percent of the amount of the self-employment 
income for such taxable year. 
‘‘(B) INDIVIDUALS COVERED UNDER PART 
B OF TITLE II OF THE SOCIAL SECURITY ACT.—
‘‘(i) IN
GENERAL.—In addition to 
other taxes, there is hereby imposed for 
each taxable year, on the self-employment 
income of every part B eligible individual, 
a tax equal to the applicable percentage of 
the amount of the self-employment income 
for such taxable year. 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of clause (i), the term ‘applicable 
percentage’ means the excess of 12.4 per-
cent, over 
‘‘(I) 3 percent, in the case of the 
first $10,000 of self-employment in-
come received in the calendar year, 
and 
‘‘(II) 2 percent, in the case of 
any additional self-employment income 
received in the calendar year. 
‘‘(2) CONTRIBUTION OF OASDI TAX REDUCTION 
TO INDIVIDUAL SECURITY ACCOUNTS.—In addition 
to other taxes, there is hereby imposed for each tax-
able year, on the self-employment income of every 
part B eligible individual for the calendar year, an 
individual security account contribution equal to the 
sum of—
‘‘(A) 3 percent of self-employment income 
as does not exceed the first $10,000 of such in-
come derived during the taxable year by such 
individual, 
‘‘(B) 2 percent of self-employment income 
in the case of any additional self-employment 
income derived by such individual during the 
taxable year, and 
‘‘(C) so much of such self-employment in-
come (not to exceed $5,000) as is designated by 
the individual in the same manner as described 
in section 251(d) of the Social Security Act. 
‘‘(3) INFLATION ADJUSTMENTS.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after 2006, the $10,000 
amount in paragraphs (1) and (2) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the wage increase percentage (if 
any) for such year,
‘‘(B) DESIGNATED
CONTRIBUTIONS.—In 
the case of any calendar year beginning after 
2006, the $5,000 amount in paragraph (2)(C) 
shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the percentage increase (if any) 
for such year determined under section 
215(i) of the Social Security Act. 
‘‘(C) ROUNDING.—If any dollar amount 
after being increased under subparagraph (A) 
or (B) is not a multiple of $10, such dollar 
amount shall be rounded to the nearest multiple 
of $10. 
‘‘(4) DEFINITION.—For purposes of this sub-
section, the term ‘wage increase percentage’, with re-
spect to a calendar year, means the percentage in-
crease which would become effective under section 
215(i)(2) of the Social Security Act in such year if 
such increase were determined as described in sec-
tion 215(i)(5)(A)(i) of such Act.’’. 
(3) PART B ELIGIBLE INDIVIDUAL.—
(A) TAXES ON EMPLOYEES.—Section 3121 
of such Code (relating to definitions) is amend-
ed by inserting after subsection (s) the fol-
lowing new subsection:
‘‘(t) PART B ELIGIBLE INDIVIDUAL.—For purposes 
of this chapter, the term ‘part B eligible individual’ means, 
for any calendar year, an individual who is an eligible indi-
vidual (as defined in section 251(a)(2) of the Social Secu-
rity Act) for such calendar year.’’. 
(B) 
SELF-EMPLOYMENT
TAX.—Section 
1402 of such Code (relating to definitions) is 
amended by adding at the end the following 
new subsection: 
‘‘(l) PART B ELIGIBLE INDIVIDUAL.—The term ‘part 
B eligible individual’ means, for any calendar year, an in-
dividual who is an eligible individual (as defined in section 
251(a)(2) of the Social Security Act) for such calendar 
year.’’. 
(4) EFFECTIVE DATES.—
(A) EMPLOYEES.—The amendments made 
by paragraphs (1) and (3)(A) apply to remu-
neration paid after December 31, 2005. 
(B) SELF-EMPLOYED
INDIVIDUALS.—The 
amendments made by paragraphs (2) and 
(3)(B) apply to taxable years beginning after 
December 31, 2005. 
(c) MATCHING CONTRIBUTIONS.—
(1) IN GENERAL.—Part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (re-
lating to credits against tax) is amended by adding 
at the end the following new subpart: 
‘‘Subpart H—Individual Security Account Credits
‘‘Sec. 54. Individual security account credit.
