ABLE Act of 2014

To amend the Internal Revenue Code of 1986 to provide for the tax treatment of ABLE accounts established under State programs for the care of family members with disabilities, and for other purposes. 1. Short title This Act may be cited as the Achieving a Better Life Experience Act of 2014 ABLE Act of 2014 2. Purposes The purposes of this Act are as follows: (1) To encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life. (2) To provide secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, the Medicaid program under title XIX of the Social Security Act, the supplemental security income program under title XVI of such Act, the beneficiary’s employment, and other sources. 3. Qualified ABLE programs (a) In general Subchapter F of chapter 1 529A. Qualified ABLE programs (a) General rule A qualified ABLE program shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). (b) Qualified ABLE program For purposes of this section— (1) In general The term qualified ABLE program (A) under which a person may make contributions for a taxable year, for the benefit of an individual who is an eligible individual for such taxable year, to an ABLE account which is established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account, (B) which limits a designated beneficiary to 1 ABLE account for purposes of this section, (C) which allows for the establishment of an ABLE account only for a beneficiary who is a resident of such State or a resident of a contracting State, and (D) which meets the other requirements of this section. (2) Cash contributions A program shall not be treated as a qualified ABLE program unless it provides that no contribution will be accepted— (A) unless it is in cash, or (B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the amount in effect under section 2503(b) for the calendar year in which the taxable year begins. For purposes of this paragraph, rules similar to the rules of section 408(d)(4) (determined without regard to subparagraph (B) thereof) shall apply. (3) Separate accounting A program shall not be treated as a qualified ABLE program unless it provides separate accounting for each designated beneficiary. (4) No investment direction A program shall not be treated as a qualified ABLE program unless it provides that any contributor to, or designated beneficiary under, such program may not directly or indirectly direct the investment of any contributions to the program (or any earnings thereon). (5) No pledging of interest as security A program shall not be treated as a qualified ABLE program if it allows any interest in the program or any portion thereof to be used as security for a loan. (6) Prohibition on excess contributions A program shall not be treated as a qualified ABLE program unless it provides adequate safeguards to prevent aggregate contributions on behalf of a designated beneficiary in excess of the limit established by the State under section 529(b)(6). For purposes of the preceding sentence, aggregate contributions include contributions under any prior qualified ABLE program of any State or agency or instrumentality thereof. (c) Tax treatment (1) Distributions (A) In general Any distribution under a qualified ABLE program shall be includible in the gross income of the distributee in the manner as provided under section 72 to the extent not excluded from gross income under any other provision of this chapter. (B) Distributions for qualified disability expenses For purposes of this paragraph, if distributions from a qualified ABLE program— (i) do not exceed the qualified disability expenses of the designated beneficiary, no amount shall be includible in gross income, and (ii) in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions. (C) Change in beneficiaries or programs (i) Rollovers from ABLE accounts Subparagraph (A) shall not apply to any amount paid or distributed from an ABLE account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another ABLE account for the benefit of the same beneficiary or an eligible individual who is a family member of the beneficiary. (ii) Change in designated beneficiaries Any change in the designated beneficiary of an interest in a qualified ABLE program during a taxable year shall not be treated as a distribution for purposes of subparagraph (A) if the new beneficiary is an eligible individual for such taxable year and a member of the family of the former beneficiary. (iii) Limitation on certain rollovers Clause (i) shall not apply to any transfer if such transfer occurs within 12 months from the date of a previous transfer to any qualified ABLE program for the benefit of the designated beneficiary. (D) Operating rules For purposes of applying section 72— (i) except to the extent provided by the Secretary, all distributions during a taxable year shall be treated as one distribution, and (ii) except to the extent provided by the Secretary, the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins. (2) Gift tax rules For purposes of chapters 12 and 13— (A) Contributions Any contribution to a qualified ABLE program on behalf of any designated beneficiary— (i) shall be treated as a completed gift