC. 4. ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNTS 

2 INDEXED FOR INFLATION. 

3 (a) IN GENERAL.—Subsection (d) of section 55 (re4 lating to exemption amount) is amended by adding at the 

5 end the following new paragraph: 

6 ‘‘(4) INFLATION ADJUSTMENT.— 

7 ‘‘(A) IN GENERAL.—In the case of any 

8 taxable year beginning in a calendar year after 

9 2008, the dollar amounts contained in para10 graphs (1), (2), and (3) shall be increased by 

11 an amount equal to— 

12 ‘‘(i) such dollar amount, multiplied by 

13 ‘‘(ii) the cost-of-living adjustment de14 termined under section 1(f)(3) for the cal15 endar year in which the taxable year be16 gins, determined by substituting ‘calendar 

17 year 2006’ for ‘calendar year 1992’ in sub18 paragraph (B) thereof. 

19 ‘‘(B) ROUNDING.—Any increase deter20 mined under subparagraph (A) shall be rounded 

21 to the nearest multiple of $100.’’. 

22 (b) PRIOR INCREASE MADE PERMANENT.—Para23 graph (1) of section 55(d) is amended— 

24 (1) by striking ‘‘$45,000 ($69,950 in the case 

25 of taxable years beginning in 2007)’’ and inserting 

26 ‘‘$69,950’’, 


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1 (2) by striking ‘‘$33,750 ($46,200 in the case 

2 of taxable years beginning in 2007)’’ and inserting 

3 ‘‘$46,200’’, and 

4 (3) by striking ‘‘paragraph (1)(A)’’ and insert5 ing ‘‘subparagraph (A)’’. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2008. 

9 SEC. 5. MAXIMUM CORPORATE INCOME TAX RATE RE10 DUCED TO 25 PERCENT. 

11 (a) IN GENERAL.—Paragraph (1) of section 11(b) 

12 (relating to amount of tax on corporations) is amended 

13 to read as follows: 

14 ‘‘(1) IN GENERAL.—The amount of the tax im15 posed by subsection (a) shall be the sum of— 

16 ‘‘(A) 15 percent of so much of the taxable 

17 income as does not exceed $50,000, and 

18 ‘‘(B) 25 percent of so much of the taxable 

19 income as exceeds $50,000.’’. 

20 (b) PERSONAL SERVICE CORPORATIONS.—Para21 graph (2) of section 11(b) is amended by striking ‘‘35 per22 cent’’ and inserting ‘‘25 percent’’. 

23 (c) CONFORMING AMENDMENTS.—Paragraphs (1) 

24 and (2) of section 1445(e) are each amended by striking 

25 ‘‘35 percent’’ and inserting ‘‘25 percent’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2008; except that the amendments made 

4 by subsection (c) shall take effect on January 1, 2009. 

5 SEC. 6. 15 PERCENT RATE ON DIVIDENDS AND CAPITAL 

6 GAINS OF INDIVIDUALS REDUCED TO 10 PER7 CENT. 

8 (a) IN GENERAL.—Subparagraph (C) of section 

9 1(h)(1) (relating to maximum capital gains rate) is 

10 amended by striking ‘‘15 percent’’ and inserting ‘‘10 per11 cent’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2008. 

15 SEC. 7. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 

16 DETERMINING GAIN OR LOSS. 

17 (a) IN GENERAL.—Part II of subchapter O of chap18 ter 1 (relating to basis rules of general application) is 

19 amended by redesignating section 1023 as section 1024 

20 and by inserting after section 1022 the following new sec21 tion: 

22 ‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 

23 OF DETERMINING GAIN OR LOSS. 

24 ‘‘(a) GENERAL RULE.— 


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1 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD2 JUSTED BASIS.—Solely for purposes of determining 

3 gain or loss on the sale or other disposition by a tax4 payer (other than a corporation) of an indexed asset 

5 which has been held for more than 3 years, the in6 dexed basis of the asset shall be substituted for its 

7 adjusted basis. 

8 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.— 

9 The deductions for depreciation, depletion, and am10 ortization shall be determined without regard to the 

11 application of paragraph (1) to the taxpayer or any 

12 other person. 

13 ‘‘(b) INDEXED ASSET.— 

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, the term ‘indexed asset’ means— 

16 ‘‘(A) common stock in a C corporation 

17 (other than a foreign corporation), and 

18 ‘‘(B) tangible property, 

19 which is a capital asset or property used in the trade 

20 or business (as defined in section 1231(b)). 

21 ‘‘(2) STOCK IN CERTAIN FOREIGN CORPORA22 TIONS INCLUDED.—For purposes of this section— 

23 ‘‘(A) IN GENERAL.—The term ‘indexed 

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1 poration which is regularly traded on an estab2 lished securities market. 

3 ‘‘(B) EXCEPTION.—Subparagraph (A) 

4 shall not apply to— 

5 ‘‘(i) stock in a passive foreign invest6 ment company (as defined in section 

7 1296), and 

8 ‘‘(ii) stock in a foreign corporation 

9 held by a United States person who meets 

10 the requirements of section 1248(a)(2). 

11 ‘‘(C) TREATMENT OF AMERICAN DEPOSI12 TORY RECEIPTS.—An American depository re13 ceipt for common stock in a foreign corporation 

14 shall be treated as common stock in such cor15 poration. 

16 ‘‘(c) INDEXED BASIS.—For purposes of this sec17 tion— 

18 ‘‘(1) IN GENERAL.—The indexed basis for any 

19 asset is— 

20 ‘‘(A) the adjusted basis of the asset, in21 creased by 

22 ‘‘(B) the applicable inflation adjustment. 

23 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 

24 The applicable inflation adjustment for any asset is 

25 an amount equal to— 


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1 ‘‘(A) the adjusted basis of the asset, multi2 plied by 

3 ‘‘(B) the percentage (if any) by which— 

4 ‘‘(i) the gross domestic product 

5 deflator for the last calendar quarter end6 ing before the asset is disposed of, exceeds 

7 ‘‘(ii) the gross domestic product 

8 deflator for the last calendar quarter end9 ing before the asset was acquired by the 

10 taxpayer (or, if later, the calendar quarter 

11 ending on December 31, 2007). 

12 The percentage under subparagraph (B) shall 

be rounded to the nearest 1 13 ⁄10 of 1 percentage 

14 point. 