‘‘SEC. 54. INDIVIDUAL SECURITY ACCOUNT CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—Each part B eligible 
individual is entitled to a credit for the taxable year in 
an amount equal to the sum of—
‘‘(1) $150, 
‘‘(2) 50 percent of the designated wages of such 
individual for the taxable year, 
‘‘(3) 50 percent of the designated self-employ-
ment income of such individual for the taxable year, 
plus 
‘‘(4) 50 percent of the designated earned in-
come credit. 
‘‘(b) LIMITATIONS.—
‘‘(1) AMOUNT.—The amount determined under 
paragraphs (2) and (3) of subsection (a) with re-
spect to such individual for any taxable year may 
not exceed the excess (if any) of—
‘‘(A) $600, over 
‘‘(B) the sum of the amounts received by 
the Secretary on behalf of such individual under 
subparagraphs 
(A) 
and 
(B) 
of 
section
3101(a)(2) and subparagraphs (A) and (B) of 
1401(a)(2) for the taxable year. 
‘‘(2) FAILURE TO MAKE VOLUNTARY CONTRIBU-
TIONS.—In the case of a part B eligible individual 
with respect to whom the amount of wages des-
ignated under section 3101(a)(2)(C) plus the 
amount self-employment income designated under 
section 1401(a)(2)(C) for the taxable year is zero, 
the credit to which such individual is entitled under 
this section shall be equal to zero. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) PART B ELIGIBLE INDIVIDUAL.—The term 
‘part B eligible individual’ means, for any calendar 
year, an individual who is an eligible individual (as 
defined in section 251(a)(2) of the Social Security 
Act) for such calendar year. 
‘‘(2) DESIGNATED
WAGES.—The term ‘des-
ignated wages’ means with respect to any taxable 
year 
the 
amount 
designated 
under 
section 
3101(a)(2)(C). 
‘‘(3) 
DESIGNATED
SELF-EMPLOYMENT
IN-
COME.—The term ‘designated self-employment in-
come’ means with respect to any taxable year the 
amount designated under section 1401(a)(2)(C) for 
such taxable year.
‘‘(4) DESIGNATED EARNED INCOME CREDIT.—
The term ‘designated earned income credit’ means 
the amount of the credit allowed under section 32 
for the taxable year that is designated by the part 
B eligible individual in the same manner as de-
scribed in section 251(d) of the Social Security Act. 
‘‘(d) CREDIT USED ONLY FOR INDIVIDUAL SECU-
RITY ACCOUNT.—For purposes of this title, the credit al-
lowed under this section with respect to any part B eligible 
individual—
‘‘(1) shall not be treated as a credit allowed 
under this part, but 
‘‘(2) shall be treated as an overpayment of tax 
under section 6401(b)(3) which may, in accordance 
with section 6402(l), only be transferred to an indi-
vidual security account established under part B of 
title II of the Social Security Act with respect to 
such individual.’’. 
(2) CONTRIBUTION OF EITC AMOUNTS TO INDI-
VIDUAL SECURITY ACCOUNTS.—Section 32 of such 
Code (relating to earned income) is amended by add-
ing at the end the following new subsection: 
‘‘(n) CONTRIBUTION TO INDIVIDUAL SECURITY AC-
COUNT.—
‘‘(1) IN
GENERAL.—An eligible part B indi-
vidual who is allowed a credit under this section may 
designate all or a portion of such credit as a con-
tribution to the individual security account estab-
lished on behalf of such individual. 
‘‘(2) CREDIT USED ONLY FOR INDIVIDUAL SE-
CURITY ACCOUNT.—For purposes of this title, the 
amount designated under paragraph (1) with respect 
to any part B individual—
‘‘(A) shall not be treated as a credit al-
lowed under this section, but 
‘‘(B) shall be treated as an overpayment of 
tax under section 6401(b)(3) which may, in ac-
cordance with section 6402(l), only be trans-
ferred to an individual security account estab-
lished under part B of title II of the Social Se-
curity Act with respect to such individual.’’. 