to such beneficiary which is not a future interest in property, and (ii) shall not be treated as a qualified transfer under section 2503(e). (B) Treatment of distributions Except as provided in subparagraph (C), in no event shall a distribution from a qualified ABLE program be treated as a taxable gift. (C) Treatment of designation of new beneficiary The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a contribution under paragraph (1)(C) to the ABLE account of a new beneficiary) during any taxable year unless, as of the beginning of such taxable year, the new beneficiary is both an eligible individual for such taxable year and a member of the family of the former beneficiary. (3) Additional tax for distributions not used for disability expenses (A) In general The tax imposed by this chapter for any taxable year on any taxpayer who receives a distribution from a qualified ABLE program which is includible in gross income shall be increased by 10 percent of the amount which is so includible. (B) Exception Subparagraph (A) shall not apply if the payment or distribution is made to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. (C) Contributions returned before certain date Subparagraph (A) shall not apply to the distribution of any contribution made during a taxable year on behalf of the designated beneficiary if— (i) such distribution is received on or before the day prescribed by law (including extensions of time) for filing such designated beneficiary’s return for such taxable year, and (ii) such distribution is accompanied by the amount of net income attributable to such excess contribution. Any net income described in clause (ii) shall be included in gross income for the taxable year in which such excess contribution was made. (4) Loss of ABLE account treatment If, during any taxable year of an eligible individual for whose benefit any ABLE account is established, more than 1 ABLE account for the benefit of the eligible individual exists at the same time, each such ABLE account other than the earliest established ABLE account shall not be treated as an ABLE account as of the first day of such taxable year. (d) Reports (1) In general Each officer or employee having control of the qualified ABLE program or their designee shall make such reports regarding such program to the Secretary and to designated beneficiaries with respect to contributions, distributions, the return of excess contributions, and such other matters as the Secretary may require. (2) Certain aggregated information For research purposes, the Secretary shall make available to the public reports containing aggregate information, by diagnosis and other relevant characteristics, on contributions and distributions from the qualified ABLE program. In carrying out the preceding sentence an item may not be made available to the public if such item can be associated with, or otherwise identify, directly or indirectly, a particular individual. (3) Notice of establishment of ABLE account The trustee of an ABLE account shall submit a notice to the Secretary upon the establishment of the ABLE account. Such notice shall contain the name and State of residence of the beneficiary and such other information as the Secretary may require. (4) Electronic distribution statements For purposes of section 4 of the Achieving a Better Life Experience Act of 2014 (5) Requirements The reports and notices required by paragraphs (1), (2), and (3) shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary. (e) Other definitions and special rules For purposes of this section— (1) Eligible individual (A) In general An individual is an eligible individual for a taxable year if during such taxable year— (i) a disability certification with respect to such individual is filed with the Secretary for such taxable year, or (ii) the individual has been determined for purposes of section 223 or 1614 of the Social Security Act ( 42 U.S.C. 421 (B) Criteria An individual meets the criteria of this subparagraph for a taxable year if— (i) in the case of an individual who has not attained age 19 as of the close of the taxable year, the individual is either blind (within the meaning of section 1614(a)(2) of the Social Security Act ( 42 U.S.C. 1382c(a)(2) 42 U.S.C. 1382c(a)(3)(C) (ii) the individual— (I) is either blind (within the meaning of section 1614(a)(2) of such Act ( 42 U.S.C. 1382c(a)(2) (II) such blindness or disability occurred before the date on which the individual attained age 26. (2) Disability certification (A) In general The term disability certification (i) the individual meets the criteria described in paragraph (1)(B), and (ii) includes a copy of the individual’s diagnosis relating to the individual’s relevant impairment or impairments, signed by a physician meeting the criteria of section 1861(r)(1) of the Social Security Act. (B) Restriction on use of certification No inference may be drawn from a disability certification for purposes of establishing eligibility for benefits under title II, XVI, or XIX of the Social Security Act. (3) Designated beneficiary The term designated beneficiary (A) the eligible individual designated at the commencement