II 

108TH CONGRESS 

2D SESSION S. 2263 

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

Accounts. 

IN THE SENATE OF THE UNITED STATES 

MARCH 31, 2004 

Mr. THOMAS (for himself, Mr. SPECTER, and Mr. KYL) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to create 

Lifetime Savings Accounts. 

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

3 SECTION 1. LIFETIME SAVINGS ACCOUNTS. 

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

5 Internal Revenue Code of 1986 (relating to exempt organi6 zations) is amended by adding at the end the following 

7 new part: 
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1 ‘‘PART IX—LIFETIME SAVINGS ACCOUNTS 

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

3 ‘‘(a) GENERAL RULE.—A Lifetime Savings Account 

4 shall be exempt from taxation under this subtitle. Not5 withstanding the preceding sentence, such account shall 

6 be subject to the taxes imposed by section 511 (relating 

7 to imposition of tax on unrelated business income of chari8 table organizations). 

9 ‘‘(b) LIFETIME SAVINGS ACCOUNT.—For purposes of 

10 this section, the term ‘Lifetime Savings Account’ means 

11 a trust created or organized in the United States for the 

12 exclusive benefit of an individual or his beneficiaries and 

13 which is designated (in such manner as the Secretary shall 

14 prescribe) at the time of the establishment of the trust 

15 as a Lifetime Savings Account, but only if the written gov16 erning instrument creating the trust meets the following 

17 requirements: 

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

19 contribution described in subsection (d)— 

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

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

23 the calendar year in excess of the contribution 

24 limit specified in subsection (c)(1). 

25 ‘‘(2) The trustee is a bank (as defined in sec26 tion 408(n)) or another person who demonstrates to 
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1 the satisfaction of the Secretary that the manner in 

2 which that person will administer the trust will be 

3 consistent with the requirements of this section or 

4 who has so demonstrated with respect to any indi5 vidual retirement plan. 

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

7 in life insurance contracts. 

8 ‘‘(4) The interest of an individual in the bal9 ance of his account is nonforfeitable. 

10 ‘‘(5) The assets of the trust shall not be com11 mingled with other property except in a common 

12 trust fund or common investment fund. 

13 ‘‘(c) TREATMENT OF CONTRIBUTIONS AND DIS14 TRIBUTIONS.— 

15 ‘‘(1) CONTRIBUTION LIMIT.— 

16 ‘‘(A) IN GENERAL.—The aggregate 

17 amount of contributions (other than qualified 

18 rollover contributions described in subsection 

19 (d)) for any calendar year to all Lifetime Sav20 ings Accounts maintained for the benefit of an 

21 individual shall not exceed $5,000. 

22 ‘‘(B) COST-OF-LIVING ADJUSTMENT.— 

23 ‘‘(i) IN GENERAL.—In the case of any 

24 calendar year after 2005, the $5,000 
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1 amount under subparagraph (A) shall be 

2 increased by an amount equal to— 

3 ‘‘(I) such dollar amount, multi4 plied by 

5 ‘‘(II) the cost-of-living adjust6 ment determined under section 1(f)(3) 

7 for the calendar year, determined by 

8 substituting ‘calendar year 2004’ for 

9 ‘calendar year 1992’ in subparagraph 

10 (B) thereof. 

11 ‘‘(ii) ROUNDING RULES.—If any 

12 amount after adjustment under clause (i) 

13 is not a multiple of $500, such amount 

14 shall be rounded to the next lower multiple 

15 of $500. 

16 ‘‘(2) DISTRIBUTIONS.—Any distribution from a 

17 Lifetime Savings Account shall not be includible in 

18 gross income. 