(3) CONTRIBUTION OF CREDITED AMOUNTS TO 
INDIVIDUAL SECURITY ACCOUNT.—
(A) CREDITED
AMOUNTS
TREATED
AS 
OVERPAYMENT OF TAX.—Subsection (b) of sec-
tion 6401 (relating to excessive credits) is 
amended by adding at the end the following 
new paragraph:
‘‘(3) SPECIAL RULE FOR CREDIT UNDER SEC-
TIONS 32 AND 54.—Subject to the provisions of sec-
tion 6402(l), the following sum shall be considered 
an overpayment—
‘‘(A) SECTION 54 CREDIT.—The amount of 
any credit allowed under section 54 for any tax-
able year, plus 
‘‘(B) SECTION 32 DESIGNATED EARNED IN-
COME CREDIT CONTRIBUTION.—The amount of 
the earned income credit designated as a con-
tribution to an individual security account 
under section 32(n) for the taxable year.’’. 
(B) TRANSFER OF CREDIT AMOUNT TO IN-
DIVIDUAL SECURITY ACCOUNT.—Section 6402 
of such Code (relating to authority to make 
credits or refunds) is amended by adding at the 
end the following new subsection: 
‘‘(l) OVERPAYMENTS ATTRIBUTABLE TO INDIVIDUAL 
SECURITY ACCOUNT CREDIT.—In the case of any over-
payment described in section 6401(b)(3) with respect to 
any individual, the Secretary shall transfer for crediting 
by the Commissioner of Social Security to the individual 
security account of an such individual, an amount equal 
to the amount of such overpayment.’’.
(4) NOTICE TO EITC RECIPIENTS OF MATCHING 
CONTRIBUTIONS
TO
INDIVIDUAL
SECURITY
AC-
COUNTS.—In connection with information and tax 
forms relating to the credit allowed under section 32 
of the Internal Revenue Code of 1986, the Secretary 
of the Treasury shall provide notice of the avail-
ability of matching contributions pursuant to section 
54 of such Code (as added by subsection (a) of this 
section) to individual security accounts under part B 
of title II of the Social Security Act. 
(5) CONFORMING AMENDMENTS.—
(A) Section 1324(b)(2) of title 31, United 
States Code, is amended by inserting before the 
period at the end ‘‘, or enacted by the Bipar-
tisan Retirement Security Act of 2005’’. 
(B) The table of subparts for part IV of 
subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the 
end the following new item:
‘‘SUBPART H. INDIVIDUAL SECURITY ACCOUNT CREDITS.’’
(6) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to refunds payable 
after December 31, 2005. 
(d) TAX TREATMENT OF INDIVIDUAL SECURITY AC-
COUNTS.—
(1) IN GENERAL.—Subchapter F of chapter 1 
of the Internal Revenue Code of 1986 (relating to 
exempt organizations) is amended by adding at the 
end the following new part: 
‘‘PART IX—INDIVIDUAL SECURITY SYSTEM
‘‘Sec. 530A. Individual security fund. 
‘‘Sec. 530B. Individual security accounts.
‘‘SEC. 530A. INDIVIDUAL SECURITY FUND AND FEDERALLY-
ADMINISTERED INDIVIDUAL SECURITY AC-
COUNTS. 
‘‘The Individual Security Fund established under sec-
tion 261 of the Social Security Act shall be exempt from 
taxation under this subtitle. 
‘‘SEC. 530B. INDIVIDUAL SECURITY ACCOUNTS. 
‘‘(a) IN GENERAL.—For purposes of this section, the 
term ‘individual security account’ means a Federally-ad-
ministered individual security account and a privately-ad-
ministered security account. 
‘‘(b) INDIVIDUAL SECURITY ACCOUNTS DEFINED.—
For purposes of subsection (a)—
‘‘(1) FEDERALLY-ADMINISTERED SECURITY AC-
COUNT.—The term ‘Federally-administered indi-
vidual security account’ means the account estab-
lished under section 251 of the Social Security Act. 
‘‘(2) PRIVATELY-ADMINISTERED SECURITY AC-
COUNT.—The term ‘privately-administered individual