15 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 

16 The gross domestic product deflator for any cal17 endar quarter is the implicit price deflator for the 

18 gross domestic product for such quarter (as shown 

19 in the last revision thereof released by the Secretary 

20 of Commerce before the close of the following cal21 endar quarter). 

22 ‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI23 MINISHED RISK OF LOSS; TREATMENT OF SHORT

24 SALES.— 


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1 ‘‘(1) IN GENERAL.—If the taxpayer (or a re2 lated person) enters into any transaction which sub3 stantially reduces the risk of loss from holding any 

4 asset, such asset shall not be treated as an indexed 

5 asset for the period of such reduced risk. 

6 ‘‘(2) SHORT SALES.— 

7 ‘‘(A) IN GENERAL.—In the case of a short 

8 sale of an indexed asset with a short sale period 

9 in excess of 3 years, for purposes of this title, 

10 the amount realized shall be an amount equal 

11 to the amount realized (determined without re12 gard to this paragraph) increased by the appli13 cable inflation adjustment. In applying sub14 section (c)(2) for purposes of the preceding sen15 tence, the date on which the property is sold 

16 short shall be treated as the date of acquisition 

17 and the closing date for the sale shall be treat18 ed as the date of disposition. 

19 ‘‘(B) SHORT SALE PERIOD.—For purposes 

20 of subparagraph (A), the short sale period be21 gins on the day that the property is sold and 

22 ends on the closing date for the sale. 

23 ‘‘(e) TREATMENT OF REGULATED INVESTMENT

24 COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 

25 ‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 


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1 ‘‘(A) IN GENERAL.—Except as otherwise 

2 provided in this paragraph, the adjustment 

3 under subsection (a) shall be allowed to any 

4 qualified investment entity (including for pur5 poses of determining the earnings and profits of 

6 such entity). 

7 ‘‘(B) EXCEPTION FOR CORPORATE SHARE8 HOLDERS.—Under regulations— 

9 ‘‘(i) in the case of a distribution by a 

10 qualified investment entity (directly or in11 directly) to a corporation— 

12 ‘‘(I) the determination of whether 

13 such distribution is a dividend shall be 

14 made without regard to this section, 

15 and 

16 ‘‘(II) the amount treated as gain 

17 by reason of the receipt of any capital 

18 gain dividend shall be increased by the 

19 percentage by which the entity’s net 

20 capital gain for the taxable year (de21 termined without regard to this sec22 tion) exceeds the entity’s net capital 

23 gain for such year determined with re24 gard to this section, and 


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1 ‘‘(ii) there shall be other appropriate 

2 adjustments (including deemed distribu3 tions) so as to ensure that the benefits of 

4 this section are not allowed (directly or in5 directly) to corporate shareholders of quali6 fied investment entities. 

7 For purposes of the preceding sentence, any 

8 amount includible in gross income under section 

9 852(b)(3)(D) shall be treated as a capital gain 

10 dividend and an S corporation shall not be 

11 treated as a corporation. 

12 ‘‘(C) EXCEPTION FOR QUALIFICATION

13 PURPOSES.—This section shall not apply for 

14 purposes of sections 851(b) and 856(c). 

15 ‘‘(D) EXCEPTION FOR CERTAIN TAXES IM16 POSED AT ENTITY LEVEL.— 

17 ‘‘(i) TAX ON FAILURE TO DISTRIBUTE

18 ENTIRE GAIN.—If any amount is subject to 

19 tax under section 852(b)(3)(A) for any 

20 taxable year, the amount on which tax is 

21 imposed under such section shall be in22 creased by the percentage determined 

23 under subparagraph (B)(i)(II). A similar 

24 rule shall apply in the case of any amount 

25 subject to tax under paragraph (2) or (3) 


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1 of section 857(b) to the extent attributable 

2 to the excess of the net capital gain over 

3 the deduction for dividends paid deter4 mined with reference to capital gain divi5 dends only. The first sentence of this 

6 clause shall not apply to so much of the 

7 amount subject to tax under section 

8 852(b)(3)(A) as is designated by the com9 pany under section 852(b)(3)(D). 

10 ‘‘(ii) OTHER TAXES.—This section 

11 shall not apply for purposes of determining 

12 the amount of any tax imposed by para13 graph (4), (5), or (6) of section 857(b). 

14 ‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN

15 ENTITY.— 

16 ‘‘(A) REGULATED INVESTMENT COMPA17 NIES.—Stock in a regulated investment com18 pany (within the meaning of section 851) shall 

19 be an indexed asset for any calendar quarter in 

20 the same ratio as— 

21 ‘‘(i) the average of the fair market 

22 values of the indexed assets held by such 

23 company at the close of each month during 

24 such quarter, bears to 


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1 ‘‘(ii) the average of the fair market 

2 values of all assets held by such company 

3 at the close of each such month. 

4 ‘‘(B) REAL ESTATE INVESTMENT

5 TRUSTS.—Stock in a real estate investment 

6 trust (within the meaning of section 856) shall 

7 be an indexed asset for any calendar quarter in 

8 the same ratio as— 

9 ‘‘(i) the fair market value of the in10 dexed assets held by such trust at the close 

11 of such quarter, bears to 

12 ‘‘(ii) the fair market value of all as13 sets held by such trust at the close of such 

14 quarter. 

15 ‘‘(C) RATIO OF 80 PERCENT OR MORE.—If 

16 the ratio for any calendar quarter determined 

17 under subparagraph (A) or (B) would (but for 

18 this subparagraph) be 80 percent or more, such 

19 ratio for such quarter shall be 100 percent. 

20 ‘‘(D) RATIO OF 20 PERCENT OR LESS.—If 

21 the ratio for any calendar quarter determined 

22 under subparagraph (A) or (B) would (but for 

23 this subparagraph) be 20 percent or less, such 

24 ratio for such quarter shall be zero. 


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1 ‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For 

2 purposes of this paragraph, a qualified invest3 ment entity which holds a partnership interest 

4 shall be treated (in lieu of holding a partnership 

5 interest) as holding its proportionate share of 

6 the assets held by the partnership. 

7 ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS8 TRIBUTIONS.—Except as otherwise provided by the 

9 Secretary, a distribution with respect to stock in a 

10 qualified investment entity which is not a dividend 

11 and which results in a reduction in the adjusted 

12 basis of such stock shall be treated as allocable to 

13 stock acquired by the taxpayer in the order in which 

14 such stock was acquired. 

