II 

114TH CONGRESS 

1ST SESSION S. 74 

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

care savings accounts. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 7, 2015 

Mr. VITTER 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 provide 

for dependent care 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. SHORT TITLE. 

4 This Act may be cited as the ‘‘Dependent Care Sav5 ings Account Act of 2015’’. 

6 SEC. 2. DEPENDENT CARE SAVINGS ACCOUNTS. 

7 (a) IN GENERAL.—Part VII of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by redesignating section 224 as section 225 and inserting 

10 after section 223 the following new section: 


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1 ‘‘SEC. 224. DEPENDENT CARE SAVINGS ACCOUNTS. 

2 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi3 vidual, there shall be allowed as a deduction for the tax4 able year an amount equal to the aggregate amount paid 

5 in cash during such taxable year by or on behalf of the 

6 individual to a dependent care savings account of such in7 dividual. 

8 ‘‘(b) LIMITATION.— 

9 ‘‘(1) IN GENERAL.—The amount allowable as a 

10 deduction under subsection (a) to an individual for 

11 the taxable year shall not exceed the lesser of— 

12 ‘‘(A) $5,000, or 

13 ‘‘(B) the individual’s earned income (with14 in the meaning of section 21) for such taxable 

15 year. 

16 ‘‘(2) COORDINATION WITH DEPENDENT CARE

17 ASSISTANCE BENEFITS.—The limitation which would 

18 (but for this paragraph) apply under paragraph (1) 

19 to an individual for any taxable year shall be re20 duced (but not below zero) by the aggregate amount 

21 excludable from the individual’s gross income for 

22 such taxable year under section 129. 

23 ‘‘(c) DEPENDENT CARE SAVINGS ACCOUNT.—For 

24 purposes of this section— 

25 ‘‘(1) IN GENERAL.—The term ‘dependent care 

26 savings account’ means a trust created or organized 


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1 in the United States as a dependent care savings ac2 count exclusively for the purpose of paying the quali3 fied dependent care expenses of the account bene4 ficiary, but only if the written governing instrument 

5 creating the trust meets the following requirements: 

6 ‘‘(A) Except in the case of a rollover con7 tribution described in subsection (e)(5), no con8 tribution will be accepted unless it is in cash, 

9 and contributions will not be accepted for the 

10 taxable year on behalf of any account bene11 ficiary in excess of $10,000. 

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

13 section 408(n)) or such other person who dem14 onstrates to the satisfaction of the Secretary 

15 that the manner in which such other person will 

16 administer the trust will be consistent with the 

17 requirements of this section. 

18 ‘‘(C) No part of the trust assets will be in19 vested in life insurance contracts. 

20 ‘‘(D) The assets of the trust will not be 

21 commingled with other property except in a 

22 common trust fund or common investment 

23 fund. 

24 ‘‘(E) The interest of an individual in the 

25 balance in his account is nonforfeitable. 


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1 ‘‘(2) QUALIFIED DEPENDENT CARE EX2 PENSES.—The term ‘qualified dependent care ex3 penses’ means the employment-related expenses (as 

4 defined in section 21(b)(2)) of the account bene5 ficiary with respect to any qualifying individual (as 

6 defined in section 21(b)(1)) of the account bene7 ficiary. Such term includes qualified long-term care 

8 services (as defined in section 7702B(c)), and 

9 amounts paid for qualified long-term care insurance 

10 contracts (as defined in section 7702B(b)), with re11 spect to such qualifying individuals of the account 

12 beneficiary. 

13 ‘‘(3) ACCOUNT BENEFICIARY.—The term ‘ac14 count beneficiary’ means the individual on whose be15 half the dependent care savings account was estab16 lished. 

17 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar 

18 to the following rules shall apply for purposes of this 

19 section: 

20 ‘‘(A) Section 219(d)(2) (relating to no de21 duction for rollovers). 

22 ‘‘(B) Except as provided in section 129, 

23 section 219(f)(3) (relating to time when con24 tributions deemed made). 


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1 ‘‘(C) Section 219(f)(5) (relating to em2 ployer payments). 

3 ‘‘(D) Section 223(b)(6) (relating to denial 

4 of deduction to dependents). 

5 ‘‘(E) Section 408(g) (relating to commu6 nity property laws). 

7 ‘‘(F) Section 408(h) (relating to custodial 

8 accounts). 

9 ‘‘(d) TAX TREATMENT OF ACCOUNTS.— 

10 ‘‘(1) IN GENERAL.—A dependent care savings 

11 account is exempt from taxation under this subtitle 

12 unless such account has ceased to be a dependent 

13 care savings account. Notwithstanding the preceding 

14 sentence, any such account is subject to the taxes 

15 imposed by section 511. 

