I 
110TH CONGRESS 
1ST SESSION H. R. 2370 
To amend the Internal Revenue Code of 1986 to provide for the establishment 
of financial security accounts for the care of family members with disabilities. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 17, 2007 
Mr. CRENSHAW (for himself, Mr. MEEK of Florida, Mr. CAMP of Michigan, 
Mr. SESSIONS, Mr. TOM DAVIS of Virginia, Mr. RAMSTAD, Mrs. BONO, 
Mr. MACK, Ms. CORRINE BROWN of Florida, Mr. PUTNAM, and Mr. 
WEXLER) introduced the following bill; which was referred to the Com-
mittee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
for the establishment of financial security accounts for 
the care of family members with disabilities. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Financial Security Ac-
counts for Individuals with Disabilities Act of 2007’’. 
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SEC. 2. FINANCIAL SECURITY ACCOUNTS FOR INDIVIDUALS 
WITH DISABILITIES. 
(a) IN GENERAL.—Subchapter F of chapter 1 of the 
Internal Revenue Code of 1986 (relating to exempt organi-
zations) is amended by inserting after part VIII the fol-
lowing new part: 
‘‘PART IX—SAVINGS FOR INDIVIDUALS WITH 
DISABILITIES 
‘‘Sec. 530A. Financial security accounts for individuals with disabilities. 
‘‘SEC. 530A. FINANCIAL SECURITY ACCOUNTS FOR INDIVID-
UALS WITH DISABILITIES. 
‘‘(a) GENERAL RULE.—A financial security account 
for an individual with a disability shall be exempt from 
taxation under this subtitle. Notwithstanding the pre-
ceding sentence, such account shall be subject to the taxes 
imposed by section 511 (relating to imposition of tax on 
unrelated business income of charitable organizations). 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) FINANCIAL SECURITY ACCOUNT FOR AN 
INDIVIDUAL WITH A DISABILITY.—The term ‘finan-
cial security account for an individual with a dis-
ability’ means a trust created or organized in the 
United States (and designated as a financial security 
account for an individual with a disability at the 
time created or organized) exclusively for the pur-
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pose of paying qualified disability expenses of an in-
dividual who is disabled and who is the designated 
beneficiary of the trust, but only if the written gov-
erning instrument creating the trust meets the fol-
lowing requirements: 
‘‘(A) No contribution will be accepted— 
‘‘(i) unless it is in cash, and 
‘‘(ii) except in the case of rollover con-
tributions described in subsection (c)(4), if 
such contribution would result in aggregate 
contributions for the taxable year and all 
preceding 
taxable 
years 
exceeding 
$500,000. 
‘‘(B) The trustee is a bank (as defined in 
section 408(n)), a parent or guardian of the 
designated beneficiary, a designee of a parent 
or guardian of the designated beneficiary, the 
designated beneficiary, or another person, who 
demonstrates to the satisfaction of the Sec-
retary that the manner in which that person 
will administer the trust will be consistent with 
the requirements of this section. 
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts. 
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‘‘(D) The assets of the trust shall not be 
commingled with other property except in a 
common trust fund or common investment 
fund. 
‘‘(2) QUALIFIED DISABILITY EXPENSES.—The 
term ‘qualified disability expenses’ means, with re-
spect to an individual with a disability, amounts paid 
or incurred, not compensated for by insurance or 
otherwise, for— 
‘‘(A) education, medical and dental care, 
community based support services, employment 
training and support, moving, and assistive 
technology, 
‘‘(B) after the designated beneficiary has 
attained the age of 18, housing and transpor-
tation, and 
‘‘(C) funeral and burial services and prop-
erty. 
‘‘(3) INDIVIDUAL WITH A DISABILITY.—An in-
dividual is an individual with a disability if such in-
dividual is receiving supplemental security income 
benefits under title XVI of the Social Security Act 
or an individual otherwise eligible to receive such 
benefits notwithstanding the income and assets tests 
required for eligibility for such benefits. 