15 ‘‘(4) QUALIFIED INVESTMENT ENTITY.—For 

16 purposes of this subsection, the term ‘qualified in17 vestment entity’ means— 

18 ‘‘(A) a regulated investment company 

19 (within the meaning of section 851), and 

20 ‘‘(B) a real estate investment trust (within 

21 the meaning of section 856). 

22 ‘‘(f) OTHER PASS-THRU ENTITIES.— 

23 ‘‘(1) PARTNERSHIPS.— 

24 ‘‘(A) IN GENERAL.—In the case of a part25 nership, the adjustment made under subsection 


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1 (a) at the partnership level shall be passed 

2 through to the partners. 

3 ‘‘(B) SPECIAL RULE IN THE CASE OF SEC4 TION 754 ELECTIONS.—In the case of a transfer 

5 of an interest in a partnership with respect to 

6 which the election provided in section 754 is in 

7 effect— 

8 ‘‘(i) the adjustment under section 

9 743(b)(1) shall, with respect to the trans10 feror partner, be treated as a sale of the 

11 partnership assets for purposes of applying 

12 this section, and 

13 ‘‘(ii) with respect to the transferee 

14 partner, the partnership’s holding period 

15 for purposes of this section in such assets 

16 shall be treated as beginning on the date 

17 of such adjustment. 

18 ‘‘(2) S CORPORATIONS.—In the case of an S 

19 corporation, the adjustment made under subsection 

20 (a) at the corporate level shall be passed through to 

21 the shareholders. This section shall not apply for 

22 purposes of determining the amount of any tax im23 posed by section 1374 or 1375. 

24 ‘‘(3) COMMON TRUST FUNDS.—In the case of a 

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1 section (a) at the trust level shall be passed through 

2 to the participants. 

3 ‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

4 DETERMINING LOSS ON SALE OF INTEREST IN ENTI5 TY.—Notwithstanding the preceding provisions of 

6 this subsection, for purposes of determining the 

7 amount of any loss on a sale or exchange of an in8 terest in a partnership, S corporation, or common 

9 trust fund, the adjustment made under subsection 

10 (a) shall not be taken into account in determining 

11 the adjusted basis of such interest. 

12 ‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.— 

13 ‘‘(1) IN GENERAL.—This section shall not apply 

14 to any sale or other disposition of property between 

15 related persons except to the extent that the basis 

16 of such property in the hands of the transferee is a 

17 substituted basis. 

18 ‘‘(2) RELATED PERSONS DEFINED.—For pur19 poses of this section, the term ‘related persons’ 

20 means— 

21 ‘‘(A) persons bearing a relationship set 

22 forth in section 267(b), and 

23 ‘‘(B) persons treated as single employer 

24 under subsection (b) or (c) of section 414. 


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1 ‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST2 MENT.—If any person transfers cash, debt, or any other 

3 property to another person and the principal purpose of 

4 such transfer is to secure or increase an adjustment under 

5 subsection (a), the Secretary may disallow part or all of 

6 such adjustment or increase. 

7 ‘‘(i) SPECIAL RULES.—For purposes of this section— 

8 ‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If 

9 there is an addition to the adjusted basis of any tan10 gible property or of any stock in a corporation dur11 ing the taxable year by reason of an improvement to 

12 such property or a contribution to capital of such 

13 corporation— 

14 ‘‘(A) such addition shall never be taken 

15 into account under subsection (c)(1)(A) if the 

16 aggregate amount thereof during the taxable 

17 year with respect to such property or stock is 

18 less than $1,000, and 

19 ‘‘(B) such addition shall be treated as a 

20 separate asset acquired at the close of such tax21 able year if the aggregate amount thereof dur22 ing the taxable year with respect to such prop23 erty or stock is $1,000 or more. 

24 A rule similar to the rule of the preceding sentence 

25 shall apply to any other portion of an asset to the 


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1 extent that separate treatment of such portion is ap2 propriate to carry out the purposes of this section. 

3 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

4 THROUGHOUT HOLDING PERIOD.—The applicable in5 flation adjustment shall be appropriately reduced for 

6 periods during which the asset was not an indexed 

7 asset. 

8 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU9 TIONS.—A distribution with respect to stock in a 

10 corporation which is not a dividend shall be treated 

11 as a disposition. 

12 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

13 LOSS.—To the extent that (but for this paragraph) 

14 this section would create or increase a net ordinary 

15 loss to which section 1231(a)(2) applies or an ordi16 nary loss to which any other provision of this title 

17 applies, such provision shall not apply. The taxpayer 

18 shall be treated as having a long-term capital loss in 

19 an amount equal to the amount of the ordinary loss 

20 to which the preceding sentence applies. 

21 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

22 BEEN PRIOR APPLICATION OF SUBSECTION (A)(1)

23 WITH RESPECT TO THE TAXPAYER.—If there has 

24 been a prior application of subsection (a)(1) to an 

25 asset while such asset was held by the taxpayer, the 


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1 date of acquisition of such asset by the taxpayer 

2 shall be treated as not earlier than the date of the 

3 most recent such prior application. 

4 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

5 such regulations as may be necessary or appropriate to 

6 carry out the purposes of this section.’’. 

7 (b) CLERICAL AMENDMENT.—The table of sections 

8 for part II of subchapter O of chapter 1 is amended by 

9 striking the item relating to section 1023 and inserting 

10 after the item relating to section 1022 the following new 

11 items: 

‘‘Sec. 1023. Indexing of certain assets for purposes of determining gain or loss. 

‘‘Sec. 1024. Cross references.’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to dispositions after December 31, 

14 2008, in taxable years ending after such date. 

15 SEC. 8. RETIREMENT SAVINGS ACCOUNTS. 

16 (a) IN GENERAL.—Subpart A of part I of subchapter 

17 D of chapter 1 (relating to pension, profit-sharing, stock 

18 bonus plans, etc.) is amended by inserting after section 

19 408A the following new section: 

20 ‘‘SEC. 408B. RETIREMENT SAVINGS ACCOUNTS. 

21 ‘‘(a) GENERAL RULE.—Except as provided in this 

22 section, a Retirement Savings Account shall be treated for 

23 purposes of this title in the same manner as an individual 

24 retirement plan. 


