I

107TH CONGRESS

1ST SESSION H. R. 1780

To amend the Internal Revenue Code of 1986 to allow a deduction for

contributions to a volunteer firefighter savings account.

IN THE HOUSE OF REPRESENTATIVES

MAY 9, 2001

Mr. LARSON of Connecticut (for himself and Mr. WELDON of Pennsylvania)

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 allow a

deduction for contributions to a volunteer firefighter savings account.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Volunteer Firefighter’s

5 Relief Act’’.

6 SEC. 2. DEDUCTION FOR CONTRIBUTIONS TO VOLUNTEER

7 FIREFIGHTER SAVINGS ACCOUNTS.

8 (a) IN GENERAL.—Part VII of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to
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1 additional itemized deductions for individuals) is amended

2 by redesignating section 222 as section 223 and by insert3 ing after section 221 the following new section:

4 ‘‘SEC. 222. CONTRIBUTIONS TO VOLUNTEER FIREFIGHTER

5 SAVINGS ACCOUNTS.

6 ‘‘(a) DEDUCTION ALLOWED.—

7 ‘‘(1) IN GENERAL.—In the case of an individual

8 who is a qualified volunteer firefighter, there shall be

9 allowed as a deduction for the taxable year an

10 amount equal to the contributions of the individual

11 to a volunteer firefighter savings account of the indi12 vidual for the taxable year.

13 ‘‘(2) MAXIMUM ANNUAL AMOUNT.—The

14 amount allowable as a deduction under subsection

15 (a) to any individual for a taxable year shall not ex16 ceed $500.

17 ‘‘(b) QUALIFIED VOLUNTEER FIREFIGHTER.—For

18 purposes of this section, the term ‘qualified volunteer fire19 fighter’ means an individual who, on the last day of the

20 taxable year, is a member in good standing of a qualified

21 volunteer fire department (as defined in section 150(e)).

22 ‘‘(c) VOLUNTEER FIREFIGHTER SAVINGS AC23 COUNT.—For purposes of this section, the term ‘volunteer

24 firefighter savings account’ means a trust created or orga25 nized in the United States for the exclusive benefit of an
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1 individual and the individual’s beneficiaries, but only if the

2 written governing instrument creating the trust meets the

3 following requirements:

4 ‘‘(1) No contribution will be accepted unless it

5 is in cash.

6 ‘‘(2) The trustee is a bank (as defined in sec7 tion 408(n)) or another person who demonstrates to

8 the satisfaction of the Secretary that the manner in

9 which that person will administer the trust will be

10 consistent with the requirements of this section.

11 ‘‘(3) No part of the trust assets will be invested

12 in life insurance contracts.

13 ‘‘(4) The assets of the trust will not be commin14 gled with other property except in a common trust

15 fund or common investment fund.

16 ‘‘(5) The interest of an individual in the bal17 ance of the individual’s account is nonforfeitable.

18 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

19 ‘‘(1) IN GENERAL.—Except as otherwise pro20 vided in this subsection, any amount paid or distrib21 uted out of a volunteer firefighter savings account

22 shall be included in the gross income of the payee

23 or distributee for the taxable year in which the pay24 ment or distribution is received in the manner pro25 vided under section 72.
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1 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE2 FORE DUE DATE OF RETURN.—Paragraph (1) shall

3 not apply to the distribution of any contribution paid

4 during a taxable year to a volunteer firefighter sav5 ings account to the extent that such contribution ex6 ceeds the amount allowable as a deduction under

7 subsection (a) if—

8 ‘‘(A) such distribution is received on or be9 fore the day prescribed by law (including exten10 sions of time) for filing such individual’s return

11 for such taxable year,

12 ‘‘(B) no deduction is allowed under sub13 section (a) with respect to such excess contribu14 tion, and

15 ‘‘(C) such distribution is accompanied by

16 the amount of net income attributable to such

17 excess contribution.

18 Any net income described in subparagraph (C) shall

19 be included in the gross income of the individual for

20 the taxable year in which such excess contribution

21 was made.