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‘‘(4) RULES RELATING TO ESTATE AND GIFT 
TAX.—Rules similar to the rules of paragraphs (2), 
(4), and (5) of section 529(c) shall apply for pur-
poses of this section. 
‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount paid or distrib-
uted out of a financial security account for an indi-
vidual with a disability shall be included in gross in-
come by the payee or distributee, as the case may 
be, for the taxable year in which received in the 
manner as provided in section 72. 
‘‘(2) DISTRIBUTIONS
FOR
BENEFIT
OF
DES-
IGNATED BENEFICIARY.— 
‘‘(A) IN GENERAL.—No amount shall be 
includible in gross income under paragraph (1) 
if the qualified disability expenses of the des-
ignated beneficiary during the taxable year are 
not less than the aggregate distributions during 
the taxable year. 
‘‘(B) DISTRIBUTIONS IN EXCESS OF EX-
PENSES.—If such aggregate distributions ex-
ceed such expenses during the taxable year, the 
amount otherwise includible in gross income 
under paragraph (1) shall be reduced by the 
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amount which bears the same ratio to the 
amount which would be includible in gross in-
come under paragraph (1) (without regard to 
this subparagraph) as the qualified disability 
expenses bear to such aggregate distributions. 
‘‘(C) 
DISALLOWANCE
OF
EXCLUDED 
AMOUNTS AS DEDUCTION, CREDIT, OR EXCLU-
SION.—No deduction, credit, or exclusion shall 
be allowed to the taxpayer under any other sec-
tion of this chapter for any qualified disability 
expenses to the extent taken into account in de-
termining the amount of the exclusion under 
this paragraph. 
‘‘(3) ADDITIONAL TAX FOR DISTRIBUTIONS NOT 
USED
FOR
BENEFIT
OF
DESIGNATED
BENE-
FICIARY.— 
‘‘(A) IN GENERAL.—The tax imposed by 
this chapter for any taxable year on any tax-
payer who receives a payment or distribution 
from a financial security account for an indi-
vidual with a disability shall be increased by 10 
percent of the amount thereof which is includ-
ible in gross income under paragraph (1). 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply if the payment or distribution is 
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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 if— 
‘‘(i) such distribution is made before 
the first day of the sixth month of the tax-
able year following the 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) ROLLOVERS.—Paragraph (1) shall not 
apply to any amount paid or distributed from a fi-
nancial security account for an individual with a dis-
ability 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 financial 
security account for an individual with a disability 
for the benefit of the same beneficiary. The pre-
ceding sentence shall not apply to any payment or 
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distribution if it applied to any prior payment or dis-
tribution during the 12-month period ending on the 
date of the payment or distribution. 
‘‘(5) CHANGE IN BENEFICIARY.—Any change in 
the beneficiary of a financial security account for an 
individual with a disability shall not be treated as a 
distribution for purposes of paragraph (1) if the new 
beneficiary is disabled and is a member of the family 
(as defined in section 529(e)(2)) of the old bene-
ficiary. 
‘‘(d) TAX TREATMENT OF ACCOUNTS.—Rules similar 
to the rules of paragraphs (2) and (4) of section 408(e) 
shall apply to any financial security account for an indi-
vidual with a disability. 
‘‘(e) COMMUNITY PROPERTY LAWS.—This section 
shall be applied without regard to any community property 
laws. 
‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this 
section, a custodial account shall be treated as a trust if— 
‘‘(1) the assets of such account are held by a 
bank (as defined in section 408(n) or another person 
who demonstrates, to the satisfaction of the Sec-
retary, that the manner in which he will administer 
the account will be consistent with the requirements 
of this section, and 
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‘‘(2) the custodial account would, except for the 
fact that it is not a trust, constitute an account de-
scribed in subsection (c)(1). 
For purposes of this title, in the case of a custodial ac-
count treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as 
the trustee thereof. 
‘‘(g) REPORTS.—The trustee of a financial security 
account for an individual with a disability shall make such 
reports regarding such account to the Secretary and to 
the beneficiary of the account with respect to contribu-
tions, distributions, and such other matters as the Sec-
retary may require. The reports required by this sub-
section 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. 