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1 ‘‘(b) RETIREMENT SAVINGS ACCOUNT.—For pur2 poses of this title, the term ‘Retirement Savings Account’ 

3 means an individual retirement plan (as defined in section 

4 7701(a)(37) which is designated at the time of establish5 ment of the plan as a Retirement Savings Account). Such 

6 designation shall be made in such manner as the Secretary 

7 may prescribe. 

8 ‘‘(c) TREATMENT OF CONTRIBUTIONS.— 

9 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction 

10 shall be allowed under section 219 for a contribution 

11 to a Retirement Savings Account. 

12 ‘‘(2) CONTRIBUTION LIMIT.—The aggregate 

13 amount of contributions for any taxable year to all 

14 Retirement Savings Accounts maintained for the 

15 benefit of an individual shall not exceed $5,000. 

16 ‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE

701 17 ⁄2.—Contributions to a Retirement Savings Ac18 count may be made even after the individual for 

19 whom the account is maintained has attained age 

701 20 ⁄2. 

21 ‘‘(4) MANDATORY DISTRIBUTION RULES NOT

22 TO APPLY BEFORE DEATH.—Notwithstanding sub23 sections (a)(6) and (b)(3) of section 408 (relating to 

24 required distributions), the following provisions shall 

25 not apply to any Retirement Savings Account: 


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1 ‘‘(A) Section 401(a)(9)(A). 

2 ‘‘(B) The incidental death benefit require3 ments of section 401(a). 

4 ‘‘(5) ROLLOVER CONTRIBUTIONS.— 

5 ‘‘(A) IN GENERAL.—No rollover contribu6 tion may be made to or from a Retirement Sav7 ings Account except from or to another such 

8 Account, as the case may be. 

9 ‘‘(B) COORDINATION WITH LIMIT.—Any 

10 rollover permitted under subparagraph (A) shall 

11 not be taken into account for purposes of para12 graph (2). 

13 ‘‘(6) TIME WHEN CONTRIBUTIONS MADE.—For 

14 purposes of this section, the rule of section 219(f)(3) 

15 shall apply. 

16 ‘‘(d) DISTRIBUTION RULES.—Any qualified distribu17 tion (as defined in section 408B(d)(2)) from a Retirement 

18 Savings Account shall not be includible in gross income.’’. 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Clause (vi) of section 1361(c)(2)(A) is 

21 amended by inserting ‘‘or a Retirement Savings Ac22 count under section 408B’’ after ‘‘Roth IRA under 

23 section 408A’’. 

24 (2) Section 4973 (relating to tax on excess con25 tributions to certain tax-favored accounts and annuVerDate Nov 24 2008 23:43 Feb 05, 2009 Jkt 079200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\H99.IH H99

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1 ities) is amended by inserting after subsection (g) 

2 the following new subsection: 

3 ‘‘(h) EXCESS CONTRIBUTIONS TO RETIREMENT SAV4 INGS ACCOUNTS.—For purposes of this section, in the 

5 case of contributions to a Retirement Savings Account 

6 (within the meaning of section 408B(b)), the term ‘excess 

7 contributions’ means the sum of— 

8 ‘‘(1) the excess (if any) of— 

9 ‘‘(A) the amount contributed for the tax10 able year to Retirement Savings Accounts 

11 (other than a rollover contribution from another 

12 such Account), over 

13 ‘‘(B) $5,000, and 

14 ‘‘(2) the amount determined under this sub15 section for the preceding taxable year, reduced by 

16 the sum of— 

17 ‘‘(A) the distributions out of the Accounts 

18 for the taxable year, and 

19 ‘‘(B) the excess (if any) of $5,000 over the 

20 amount contributed by the individual to all Re21 tirement Savings Accounts for the taxable year. 

22 For purposes of this subsection, any contribution 

23 which is distributed from a Retirement Savings Ac24 count in a distribution described in section 


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1 408(d)(4) shall be treated as an amount not contrib2 uted.’’. 

3 (3) The table of sections for subpart A of part 

4 I of subchapter D of chapter 1 is amended by insert5 ing after the item relating to section 408A the fol6 lowing new item: 

‘‘Sec. 408B. Retirement Savings Accounts.’’. 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to amounts contributed for taxable 

9 years beginning after December 31, 2008. 

10 SEC. 9. LIFETIME SAVINGS ACCOUNTS. 

11 (a) IN GENERAL.—Subchapter F of chapter 1 (relat12 ing to exempt organizations) is amended by adding at the 

13 end the following new part: 

14 ‘‘PART IX—LIFETIME SAVINGS ACCOUNTS. 

‘‘Sec. 530B. Lifetime Savings Accounts. 

15 ‘‘SEC. 530B. LIFETIME SAVINGS ACCOUNTS. 

16 ‘‘(a) IN GENERAL.—A Lifetime Savings Account 

17 shall be exempt from taxation under this subtitle. Not18 withstanding the preceding sentence, the Lifetime Savings 

19 Account shall be subject to the taxes imposed by section 

20 511 (relating to imposition of tax on unrelated business 

21 income of charitable organizations). 

22 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur23 poses of this section— 


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1 ‘‘(1) LIFETIME SAVINGS ACCOUNT.—The term 

2 ‘Lifetime Savings Account’ means a trust created or 

3 organized in the United States exclusively for the 

4 benefit of an individual who is the designated bene5 ficiary of the trust (and designated as a Lifetime 

6 Savings Account at the time created or organized), 

7 but only if the written governing instrument creating 

8 the trust meets the following requirements: 

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

10 ‘‘(i) unless it is in cash, and 

11 ‘‘(ii) except in the case of rollover con12 tributions from another Lifetime Savings 

13 Account, if such contribution would result 

14 in aggregate contributions for the taxable 

15 year exceeding $5,000. 

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

17 section 408(n)) or another person who dem18 onstrates to the satisfaction of the Secretary 

19 that the manner in which that person will ad20 minister the trust will be consistent with the re21 quirements of this section or who has so dem22 onstrated with respect to any individual retire23 ment plan. 

24 ‘‘(C) No part of the trust assets will be in25 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) TIME WHEN CONTRIBUTIONS DEEMED

6 MADE.—An individual shall be deemed to have made 

7 a contribution to a Lifetime Savings Account on the 

8 last day of the preceding taxable year if the con9 tribution is made on account of such taxable year 

10 and is made not later than the time prescribed by 

11 law for filing the return for such taxable year (not 

12 including extensions thereof). 