of participation in the qualified ABLE program as the beneficiary of amounts paid (or to be paid) to the program, and (B) in the case of a change in beneficiaries described in subparagraph (C)(ii) of subsection (c)(1), the individual who is the new beneficiary. (4) Member of family The term member of the family (5) Qualified disability expenses The term qualified disability expenses (6) ABLE account The term ABLE account (7) Contracting State The term contracting State (f) Transfer to State Subject to any outstanding payments due for qualified disability expenses, in the case that the designated beneficiary dies, all amounts remaining in the qualified ABLE account not in excess of the amount equal to the total medical assistance paid for the designated beneficiary after the establishment of the account, net of any premiums paid from the account or paid by or on behalf of the beneficiary to a Medicaid Buy-In program, under any State Medicaid plan established under title XIX of the Social Security Act shall be distributed to such State upon filing of a claim for payment by such State. For purposes of this paragraph, the State shall be a creditor of an ABLE account and not a beneficiary. Subsection (c)(3) shall not apply to a distribution under the preceding sentence. (g) Regulations The Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations— (1) to enforce the 1 ABLE account per eligible individual limit, (2) providing for the information required to be presented to open an ABLE account, (3) to generally define qualified disability expenses, (4) developed in consultation with the Commissioner of Social Security, relating to disability certifications and determinations of disability, including those conditions deemed to meet the requirements of subsection (e)(1)(B)(ii), (5) to prevent fraud and abuse with respect to amounts claimed as qualified disability expenses, (6) under chapters 11, 12, and 13 of this title, and (7) to allow for transfers from one ABLE account to another ABLE account in cases in which there is a change in the State of residence of an eligible individual. . (b) Tax on excess contributions (1) In general Subsection (a) of section 4973 or or (6) an ABLE account (within the meaning of section 529A), . (2) Excess contribution Section 4973 (h) Excess contributions to ABLE account For purposes of this section— (1) In general In the case of an ABLE account (within the meaning of section 529A), the term excess contributions (2) Special rule For purposes of this subsection, any contribution which is distributed out of the ABLE account in a distribution to which the last sentence of section 529A(b)(2) applies shall be treated as an amount not contributed. . (c) Penalty for failure to file reports Section 6693(a)(2) and (E) section 529A(d) (relating to qualified ABLE programs), and . (d) Conforming amendments (1) Section 26(b)(2) and , and (Y) section 529A(c)(3)(A) (relating to additional tax on ABLE account distributions not used for qualified disability expenses). . (2) The heading for part VIII of subchapter F of chapter 1 Higher Education Certain (3) The item in the table of parts for subchapter F of chapter 1 Part VIII. Certain Savings Entities. . (4) The table of sections for part VIII of subchapter F of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 529 the following new item: Sec. 529A. Qualified ABLE programs. . (e) Effective date (1) In general The amendments made by this section shall apply to taxable years beginning after December 31, 2014. (2) Regulations The Secretary of the Treasury (or the Secretary’s designee) shall promulgate the regulations or other guidance required under section 529A(g) of the Internal Revenue Code of 1986, as added by subsection (a), not later than 6 months after the date of the enactment of this Act. 4. Treatment of ABLE accounts under certain Federal programs (a) Account funds disregarded for purposes of certain other means-Tested Federal programs Notwithstanding any other provision of Federal law that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such provision to be provided to or for the benefit of such individual, any amount (including earnings thereon) in the ABLE account (within the meaning of section 529A (b) Suspension of SSI benefits during periods of excessive account funds (1) In general The benefits of an individual under the supplemental security income program under title XVI of the Social Security Act shall not be terminated, but shall be suspended, by reason of excess resources of the individual attributable to an amount in the ABLE account (within the meaning of section 529A of the Internal Revenue Code of 1986) of the individual not disregarded under subsection (a) of this section. (2) No impact on Medicaid eligibility An individual who would be receiving payment of such supplemental security income benefits but for the application of the previous sentence shall be treated for purposes of title XIX of the Social Security Act as if the individual continued to be receiving payment of such benefits. (c) Effective date This section shall take effect on the date of the enactment of this Act. November 12, 2014 Reported from the Committee on Ways and Means November 12, 2014 The Committee on Energy and Commerce