‘‘(h) COORDINATION WITH MEANS-TESTED PRO-
GRAMS.—Amounts held by, or paid or distributed from, 
a financial security account for an individual with a dis-
ability shall not be treated as income or assets, and shall 
not be taken into account in determining eligibility for, 
or the amount or extent of, benefits provided by any pro-
gram funded in whole or in part with Federal funds.’’. 
(b) CONFORMING AMENDMENTS.— 
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(1) PENALTY FOR FAILURE TO MEET MINIMUM 
DISTRIBUTION
REQUIREMENT.—Subsection (c) of 
section 4974 of such Code is amended by striking 
‘‘or’’ at the end of paragraph (4), by striking the pe-
riod at the end of paragraph (5) and inserting ‘‘, 
or’’, and by inserting after paragraph (5) the fol-
lowing new paragraph: 
‘‘(6) any financial security account for an indi-
vidual with a disability (as defined in section 
530A(b)).’’. 
(2) TAX ON PROHIBITED TRANSACTIONS.— 
(A) IN GENERAL.—Paragraph (1) of sec-
tion 4975(e) of such Code (defining plan) is 
amended by redesignating subparagraph (G) as 
subparagraph (H), by striking ‘‘or’’ at the end 
of subparagraph (F), and by adding after sub-
paragraph (F) the following: 
‘‘(G) a financial security account for an in-
dividual with a disability described in section 
530A, or’’. 
(B) EXEMPTION.—Subsection (d) of sec-
tion 4975 of such Code (relating to exemptions) 
is amended by striking ‘‘or’’ at the end of para-
graph (22), by striking the period at the end of 
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paragraph (23) and inserting ‘‘; or’’, and by in-
serting after paragraph (23) the following: 
‘‘(24) in the case of a financial security account 
for an individual with a disability, any transaction to 
provide housing or other services by a family mem-
ber to or for the designated beneficiary of the trust 
to the extent that such transaction does not exceed 
the fair market value of the housing or service (as 
the case may be) provided.’’. 
(C) SPECIAL RULE.—Subsection (c) of sec-
tion 4975 of such Code (relating to tax on pro-
hibited transactions) is amended by adding at 
the end the following new paragraph: 
‘‘(7) SPECIAL RULE FOR FINANCIAL SECURITY 
ACCOUNT FOR INDIVIDUALS WITH DISABILITIES.— 
An individual for whose benefit a financial security 
account for an individual with a disability is estab-
lished and any contributor to such account shall be 
exempt from the tax imposed by this section with re-
spect to any transaction concerning such account 
(which would otherwise be taxable under this sec-
tion) if section 530A(d) applies with respect to such 
transaction.’’. 
(3) ROLLOVERS
FROM
QUALIFIED
TUITION 
PROGRAMS AND EDUCATION SAVINGS ACCOUNTS.— 
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(A) QUALIFIED
TUITION
PROGRAMS.— 
Paragraph (3) of section 529(c) of such Code is 
amended by adding at the end the following 
new subparagraph: 
‘‘(E) CONTRIBUTIONS TO FINANCIAL SE-
CURITY ACCOUNT FOR AN INDIVIDUAL WITH A 
DISABILITY.—Subparagraph (A) shall not apply 
to that portion of any distribution which, within 
60 days of such distribution, is contributed to 
a financial security account for an individual 
with a disability for the benefit of the des-
ignated beneficiary.’’. 
(B) EDUCATION SAVINGS ACCOUNT.—Sub-
section (d) of section 530 of such Code is 
amended by adding at the end the following 
new paragraph: 
‘‘(9) CONTRIBUTIONS TO FINANCIAL SECURITY 
ACCOUNT
FOR
AN
INDIVIDUAL
WITH
A
DIS-
ABILITY.—Paragraph (1) shall not apply to any 
amount paid or distributed from a Coverdell edu-
cation savings 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 a fi-
nancial security account for an individual with a dis-
ability for the benefit of the same beneficiary.’’. 
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