19 ‘‘(d) QUALIFIED ROLLOVER CONTRIBUTION.—For 

20 purposes of this section, the term ‘qualified rollover con21 tribution’ means a contribution to a Lifetime Savings Ac22 count— 

23 ‘‘(1) from another such account of the same 

24 beneficiary, but only if such amount is contributed 
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1 not later than the 60th day after the distribution 

2 from such other account, 

3 ‘‘(2) from a Lifetime Savings Account of a 

4 spouse of the beneficiary of the account to which the 

5 contribution is made, but only if such amount is 

6 contributed not later than the 60th day after the 

7 distribution from such other account, and 

8 ‘‘(3) before January 1, 2006, from— 

9 ‘‘(A) a qualified tuition program pursuant 

10 to section 529(c)(3)(E), or 

11 ‘‘(B) a Coverdell education savings account 

12 pursuant to section 530(d)(9). 

13 ‘‘(e) LOSS OF TAXATION EXEMPTION OF ACCOUNT

14 WHERE BENEFICIARY ENGAGES IN PROHIBITED TRANS15 ACTION.—Rules similar to the rules of paragraph (2) of 

16 section 408(e) shall apply to any Lifetime Savings Ac17 count. 

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

19 section, a custodial account or an annuity contract issued 

20 by an insurance company qualified to do business in a 

21 State shall be treated as a trust under this section if— 

22 ‘‘(1) the custodial account or annuity contract 

23 would, except for the fact that it is not a trust, con24 stitute a trust which meets the requirements of sub25 section (b), and 
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1 ‘‘(2) in the case of a custodial account, the as2 sets of such account are held by a bank (as defined 

3 in section 408(n)) or another person who dem4 onstrates, to the satisfaction of the Secretary, that 

5 the manner in which he will administer the account 

6 will be consistent with the requirements of this sec7 tion. 

8 For purposes of this title, in the case of a custodial ac9 count or annuity contract treated as a trust by reason of 

10 the preceding sentence, the person holding the assets of 

11 such account or holding such annuity contract shall be 

12 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 ON EXCESS CONTRIBUTIONS.— 

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

23 4973 of the Internal Revenue Code of 1986 (relating 

24 to tax on excess contributions to certain tax-favored 

25 accounts and annuities) is amended by striking ‘‘or’’ 
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1 at the end of paragraph (4), by inserting ‘‘or’’ at the 

2 end of paragraph (5), and by inserting after para3 graph (5) the following new paragraph: 

4 ‘‘(6) a Lifetime Savings Account (as defined in 

5 section 530A),’’. 

6 (2) EXCESS CONTRIBUTION.—Section 4973 of 

7 such Code is amended by adding at the end the fol8 lowing new subsection: 

9 ‘‘(h) EXCESS CONTRIBUTIONS TO LIFETIME SAVINGS

10 ACCOUNTS.—For purposes of this section— 

11 ‘‘(1) IN GENERAL.—In the case of Lifetime 

12 Savings Accounts (within the meaning of section 

13 530A), the term ‘excess contributions’ means the 

14 sum of— 

15 ‘‘(A) the amount by which the amount con16 tributed for the calendar year to such accounts 

17 (other than qualified rollover contributions (as 

18 defined in section 530A(d))) exceeds the con19 tribution limit under section 530A(c)(1), and 

20 ‘‘(B) the amount determined under this 

21 subsection for the preceding calendar year, re22 duced by the excess (if any) of the maximum 

23 amount allowable as a contribution under sec24 tion 530A(c)(1) for the calendar year over the 
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1 amount contributed to the accounts for the cal2 endar year. 

3 ‘‘(2) SPECIAL RULE.—A contribution shall not 

4 be taken into account under paragraph (1) if such 

5 contribution (together with the amount of net in6 come attributable to such contribution) is returned 

7 to the beneficiary before July 1 of the year following 

8 the year in which the contribution is made.’’. 