22 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

23 ‘‘(A) IN GENERAL.—Paragraph (1) shall

24 not apply to any amount paid or distributed to

25 an account holder from a volunteer firefighter
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1 savings account to the extent that the amount

2 received is paid into an individual retirement

3 plan (as defined in section 7701(37)) for the

4 benefit of the account holder not later than the

5 60th day after the day on which the account

6 holder receives the payment or distribution.

7 ‘‘(B) LIMITATION.—Subparagraph (A)

8 shall not apply to any payment or distribution

9 described in subparagraph (A) if, at any time

10 during the 1-year period ending on the day of

11 such receipt, such account holder received any

12 other amount described in subparagraph (A)

13 which was not includible in the account holder’s

14 gross income because of the application of sub15 paragraph (A).

16 ‘‘(4) INVESTMENT IN COLLECTIBLES TREATED

17 AS DISTRIBUTIONS.—Rules similar to the rules of

18 section 408(m) shall apply for purposes of this sec19 tion.

20 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—

21 ‘‘(1) EXEMPTION FROM TAX.—A volunteer fire22 fighter savings account is exempt from taxation

23 under this subtitle unless such account has ceased to

24 be a volunteer firefighter savings account by reason

25 of paragraph (2). Notwithstanding the preceding
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1 sentence, any such account is subject to the taxes

2 imposed by section 511 (relating to imposition of tax

3 on unrelated business income of charitable, etc. or4 ganizations).

5 ‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE

6 INDIVIDUAL ENGAGES IN PROHIBITED TRANS7 ACTION.—

8 ‘‘(A) IN GENERAL.—If the individual for

9 whose benefit a volunteer firefighter savings ac10 count is established or any individual who con11 tributes to such account engages in any trans12 action prohibited by section 4975 with respect

13 to the account, the account shall cease to be a

14 volunteer firefighter savings account as of the

15 first day of the taxable year (of the individual

16 so engaging in such transaction) during which

17 such transaction occurs.

18 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

19 ALL ITS ASSETS.—In any case in which any ac20 count ceases to be a volunteer firefighter sav21 ings account by reason of subparagraph (A) as

22 of the first day of any taxable year, paragraph

23 (1) of subsection (d) shall apply as if there was

24 a distribution on such first day in an amount

25 equal to the fair market value (on such first
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1 day) of all assets in the account (on such first

2 day).

3 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU4 RITY.—If, during any taxable year, the individual for

5 whose benefit a volunteer firefighter savings account

6 is established uses the account or any portion there7 of as security for a loan, the portion so used shall

8 be treated as distributed to the individual so using

9 such portion.

10 ‘‘(f) SPECIAL RULES.—

11 ‘‘(1) TIME WHEN CONTRIBUTIONS DEEMED

12 MADE.—A taxpayer shall be deemed to have made a

13 contribution to a volunteer firefighter savings ac14 count on the last day of the preceding taxable year

15 if the contribution is made on account of such tax16 able year and is made not later than the time pre17 scribed by law for filing the return for such taxable

18 year (not including extensions thereof).

19 ‘‘(2) DEATH AND DIVORCE.—Rules similar to

20 the rules of sections 401(a)(9), 401(a)(11), and

21 408(d)(6) shall apply for purposes of this section.

22 ‘‘(3) COMMUNITY PROPERTY LAWS.—This sec23 tion shall be applied without regard to any commu24 nity property laws.
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1 ‘‘(g) REPORTS.—The trustee of a volunteer fire2 fighter savings account shall make such reports regarding

3 such account to the Secretary and to the account holder

4 with respect to contributions, distributions, and such other

5 matters as the Secretary may require under regulations.

6 The reports required by this subsection shall be filed at

7 such time and in such manner and furnished to such indi8 viduals at such time and in such manner as may be re9 quired by those regulations.’’.

10 (b) ALLOWANCE OF DEDUCTION IN COMPUTING AD11 JUSTED GROSS INCOME.—Subsection (a) of section 62 of

12 such Code (defining adjusted gross income) is amended

13 by inserting after paragraph (17) the following new para14 graph:

15 ‘‘(18) CONTRIBUTIONS TO VOLUNTEER FIRE16 FIGHTER SAVINGS ACCOUNTS.—The deduction al17 lowed by section 222(a).’’.