13 ‘‘(3) CONTRIBUTIONS RETURNED BEFORE DUE

14 DATE OF RETURN.—A rule similar to the rule of sec15 tion 408(d)(4) shall apply for purposes of this sec16 tion. 

17 ‘‘(c) DISTRIBUTION NOT INCLUDIBLE.—Distribu18 tions from a Lifetime Savings Account shall not be includ19 ible in gross income. 

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

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

22 shall apply to any Lifetime Savings Account. 

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

24 shall be applied without regard to any community property 

25 laws. 


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

2 section, a custodial account shall be treated as a trust if 

3 the assets of such account are held by a bank (as defined 

4 in section 408(n) or another person who demonstrates, to 

5 the satisfaction of the Secretary, that the manner in which 

6 he will administer the account will be consistent with the 

7 requirements of this section, and if the custodial account 

8 would, except for the fact that it is not a trust, constitute 

9 an account described in subsection (b)(1)). For purposes 

10 of this title, in the case of a custodial account treated as 

11 a trust by reason of the preceding sentence, the custodian 

12 of such account shall be treated as the trustee thereof. 

13 ‘‘(g) REPORTS.—The trustee of a Lifetime Savings 

14 Account shall make such reports regarding such Account 

15 to the Secretary and to the beneficiary of the Account with 

16 respect to contributions, distributions, and such other 

17 matters as the Secretary may require. The reports re18 quired by this subsection shall be filed at such time and 

19 in such manner and furnished to such individuals at such 

20 time and in such manner as may be required.’’. 

21 (b) TAX OF EXCESS CONTRIBUTIONS.— 

22 (1) Subsection (a) of section 4973 (relating to 

23 tax on excess contributions to certain tax-favored ac24 counts and annuities) is amended by striking ‘‘or’’ 

25 at the end of paragraph (4), by adding ‘‘or’’ at the 


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1 end of paragraph (5), and by inserting after para2 graph (5) the following new paragraph: 

3 ‘‘(6) a Lifetime Savings Account (as defined by 

4 section 530B(b)),’’. 

5 (2) Section 4973 is amended by inserting after 

6 subsection (h) the following new subsection: 

7 ‘‘(i) EXCESS CONTRIBUTIONS TO LIFETIME SAVINGS

8 ACCOUNTS.—For purposes of this section, in the case of 

9 contributions to a Lifetime Savings Account (within the 

10 meaning of section 530B(b)), the term ‘excess contribu11 tions’ means the sum of— 

12 ‘‘(1) the excess (if any) of— 

13 ‘‘(A) the amount contributed for the tax14 able year to Lifetime Savings Accounts (other 

15 than a rollover contribution from another such 

16 Account), over 

17 ‘‘(B) $5,000, and 

18 ‘‘(2) the amount determined under this sub19 section for the preceding taxable year, reduced by 

20 the sum of— 

21 ‘‘(A) the distributions out of such Accounts 

22 for the taxable year, and 

23 ‘‘(B) the excess (if any) of $5,000 over the 

24 amount contributed by the individual to all such 

25 Accounts for the taxable year. 


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1 For purposes of this subsection, any contribution 

2 which is distributed from a Lifetime Savings Ac3 count in a distribution described in section 

4 530C(b)(3) shall be treated as an amount not con5 tributed.’’. 

6 (c) TAX ON PROHIBITED TRANSACTIONS.— 

7 (1) IN GENERAL.—Paragraph (1) of section 

8 4975(e) (relating to prohibited transactions) is 

9 amended by striking ‘‘or’’ at the end of subpara10 graph (F), by redesignating subparagraph (G) as 

11 subparagraph (H), and by inserting after subpara12 graph (F) the following new subparagraph: 

13 ‘‘(G) a Lifetime Savings Account described 

14 in section 530B, or’’. 

15 (2) SPECIAL RULE.—Subsection (c) of section 

16 4975 is amended by inserting after paragraph (6) 

17 the following new paragraph: 

18 ‘‘(7) SPECIAL RULES FOR LIFETIME SAVINGS

19 ACCOUNTS.—An individual for whose benefit a Life20 time Savings Account is established and any contrib21 utor to such account shall be exempt from the tax 

22 imposed by this section with respect to any trans23 action concerning such account (which would other24 wise be taxable under this section) if section 

25 530B(d) applies with respect to such transaction.’’. 


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1 (d) FAILURE TO PROVIDE REPORTS.—Paragraph 

2 (2) of section 6693(a) (relating to failure to provide re3 ports on certain tax-favored accounts or annuities; pen4 alties relating to designated nondeductible contributions) 

5 is amended by striking ‘‘and’’ at the end of subparagraph 

6 (D), by striking the period at the end of subparagraph 

7 (E) and inserting ‘‘, and’’, and by inserting after subpara8 graph (E) the end the following new subparagraph: 

9 ‘‘(F) section 530B(g) (relating to Lifetime 

10 Savings Accounts).’’. 

11 (e) CLERICAL AMENDMENT.—The table of parts for 

12 subchapter F of chapter 1 is amended by adding at the 

13 end the following new item: 

‘‘Part IX. Lifetime Savings Accounts.’’. 

14 SEC. 10. LIFETIME SKILLS ACCOUNTS. 

15 (a) IN GENERAL.—Part VIII of subchapter F of 

16 chapter 1 (relating to higher education savings entities) 

17 is amended by adding at the end the following new section: 

18 ‘‘SEC. 530A. LIFETIME SKILLS ACCOUNTS. 

19 ‘‘(a) IN GENERAL.—A Lifetime Skills Account shall 

20 be exempt from taxation under this subtitle. Notwith21 standing the preceding sentence, the Lifetime Skills Ac22 count shall be subject to the taxes imposed by section 511 

23 (relating to imposition of tax on unrelated business income 

24 of charitable organizations). 


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1 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section— 

3 ‘‘(1) LIFETIME SKILLS ACCOUNT.—The term 

4 ‘Lifetime Skills Account’ means a trust created or 

5 organized in the United States exclusively for the 

6 purpose of paying the qualified life skills expenses of 

7 an individual who is the designated beneficiary of 

8 the trust (and designated as a Lifetime Skills Ac9 count at the time created or organized), but only if 

10 the written governing instrument creating the trust 

11 meets the following requirements: 

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

13 ‘‘(i) unless it is in cash, and 

14 ‘‘(ii) except in the case of rollover con15 tributions from another such Account, if 

16 such contribution would result in aggregate 

17 contributions for the taxable year exceed18 ing $1,000. 