9 (c) FAILURE TO PROVIDE REPORTS ON LIFETIME

10 SAVINGS ACCOUNTS.—Paragraph (2) of section 6693(a) 

11 of the Internal Revenue Code of 1986 (relating to failure 

12 to provide reports on individual retirement accounts or an13 nuities) is amended by striking ‘‘and’’ at the end of sub14 paragraph (D), by striking the period at the end of sub15 paragraph (E) and inserting ‘‘, and’’, and by adding at 

16 the end the following new subparagraph: 

17 ‘‘(F) section 530A(g) (relating to Lifetime 

18 Savings Accounts).’’. 

19 (d) ROLLOVERS FROM CERTAIN OTHER TAX-FREE

20 ACCOUNTS.— 

21 (1) QUALIFIED STATE TUITION PLANS.—Para22 graph (3) of section 529(c) of the Internal Revenue 

23 Code of 1986 (relating to distributions) is amended 

24 by adding at the end the following new subpara25 graph: 
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1 ‘‘(E) ROLLOVERS TO LIFETIME SAVINGS

2 ACCOUNTS.— 

3 ‘‘(i) IN GENERAL.—Subparagraph (A) 

4 shall not apply to the qualified portion of 

5 any distribution which, before January 1, 

6 2006, and within 60 days of such distribu7 tion, is transferred to a Lifetime Savings 

8 Account (within the meaning of section 

9 530A) of the designated beneficiary. This 

10 subparagraph shall only apply to distribu11 tions in accordance with the previous sen12 tence from an account which was in exist13 ence with respect to such designated bene14 ficiary on December 31, 2003. 

15 ‘‘(ii) QUALIFIED PORTION.—For pur16 poses of this subparagraph, the term 

17 ‘qualified portion’ means the amount equal 

18 to the sum of— 

19 ‘‘(I) the lesser of $50,000 or the 

20 amount which is in the account of the 

21 designated beneficiary on December 

22 31, 2003, 

23 ‘‘(II) any contributions to such 

24 account for the taxable year beginning 
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1 after December 31, 2004, and before 

2 January 1, 2005, and 

3 ‘‘(III) any earnings of such ac4 count for such year. 

5 ‘‘(iii) LIMITATION.—The sum of the 

6 amounts taken into account under clause 

7 (ii)(II) with respect to all accounts of the 

8 designated beneficiary plus any amounts 

9 with respect to such designated beneficiary 

10 taken into account under section 

11 530(d)(9)(B)(ii) shall not exceed the sum 

12 of $5,000 plus the earnings attributable to 

13 such amounts.’’. 

14 (2) COVERDELL EDUCATION SAVINGS AC15 COUNTS.—Subsection (d) of section 530 of such 

16 Code (relating to tax treatment of distributions) is 

17 amended by inserting at the end the following new 

18 paragraph: 

19 ‘‘(9) ROLLOVERS TO LIFETIME SAVINGS AC20 COUNTS.— 

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

22 not apply to the qualified portion of any 

23 amount paid or distributed from a Coverdell 

24 education savings account to the extent that the 

25 amount received is paid, before January 1, 
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1 2006, and not later than the 60th day after the 

2 date of such payment or distribution, into a 

3 Lifetime Savings Account (within the meaning 

4 of section 530A) for the benefit of the same 

5 beneficiary. This paragraph shall only apply to 

6 amounts paid or distributed in accordance with 

7 the preceding sentence from an account which 

8 was in existence with respect to such bene9 ficiary on December 31, 2003. 

10 ‘‘(B) QUALIFIED PORTION.—For purposes 

11 of this paragraph, the term ‘qualified portion’ 

12 means the amount equal to the sum of— 

13 ‘‘(i) the amount which is in the ac14 count of the beneficiary on December 31, 

15 2003, 

16 ‘‘(ii) any contributions to such ac17 count for the taxable year beginning after 

18 December 31, 2004, and before January 1, 

19 2005, and 

20 ‘‘(iii) any earnings of such account for 

21 such year. 

22 ‘‘(C) LIMITATION.—The sum of the 

23 amounts taken into account under subpara24 graph (B)(ii) with respect to all accounts of the 

25 beneficiary plus any amounts with respect to 
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1 such beneficiary taken into account under sec2 tion 529(c)(3)(E)(ii)(II) shall not exceed the 

3 sum of $5,000 plus the earnings attributable to 

4 such amounts.’’. 

5 (e) CONFORMING AMENDMENT.—The table of parts 

6 for subchapter F of chapter 1 of the Internal Revenue 

7 Code of 1986 is amended by adding at the end the fol8 lowing new item: 

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

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2004. 

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