18 (c) ADDITIONAL TAX ON EARLY DISTRIBUTIONS.—

19 Subsection (t) of section 72 of such Code (relating to 10-

20 percent additional tax on early distributions from qualified

21 retirement plans) is amended—

22 (1) in paragraph (1) by inserting ‘‘or a volun23 teer firefighter savings account (as defined in section

24 220(c))’’ after ‘‘section 4974(c))’’, and
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1 (2) in the heading by striking ‘‘QUALIFIED RE2 TIREMENT PLANS’’ and inserting ‘‘CERTAIN TAX3 FAVORED PLANS’’.

4 (d) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

5 of such Code (relating to tax on excess contributions to

6 certain tax-favored accounts and annuities) is amended—

7 (1) in subsection (a) by striking ‘‘or’’ at the end

8 of paragraph (3), by inserting ‘‘or’’ at the end of

9 paragraph (4), and by inserting after paragraph (4)

10 the following new paragraph:

11 ‘‘(5) a volunteer firefighter savings account (as

12 defined in section 222(c)),’’, and

13 (2) by adding at the end the following new sub14 section:

15 ‘‘(g) EXCESS CONTRIBUTIONS TO VOLUNTEER FIRE16 FIGHTER SAVINGS ACCOUNTS.—For purposes of this sec17 tion, in the case of a volunteer firefighter savings account,

18 the term ‘excess contributions’ means the sum of—

19 ‘‘(1) the aggregate amount contributed for the

20 taxable year to the account which is not allowable as

21 a deduction under section 222 for such taxable year,

22 and

23 ‘‘(2) the amount determined under this sub24 section for the preceding taxable year, reduced by—
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1 ‘‘(A) the distributions out of the accounts

2 which were included in gross income under sec3 tion 222(d)(1) for the taxable year, over

4 ‘‘(B) the amount contributed to the ac5 counts for the taxable year.

6 For purposes of this subsection, any contribution

7 which is distributed out of the volunteer firefighter

8 account in a distribution to which section 222(d)(2)

9 applies shall be treated as an amount not contrib10 uted.’’.

11 (e) TAX ON PROHIBITED TRANSACTIONS.—Section

12 4975 of such Code (relating to prohibited transactions)

13 is amended—

14 (1) by adding at the end of subsection (c) the

15 following new paragraph:

16 ‘‘(6) SPECIAL RULE FOR VOLUNTEER FIRE17 FIGHTER SAVINGS ACCOUNTS.—An individual for

18 whose benefit a volunteer firefighter savings account

19 is established and any contributor to such account

20 shall be exempt from the tax imposed by this section

21 with respect to any transaction concerning such ac22 count (which would otherwise be taxable under this

23 section) if, with respect to such transaction, the ac24 count ceases to be a volunteer firefighter savings ac-
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1 count by reason of the application of section 222 to

2 such account.’’, and

3 (2) in subsection (e)(1) by striking ‘‘or’’ at the

4 end of subparagraph (E), by redesignating subpara5 graph (F) as subparagraph (G), and by inserting

6 after subparagraph (E) the following new subpara7 graph:

8 ‘‘(F) a volunteer firefighter savings ac9 count described in section 222, or’’.

10 (f) FAILURE TO PROVIDE REPORTS ON VOLUNTEER

11 FIREFIGHTER SAVINGS ACCOUNTS.—Paragraph (2) of

12 section 6693(a) of such Code (relating to failure to provide

13 reports on certain tax-favored accounts or annuities) is

14 amended by striking ‘‘and’’ at the end of subparagraph

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

16 and inserting ‘‘, and’’, and by adding at the end the fol17 lowing new subparagraph:

18 ‘‘(E) section 222(g) (relating to volunteer

19 firefighter savings accounts).’’.

20 (g) CONFORMING AMENDMENTS.—

21 (1) Paragraph (1) of section 408(a) is amended

22 by inserting ‘‘222(d)(3),’’ before ‘‘402(c)’’.

23 (2) The table of sections for part VII of sub24 chapter B of chapter 1 of such Code is amended by
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1 striking the item relating to section 222 and insert2 ing the following new items:

‘‘Sec. 222. Contributions to volunteer firefighter savings accounts.

‘‘Sec. 223. Cross reference.’’

3 (h) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to taxable years beginning after

5 the date of the enactment of this Act.

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