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

20 section 408(n)) or another person who dem21 onstrates to the satisfaction of the Secretary 

22 that the manner in which that person will ad23 minister the trust will be consistent with the re24 quirements of this section or who has so demVerDate Nov 24 2008 23:43 Feb 05, 2009 Jkt 079200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\H99.IH H99

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1 onstrated with respect to any individual retire2 ment plan. 

3 ‘‘(C) No part of the trust assets will be in4 vested in life insurance contracts. 

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

6 commingled with other property except in a 

7 common trust fund or common investment 

8 fund. 

9 ‘‘(2) QUALIFIED LIFE SKILLS EXPENSES.—The 

10 term ‘qualified life skills expenses’ means expenses 

11 for any of the following services: 

12 ‘‘(A) Comprehensive and specialized as13 sessments of the skill levels and service needs of 

14 adults and dislocated workers, which may in15 clude— 

16 ‘‘(i) diagnostic testing and use of 

17 other assessment tools, and 

18 ‘‘(ii) in-depth interviewing and evalua19 tion to identify employment barriers and 

20 appropriate employment goals. 

21 ‘‘(B) Development of an individual employ22 ment plan, to identify the employment goals, 

23 appropriate achievement objectives, and appro24 priate combination of services for the partici25 pant to achieve the employment goals. 


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1 ‘‘(C) Individual counseling and career 

2 planning. 

3 ‘‘(D) Short-term prevocational services, in4 cluding development of learning skills, commu5 nication skills, interviewing skills, punctuality, 

6 personal maintenance skills, and professional 

7 conduct, to prepare individuals for unsubsidized 

8 employment or training. 

9 ‘‘(E) Occupational skills training, including 

10 training for nontraditional employment. 

11 ‘‘(F) On-the-job training. 

12 ‘‘(G) Programs that combine workplace 

13 training with related instruction, which may in14 clude cooperative education programs. 

15 ‘‘(H) Training programs operated by the 

16 private sector. 

17 ‘‘(I) Skill upgrading and retraining. 

18 ‘‘(J) Entrepreneurial training. 

19 ‘‘(K) Job readiness training. 

20 ‘‘(L) Adult education and literacy activities 

21 provided in combination with services described 

22 in any of subparagraphs (E) through (K). 

23 ‘‘(M) Customized training conducted with 

24 a commitment by an employer or group of emVerDate Nov 24 2008 23:43 Feb 05, 2009 Jkt 079200 PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 E:\BILLS\H99.IH H99

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1 ployers to employ an individual upon successful 

2 completion of the training. 

3 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

4 MADE.—An individual shall be deemed to have made 

5 a contribution to a Lifetime Skills Account on the 

6 last day of the preceding taxable year if the con7 tribution is made on account of such taxable year 

8 and is made not later than the time prescribed by 

9 law for filing the return for such taxable year (not 

10 including extensions thereof). 

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

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

13 Lifetime Skills Account shall be includible in the 

14 gross income of the distributee in the manner pro15 vided in section 72. 

16 ‘‘(2) DISTRIBUTIONS FOR QUALIFIED LIFE

17 SKILLS EXPENSES.— 

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

19 includible in gross income under paragraph (1) 

20 if the qualified life skills expenses of the des21 ignated beneficiary during the taxable year are 

22 not less than the aggregate distributions during 

23 the taxable year. 

24 ‘‘(B) DISTRIBUTIONS IN EXCESS OF EX25 PENSES.—If such aggregate distributions exVerDate Nov 24 2008 23:43 Feb 05, 2009 Jkt 079200 PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 E:\BILLS\H99.IH H99

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1 ceed such expenses during the taxable year, the 

2 amount otherwise includible in gross income 

3 under paragraph (1) shall be reduced by the 

4 amount which bears the same ratio to the 

5 amount which would be includible in gross in6 come under paragraph (1) (without regard to 

7 this subparagraph) as the qualified life skills 

8 expenses bear to such aggregate distributions. 

9 ‘‘(C) COORDINATION WITH OTHER EDU10 CATION SAVINGS INCENTIVES.—For purposes of 

11 subparagraph (A), rules similar to the rules of 

12 subparagraph (C) of section 530(d)(2) shall 

13 apply. 

14 ‘‘(D) DISALLOWANCE OF EXCLUDED

15 AMOUNTS AS DEDUCTION, CREDIT, OR EXCLU16 SION.—No deduction, credit, or exclusion shall 

17 be allowed to the taxpayer under any other sec18 tion of this chapter for any qualified life skills 

19 expenses to the extent taken into account in de20 termining the amount of the exclusion under 

21 this paragraph. 

22 ‘‘(3) SPECIAL RULES FOR APPLYING ESTATE

23 AND GIFT TAXES WITH RESPECT TO ACCOUNT.— 

24 Rules similar to the rules of paragraphs (2), (4), 


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1 and (5) of section 529(c) shall apply for purposes of 

2 this section. 

3 ‘‘(4) ADDITIONAL TAX FOR DISTRIBUTIONS NOT

4 USED FOR LIFE SKILLS EXPENSES.— 

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

6 this chapter for any taxable year on any tax7 payer who receives a payment or distribution 

8 from a Lifetime Skills Account which is includ9 ible in gross income shall be increased by 10 

10 percent of the amount which is so includible. 

11 ‘‘(B) EXCEPTIONS.—Rules similar to the 

12 following rules shall apply for purposes of this 

13 subsection: 

14 ‘‘(i) Subparagraphs (B) and (C) of 

15 section 530(d)(4). 

16 ‘‘(ii) Paragraphs (5), (6), (7), and (8) 

17 of section 530(d). 

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

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

20 shall apply to any Lifetime Skills Account. 

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

22 shall be applied without regard to any community property 

23 laws. 

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

25 section, a custodial account shall be treated as a trust if 


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•HR 99 IH

1 the assets of such account are held by a bank (as defined 

2 in section 408(n) or another person who demonstrates, to 

3 the satisfaction of the Secretary, that the manner in which 

4 he will administer the account will be consistent with the 

5 requirements of this section, and if the custodial account 

6 would, except for the fact that it is not a trust, constitute 

7 an account described in subsection (b)(1)). For purposes 

8 of this title, in the case of a custodial account treated as 

9 a trust by reason of the preceding sentence, the custodian 

10 of such account shall be treated as the trustee thereof. 