16 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 

17 to the rules of paragraphs (2) and (4) of section 

18 408(e) shall apply to dependent care savings ac19 counts, and any amount treated as distributed under 

20 such rules shall be treated as not used to pay quali21 fied dependent care expenses. 

22 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.— 

23 ‘‘(1) AMOUNTS USED FOR QUALIFIED DEPEND24 ENT CARE EXPENSES.—Any amount paid or distrib25 uted out of a dependent care savings account which 


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1 is used exclusively to pay qualified dependent care 

2 expenses of any account beneficiary shall not be in3 cludible in gross income. 

4 ‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR

5 QUALIFIED DEPENDENT CARE EXPENSES.—Any 

6 amount paid or distributed out of a dependent care 

7 savings account which is not used exclusively to pay 

8 the qualified dependent care expenses of the account 

9 beneficiary shall be included in the gross income of 

10 such beneficiary. 

11 ‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE12 FORE DUE DATE OF RETURN.— 

13 ‘‘(A) IN GENERAL.—If any excess con14 tribution is contributed for a taxable year to 

15 any dependent care savings account of an indi16 vidual, paragraph (2) shall not apply to dis17 tributions from the dependent care savings ac18 counts of such individual (to the extent such 

19 distributions do not exceed the aggregate excess 

20 contributions to all such accounts of such indi21 vidual for such year) if— 

22 ‘‘(i) such distribution is received by 

23 the individual on or before the last day 

24 prescribed by law (including extensions of 


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1 time) for filing such individual’s return for 

2 such taxable year, and 

3 ‘‘(ii) such distribution is accompanied 

4 by the amount of net income attributable 

5 to such excess contribution. 

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

7 included in the gross income of the individual 

8 for the taxable year in which it is received. 

9 ‘‘(B) EXCESS CONTRIBUTION.—For pur10 poses of subparagraph (A), the term ‘excess 

11 contribution’ means any contribution (other 

12 than a rollover contribution described in para13 graph (5)) which is neither excludable from 

14 gross income under section 129 nor deductible 

15 under this section. 

16 ‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT

17 USED FOR QUALIFIED DEPENDENT CARE EX18 PENSES.— 

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

20 this chapter on the account beneficiary for any 

21 taxable year in which there is a payment or dis22 tribution from a dependent care savings ac23 count of such beneficiary which is includible in 

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1 creased by 20 percent of the amount which is 

2 so includible. 

3 ‘‘(B) EXCEPTION FOR DISABILITY OR

4 DEATH.—Subparagraph (A) shall not apply if 

5 the payment or distribution is made after the 

6 account beneficiary becomes disabled within the 

7 meaning of section 72(m)(7) or dies. 

8 ‘‘(5) ROLLOVER CONTRIBUTION.—An amount is 

9 described in this paragraph as a rollover contribu10 tion if it meets the requirements of subparagraphs 

11 (A) and (B). 

12 ‘‘(A) IN GENERAL.—Paragraph (2) shall 

13 not apply to any amount paid or distributed 

14 from a dependent care savings account to the 

15 account beneficiary to the extent the amount 

16 received is paid into a dependent care savings 

17 account for the benefit of such beneficiary not 

18 later than the 60th day after the day on which 

19 the beneficiary receives the payment or distribu20 tion. 

21 ‘‘(B) LIMITATION.—This paragraph shall 

22 not apply to any amount described in subpara23 graph (A) received by an individual from a de24 pendent care savings account if, at any time 

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


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1 such receipt, such individual received any other 

2 amount described in subparagraph (A) from a 

3 dependent care savings account which was not 

4 includible in the individual’s gross income be5 cause of the application of this paragraph. 

6 ‘‘(6) COORDINATION WITH DEPENDENT CARE

7 CREDIT.—For purposes of determining the amount 

8 of the credit under section 21, any payment or dis9 tribution out of a dependent care savings account 

10 for qualified dependent care expenses shall not be 

11 treated as employment-related expenses. 

12 ‘‘(7) TRANSFER OF ACCOUNT INCIDENT TO DI13 VORCE; TREATMENT AFTER DEATH.—Rules similar 

14 to the rules of paragraphs (7) and (8) of section 223 

15 shall apply with respect to dependent care savings 

16 accounts. 

17 ‘‘(f) REPORTS.—The Secretary may require the 

18 trustee of a dependent care savings account to make such 

19 reports regarding such account to the Secretary and to 

20 the account beneficiary with respect to contributions, dis21 tributions, the return of excess contributions, and such 

22 other matters as the Secretary determines appropriate. 

23 The reports required by this subsection shall be filed at 

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1 viduals at such time and in such manner as may be re2 quired by the Secretary.’’. 