Summary: Achieving a Better Life Experience Act of 2014 or the ABLE Act of 2014 - Title I: Qualified ABLE Programs - (Sec. 101) States as the purposes of this title to: (1) encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life; and (2) provide secure funding for disability-related expenses of beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, title XVI (Supplemental Security Income) and title XIX (Medicaid) of the Social Security Act, the beneficiary's employment, and other sources. (Sec. 102) Amends the Internal Revenue Code to exempt from taxation a qualified ABLE program established and maintained by a state, or by an agency or instrumentality of the state, to pay the qualified disability expenses related to the blindness or disability of a program beneficiary, including expenses for education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, and expenses for oversight and monitoring, funeral and burial expenses. Requires officers and employees who have control of the qualified ABLE program to make reports as required by the Secretary of the Treasury. Imposes an additional 10% tax on individuals who do not use distributions from an ABLE account for disability expenses. Subjects ABLE accounts to the penalty tax for excess contributions and for failure to file required reports. (Sec. 103) Requires amounts in ABLE accounts to be disregarded in determining eligibility for means-tested federal programs, except distributions for housing expenses under the supplemental security income program and for amounts in an ABLE account exceeding $100,000. Suspends the payment of supplemental security income benefits to an individual during any period in which such individual has excess resources in an ABLE account, but does not suspend or affect the Medicaid eligibility of such individual. (Sec. 104) Amends the bankruptcy code to exclude funds placed in an account of a qualified ABLE program from a bankruptcy estate, but only if: (1) the designated beneficiary of such account was a child, stepchild, grandchild, or step grandchild of the debtor; (2) such funds are not pledged or promised to any entity in connection with any extension of credit and are not excess contributions to an ABLE account; and (3) such funds do not exceed $6,225 during a specified time period. (Sec. 105) Amends the Internal Revenue Code to permit contributors to or beneficiaries of a qualified tuition program (529 program) to direct the investment of contributions to a 529 program (or any earnings thereon) up to two times in any calendar year (currently, no investment direction is allowed). Title II: Offsets- (Sec. 201) Amends title II (Old Age, Survivors, and Disability Insurance Benefits) of the Social Security Act to change the age at which disability benefits are no longer subject to reductions from 65 to the normal retirement age range as set forth in such Act. (Sec. 202) Amends title XVIII (Medicare) of the Social Security Act to: (1) accelerate the beginning date for adjustments of relative value targets for misvalued services in Medicare physician fee schedules from 2017 to 2016; and (2) treat items and services for vacuum erection systems furnished on and after July 1, 2015, in the same manner as erectile dysfunction drugs for purposes of defining covered drugs under Medicare part D. (Sec. 204) Amends the American Taxpayer Relief Act of 2012 to delay to January 1, 2025, the implementation of oral-only end stage renal disease (ESRD)-related drugs in the ESRD prospective payment system. (Sec. 205) Amends the Internal Revenue Code to increase the Inland Waterways Trust Fund financing rate to 29 cents per gallon for fuel used after March 31, 2015. (Sec. 206) Amends the Internal Revenue Code to treat Internal Revenue Service (IRS)-certified professional employer organizations (PEOs) as employers for employment tax purposes (thus allowing such PEOs to pay wages and collect and remit payroll taxes on behalf of an employer). Sets forth IRS certification requirements for PEOs, including independent financial review and reporting requirements. Requires a PEO, each year, to post a bond equal to the greater of 5% of the PEO's liability during the preceding calendar year (not exceeding $1 million) or $50,000. (Sec. 207) Amends the Internal Revenue Code to exclude dividends received by a U.S. shareholder from a controlled foreign corporation from the definition of "personal holding company income" for purposes of personal holding company taxation. (Sec. 208) Amends the Internal Revenue Code to require an annual inflation adjustment to tax penalty amounts for: (1) failure to file a tax return or pay tax, (2) failure to file certain information returns or registration statements, (3) noncompliance of tax return preparers, (4) failure to file partnership or S corporation returns, and (5) failure to file correct information returns or correct payee statements. (Sec. 209) Amends the Internal Revenue Code to increase from 15 to 30% the rate of the continuous levy on payments due to a Medicare provider or supplier for overdue taxes.