11 ‘‘(g) REPORTS.—The trustee of a Lifetime Skills Ac12 count shall make such reports regarding such account to 

13 the Secretary and to the beneficiary of the Account with 

14 respect to contributions, distributions, and such other 

15 matters as the Secretary may require. The reports re16 quired by this subsection shall be filed at such time and 

17 in such manner and furnished to such individuals at such 

18 time and in such manner as may be required.’’. 

19 (b) TAX ON EXCESS CONTRIBUTIONS.— 

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

21 4973, as amended by section 9 of this Act, is 

22 amended by striking ‘‘or’’ at the end of paragraph 

23 (5), by adding ‘‘or’’ at the end of paragraph (6), and 

24 by inserting after paragraph (6) the following new 

25 paragraph: 


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1 ‘‘(7) a Lifetime Skills Account (as defined in 

2 section 530A(b)),’’. 

3 (2) EXCESS CONTRIBUTION DEFINED.—Section 

4 4973 is amended by inserting after subsection (i) 

5 the following new subsection: 

6 ‘‘(j) EXCESS CONTRIBUTIONS TO LIFETIME SKILLS

7 ACCOUNTS.—For purposes of this section, in the case of 

8 contributions to a Lifetime Skills Account (within the 

9 meaning of section 530A(b)), the term ‘excess contribu10 tions’ means the sum of— 

11 ‘‘(1) the excess (if any) of— 

12 ‘‘(A) the amount contributed for the tax13 able year to Lifetime Skills Accounts (other 

14 than a rollover contribution from another such 

15 Account), over 

16 ‘‘(B) $1,000, and 

17 ‘‘(2) the amount determined under this sub18 section for the preceding taxable year, reduced by 

19 the sum of— 

20 ‘‘(A) the distributions out of such Accounts 

21 for the taxable year, and 

22 ‘‘(B) the excess (if any) of $1,000 over the 

23 amount contributed by the individual to all such 

24 Accounts for the taxable year. 


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1 For purposes of this subsection, any contribution 

2 which is distributed from a Lifetime Skills Account 

3 in a distribution to which rules similar to the rules 

4 of section 530(d)(4)(C) apply under section 

5 530B(c)(4)(B)(i) shall be treated as an amount not 

6 contributed.’’. 

7 (c) TAX ON PROHIBITED TRANSACTIONS.— 

8 (1) IN GENERAL.—Paragraph (1) of section 

9 4975(e) (relating to prohibited transactions), as 

10 amended by section 9 of this Act, is amended by 

11 striking ‘‘or’’ at the end of subparagraph (G), by re12 designating subparagraph (H) as subparagraph (I), 

13 and by inserting after subparagraph (G) the fol14 lowing new subparagraph: 

15 ‘‘(H) a Lifetime Skills Account described 

16 in section 530A, or’’. 

17 (2) SPECIAL RULE.—Subsection (c) of section 

18 4975, as amended by section 9 of this Act, is 

19 amended by adding at the end the following new 

20 paragraph: 

21 ‘‘(8) SPECIAL RULES FOR LIFETIME SKILLS AC22 COUNTS.—An individual for whose benefit a Life23 time Skills Account is established and any contrib24 utor to such account shall be exempt from the tax 

25 imposed by this section with respect to any transVerDate Nov 24 2008 23:43 Feb 05, 2009 Jkt 079200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 E:\BILLS\H99.IH H99

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1 action concerning such account (which would other2 wise be taxable under this section) if section 

3 530A(d) applies with respect to such transaction.’’. 

4 (d) FAILURE TO PROVIDE REPORTS.—Paragraph 

5 (2) of section 6693(a) (relating to failure to provide re6 ports on certain tax-favored accounts or annuities; pen7 alties relating to designated nondeductible contributions), 

8 as amended by section 9 of this Act, is amended by strik9 ing ‘‘and’’ at the end of subparagraph (E), by striking 

10 the period at the end of subparagraph (F) and inserting 

11 ‘‘, and’’, and by adding at the end the following new sub12 paragraph: 

13 ‘‘(G) section 530A(g) (relating to Lifetime 

14 Skills Accounts).’’. 

15 (e) TECHNICAL AMENDMENTS.— 

16 (1) Section 26(b)(2) is amended by striking 

17 ‘‘and’’ at the end of subparagraph (U), by striking 

18 the period at the end of subparagraph (V) and in19 serting ‘‘, and’’, and by adding at the end the fol20 lowing new subparagraph: 

21 ‘‘(W) section 530A(c)(4) (relating to Life22 time Skills Accounts).’’. 

23 (2) Paragraph (9) of section 72(e) is amend24 ed— 


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1 (A) by striking ‘‘COVERDELL’’ in the head2 ing, 

3 (B) by striking ‘‘or under a Coverdell’’ and 

4 inserting ‘‘, under a Coverdell’’, and 

5 (C) by inserting ‘‘, or under a Lifetime 

6 Skills Account (as defined in section 530A(b))’’ 

7 after ‘‘530(b))’’. 

8 (3) Subparagraph (C) of section 135(c)(2) is 

9 amended— 

10 (A) in the heading by striking ‘‘AND’’ and 

11 by adding at the end ‘‘, AND LIFETIME SKILLS

12 ACCOUNTS’’, 

13 (B) by striking ‘‘or to a Coverdell’’ and in14 serting ‘‘to a Coverdell’’, and 

15 (C) by inserting ‘‘, or to a Lifetime Skills 

16 Account (as defined in section 530A(b))’’ after 

17 ‘‘530)’’. 

18 (4) Subparagraph (A) of section 221(d)(2) is 

19 amended by striking ‘‘or 530’’ and inserting ‘‘530, 

20 or 530A’’. 

21 (5) Subparagraph (B) of section 222(c)(2) is 

22 amended by striking ‘‘or 530(d)(2)’’ and inserting 

23 ‘‘530(d)(2), or 530A(c)(2)’’. 

24 (6) Clause (vi) of section 529(c)(3)(B) is 

25 amended— 


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•HR 99 IH

1 (A) by adding at the end of the heading 

2 ‘‘AND LIFETIME SKILLS ACCOUNTS’’, and 

3 (B) by striking ‘‘and section 530(d)(2)(A) 

4 apply’’ each place it appears and inserting ‘‘, 

5 section 530(d)(2)(A), and 530A(c)(2)(A) 

6 apply’’. 