3 (b) DEDUCTION ALLOWED IN COMPUTING AD4 JUSTED GROSS INCOME.—Subsection (a) of section 62 of 

5 the Internal Revenue Code of 1986 is amended by insert6 ing before the last sentence the following new paragraph: 

7 ‘‘(22) DEPENDENT CARE SAVINGS ACCOUNTS.— 

8 The deduction allowed by section 224(a).’’. 

9 (c) EXCLUSION OF EMPLOYER CONTRIBUTIONS.— 

10 Section 129 of the Internal Revenue Code of 1986 is 

11 amended by adding at the end the following new sub12 section: 

13 ‘‘(f) CONTRIBUTIONS TO DEPENDENT CARE SAVINGS

14 ACCOUNTS.— 

15 ‘‘(1) IN GENERAL.—Gross income of an em16 ployee does not include amounts contributed by an 

17 employee’s employer to any dependent care savings 

18 account (as defined in section 224) of such employee 

19 to the extent such amounts do not exceed the limita20 tion under section 224(b)(1) which is applicable to 

21 such employee for such taxable year. 

22 ‘‘(2) CROSS REFERENCE.—For penalty on fail23 ure by employer to make comparable contributions 

24 to the dependent care savings accounts of com25 parable employees, see section 4980H.’’. 


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

2 of the Internal Revenue Code of 1986 is amended— 

3 (1) in subsection (a), by striking ‘‘or’’ at the 

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

5 paragraph (5), and by inserting after paragraph (5) 

6 the following new paragraph: 

7 ‘‘(6) a dependent care savings account (as de8 fined in section 224),’’, and 

9 (2) by adding at the end the following new sub10 section: 

11 ‘‘(h) EXCESS CONTRIBUTIONS TO DEPENDENT CARE

12 SAVINGS ACCOUNTS.—For purposes of this section, in the 

13 case of a dependent care savings account (as defined in 

14 section 224), the term ‘excess contributions’ means the 

15 sum of— 

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

17 taxable year to the account (other than a rollover 

18 contribution described in section 224(e)(5)) which is 

19 neither excludable from gross income under section 

20 129 nor allowable as a deduction under section 224 

21 for such year, and 

22 ‘‘(2) the amount determined under this sub23 section for the preceding taxable year, reduced by 

24 the sum of— 


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1 ‘‘(A) the distributions out of the account 

2 which were included in gross income under sec3 tion 224(e)(2), and 

4 ‘‘(B) the excess (if any) of— 

5 ‘‘(i) the maximum amount allowable 

6 as a deduction under section 224(b)(1) for 

7 the taxable year, over 

8 ‘‘(ii) the amount contributed to the 

9 account for the taxable year.’’. 

10 (e) FAILURE OF EMPLOYER TO MAKE COMPARABLE

11 DEPENDENT CARE SAVINGS ACCOUNT CONTRIBU12 TIONS.—Chapter 43 of the Internal Revenue Code of 

13 1986, as amended by the Patient Protection and Afford14 able Care Act, is amended by adding at the end the fol15 lowing new section: 

16 ‘‘SEC. 4980J. FAILURE OF EMPLOYER TO MAKE COM17 PARABLE DEPENDENT CARE SAVINGS AC18 COUNT CONTRIBUTIONS. 

19 ‘‘(a) GENERAL RULE.—In the case of an employer 

20 who makes a contribution to the dependent care savings 

21 account of any employee during a calendar year, there is 

22 hereby imposed a tax on the failure of such employer to 

23 meet the requirements of subsection (b) for such calendar 

24 year. 


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1 ‘‘(b) RULES AND REQUIREMENTS.—Rules and re2 quirements similar to the rules and requirements of sec3 tion 4980E shall apply for purposes of this section. 

4 ‘‘(c) REGULATIONS.—The Secretary shall issue regu5 lations to carry out the purposes of this section. 

6 ‘‘(d) EXCEPTION.—For purposes of applying section 

7 4980E to a contribution to a dependent care savings ac8 count of an employee who is not a highly compensated 

9 employee (as defined in section 414(q)), highly com10 pensated employees shall not be treated as comparable 

11 participating employees.’’. 

12 (f) CLERICAL AMENDMENTS.— 

13 (1) The table of sections for part VII of sub14 chapter B of chapter 1 of the Internal Revenue Code 

15 of 1986 is amended by redesignating the item relat16 ing to section 224 as an item relating to section 

17 225, and by inserting before such item the following 

18 new item: 

‘‘Sec. 224. Dependent care savings accounts.’’. 

19 (2) The table of sections for chapter 43 of such 

20 Code, as amended by the Patient Protection and Af21 fordable Care Act, is amended by adding at the end 

22 the following new item: 

‘‘Sec. 4980J. Failure of employer to make comparable dependent care savings 

account contributions.’’. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

Æ 


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