7 (7) The table of sections for part VIII of sub8 chapter F of chapter 1 is amended by adding at the 

9 end the following new item: 

‘‘Sec. 530A. Lifetime Skills Accounts.’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2008. 

13 SEC. 11. EXPANDED DEDUCTION FOR MEDICAL CARE EX14 PENSES; EXPANSION OF INDIVIDUALS TO 

15 WHOM HEALTH SAVINGS ACCOUNTS MAY BE 

16 PASSED ON DEATH. 

17 (a) IN GENERAL.—Subsection (a) of section 213 (re18 lating to medical, dental, etc., expenses) is amended to 

19 read as follows: 

20 ‘‘(a) ALLOWANCE OF DEDUCTION.— 

21 ‘‘(1) IN GENERAL.—There shall be allowed as a 

22 deduction the expenses paid during the taxable year, 

23 not compensated for by insurance or otherwise, for 

24 medical care of the taxpayer, his spouse, or a de25 pendent (as defined in section 152, determined withVerDate Nov 24 2008 23:43 Feb 05, 2009 Jkt 079200 PO 00000 Frm 00044 Fmt 6652 Sfmt 6201 E:\BILLS\H99.IH H99

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1 out regard to subsections (b)(1), (b)(2), and 

2 (d)(1)(B) thereof), to the extent that such expenses 

3 exceed 7.5 percent of adjusted gross income. 

4 ‘‘(2) INDIVIDUALS WHO HAVE NOT ATTAINED

5 AGE 65 AND ARE NOT COVERED UNDER AN EM6 PLOYER PLAN.— 

7 ‘‘(A) IN GENERAL.—The expenses for med8 ical care of an individual which are incurred 

9 while the individual is an eligible individual may 

10 be taken into account under paragraph (1) 

11 without regard to the adjusted gross income 

12 threshold. 

13 ‘‘(B) ELIGIBLE INDIVIDUAL.—For pur14 poses of this paragraph, the term ‘eligible indi15 vidual’ means any individual— 

16 ‘‘(i) who has not attained age 65 as of 

17 the close of the taxable year, and 

18 ‘‘(ii) who is not covered by any plan 

19 sponsored by an employer of such indi20 vidual, such individual’s spouse, or of any 

21 other individual with respect to whom such 

22 individual is a dependent (within the 

23 meaning of paragraph (1)). 

24 ‘‘(C) LIMITATIONS.— 


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1 ‘‘(i) PER INDIVIDUAL.—The amount 

2 of each individual’s expenses which may be 

3 taken into account by reason of subpara4 graph (A) for the taxable year shall not ex5 ceed $7,500. 

6 ‘‘(ii) PER TAXPAYER.—If expenses for 

7 the medical care of more than 1 eligible in8 dividual are paid by the taxpayer, clause 

9 (i) shall not apply and the aggregate ex10 penses which may be taken into account by 

11 reason of subparagraph (A) for the taxable 

12 year shall not exceed $15,000. 

13 ‘‘(D) UNUSED LIMITATION MAY BE DEPOS14 ITED INTO HEALTH SAVINGS ACCOUNT.— 

15 ‘‘(i) IN GENERAL.—Except as other16 wise provided in this subparagraph, if the 

17 limitation under subparagraph (C) applica18 ble to an individual exceeds the expenses 

19 taken into account by reason of subpara20 graph (A), then, for purposes of section 

21 223 (relating to health savings accounts)— 

22 ‘‘(I) such individual shall be 

23 treated as an eligible individual for 

24 purposes of such section, and 


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1 ‘‘(II) the limitation otherwise ap2 plicable under section 223(b) shall be 

3 increased by an amount equal to such 

4 excess. 

5 ‘‘(ii) ALLOCATION OF PER TAXPAYER

6 LIMITATION.—For purposes of clause (i), 

7 the limitation under subparagraph (C)(ii) 

8 shall be allocated among the individuals’s 

9 whose expenses are paid in proportion to 

10 their respective shares of such expenses. 

11 ‘‘(iii) TREATMENT OF DEPEND12 ENTS.—Clause (i) shall not apply to a de13 pendent (within the meaning of paragraph 

14 (1)) of the taxpayer, and any excess deter15 mined under clause (i) for such dependent 

16 shall be allowed to the taxpayer. In the 

17 case of a joint return, any excess allowed 

18 to the taxpayer under the preceding sen19 tence shall be divided equally between the 

20 husband and wife.’’. 

21 (b) HEATH SAVINGS ACCOUNTS MAY BE PASSED TO

22 OTHER THAN SPOUSE.—Paragraph (8) of section 223(f) 

23 (relating to treatment after death of account beneficiary) 

24 is amended to read as follows: 


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1 ‘‘(8) TREATMENT AFTER DEATH OF ACCOUNT

2 BENEFICIARY.—If an individual acquires the account 

3 beneficiary’s interest in a health savings account by 

4 reason of being the designated beneficiary of such 

5 account at the death of the account beneficiary, such 

6 health savings account shall be treated as if the indi7 vidual were the account beneficiary.’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to taxable years beginning after 

10 December 31, 2008. 

11 SEC. 12. RESEARCH CREDIT MADE PERMANENT. 

12 (a) IN GENERAL.—Section 41 (relating to credit for 

13 increasing research activities) is amended by striking sub14 section (h). 

15 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

16 section 45C(b) is amended by striking subparagraph (D). 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to amounts paid or incurred after 

19 December 31, 2008. 

20 SEC. 13. TAX PROVISIONS OF PRIOR LAWS MADE PERMA21 NENT. 

22 (a) ECONOMIC GROWTH AND TAX RELIEF REC23 ONCILIATION ACT OF 2001.—Title IX of the Economic 

24 Growth and Tax Relief Reconciliation Act of 2001 (relat25 ing to sunset of provisions of Act) is hereby repealed. 


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1 (b) JOBS AND GROWTH TAX RELIEF RECONCILI2 ATION ACT OF 2003.—Section 107 of the Jobs and 

3 Growth Tax Relief Reconciliation Act of 2003 (relating 

4 to application of EGTRRA sunset to this title) is hereby 

5 repealed. 

Æ 


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