able goals, actions, and timetables. Such course
of action shall include at least five of the follow-
ing:
‘‘(i) A reduction of tax rates or fees
applying within the renewal community.
‘‘(ii) An increase in the level of effi-
ciency of local services within the renewal
community.
‘‘(iii) Crime reduction strategies, such
as crime prevention (including the provi-
sion of such services by nongovernmental
entities).
‘‘(iv) Actions to reduce, remove, sim-
plify, or streamline governmental require-
ments applying within the renewal commu-
nity.
‘‘(v) Involvement in the program by
private entities, organizations, neighbor-
hood 
organizations, 
and 
community
groups, particularly those in the renewal
community, including a commitment from
such private entities to provide jobs and
job training for, and technical, financial, or
other assistance to, employers, employees,
and residents from the renewal community.
‘‘(vi) State or local income tax bene-
fits for fees paid for services performed by
a nongovernmental entity which were for-
merly performed by a governmental entity.
‘‘(vii) The gift (or sale at below fair
market value) of surplus realty (such as
land, homes, and commercial or industrial
structures) in the renewal community to
neighborhood organizations, community de-
velopment corporations, or private compa-
nies.
‘‘(B) RECOGNITION OF PAST EFFORTS.—
For purposes of this section, in evaluating the
course of action agreed to by any State or local
government, the Secretary of Housing and
Urban Development shall take into account the
past efforts of such State or local government
in reducing the various burdens borne by em-
ployers and employees in the area involved.
‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE-
MENTS.—The economic growth promotion require-
ments of this paragraph are met with respect to a
nominated area if the local government and the
State in which such area is located certify in writing
that such government and State, respectively, have
repealed or otherwise will not enforce within the
area, if such area is designated as a renewal commu-
nity—
‘‘(A) licensing requirements for occupa-
tions that do not ordinarily require a profes-
sional degree,
‘‘(B) zoning restrictions on home-based
businesses which do not create a public nui-
sance,
‘‘(C) permit requirements for street ven-
dors who do not create a public nuisance,
‘‘(D) zoning or other restrictions that im-
pede the formation of schools or child care cen-
ters, and
‘‘(E) franchises or other restrictions on
competition for businesses providing public
services, including but not limited to taxicabs,
jitneys, cable television, or trash hauling,
except to the extent that such regulation of busi-
nesses and occupations is necessary for and well-tai-
lored to the protection of health and safety.
‘‘(e) COORDINATION WITH TREATMENT
OF EM-
POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—
For purposes of this title, if there are in effect with respect
to the same area both—
‘‘(1) a designation as a renewal community, and
‘‘(2) a designation as an empowerment zone or
enterprise community,
both of such designations shall be given full effect with
respect to such area.
‘‘(f) DEFINITIONS.—For purposes of this sub-
chapter—
‘‘(1) GOVERNMENTS.—If more than one govern-
ment seeks to nominate an area as a renewal com-
munity, any reference to, or requirement of, this sec-
tion shall apply to all such governments.
‘‘(2) STATE.—The term ‘State’ includes Puerto
Rico, the Virgin Islands of the United States, Guam,
American Samoa, the Northern Mariana Islands,
and any other possession of the United States.
‘‘(3) LOCAL
GOVERNMENT.—The term ‘local
government’ means—
‘‘(A) any county, city, town, township, par-
ish, village, or other general purpose political
subdivision of a State,
‘‘(B) any combination of political subdivi-
sions described in subparagraph (A) recognized
by the Secretary of Housing and Urban Devel-
opment, and
‘‘(C) the District of Columbia.’’
SEC. 104. EVALUATION AND REPORTING REQUIREMENTS.
Not later than the close of the fourth calendar year
after the year in which the Secretary of Housing and
Urban Development first designates an area as a renewal
community under section 1400E of the Internal Revenue
Code of 1986, and at the close of each fourth calendar
year thereafter, such Secretary shall prepare and submit
to the Congress a report on the effects of such designa-
tions in accomplishing the purposes of this Act.
SEC. 105. INTERACTION WITH OTHER FEDERAL PROGRAMS.
(a) TAX REDUCTIONS.—Any reduction of taxes, with
respect to any renewal community designated under sec-
tion 1400E of the Internal Revenue Code of 1986 (as
added by this title), under any plan of action under section
1400E(d) of such Code shall be disregarded in determin-
ing the eligibility of a State or local government for, or
the amount or extent of, any assistance or benefits under
any law of the United States (other than subchapter X
of chapter 1 of such Code).
(b) COORDINATION
WITH
RELOCATION
ASSIST-
ANCE.—The designation of a renewal community under
section 1400E of such Code (as added by this title) shall
not—
(1) constitute approval of a Federal or Feder-
ally assisted program or project (within the meaning
of the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970 (42
U.S.C. 4601 et seq.)), or
(2) entitle any person displaced from real prop-
erty located in such community to any rights or any
benefits under such Act.
(c) RENEWAL COMMUNITIES TREATED AS LABOR
SURPLUS AREAS.—Any area which is designated as a re-
newal community under section 1400E of such Code (as
added by this title) shall be treated for all purposes under
Federal law as a labor surplus area.
(d) COORDINATION
WITH
JOB
TRAINING
PRO-
GRAMS.—Renewal communities are encouraged to coordi-
nate efforts with job training providers who are public,
private not-for-profit, or private for-profit entities.
TITLE II—TAX INCENTIVES FOR
RENEWAL COMMUNITIES
SEC. 201. TAX TREATMENT OF RENEWAL COMMUNITIES.
(a) IN GENERAL.—Subchapter X of chapter I of the
Internal Revenue Code of 1986 (as added by title I) is
amended by adding at the end the following new parts:
‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN
‘‘Sec. 1400F. Renewal community capital gain.
‘‘Sec. 1400G. Renewal community business defined.
‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
‘‘(a) GENERAL RULE.—Gross income does not in-
clude any qualified capital gain recognized on the sale or
exchange of a qualified community asset held for more
than 5 years.
‘‘(b) QUALIFIED COMMUNITY ASSET.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘qualified com-
munity asset’ means—
‘‘(A) any qualified community stock,
‘‘(B) any qualified community business
property, and
‘‘(C) any qualified community partnership
interest.
‘‘(2) QUALIFIED COMMUNITY STOCK.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified commu-
nity stock’ means any stock in a domestic cor-
poration if—
‘‘(i) such stock is acquired by the tax-
payer on original issue from the corpora-
tion solely in exchange for cash,
‘‘(ii) as of the time such stock was
issued, such corporation was a renewal
community business (or, in the case of a
new corporation, such corporation was
being organized for purposes of being a re-
newal community business), and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such stock,
such corporation qualified as a renewal
community business.
‘‘(B) REDEMPTIONS.—The term ‘qualified
community stock’ shall not include any stock
acquired from a corporation which made a sub-
stantial stock redemption or distribution (with-
out a bona fide business purpose therefor) in an
attempt to avoid the purposes of this section.
‘‘(3) QUALIFIED COMMUNITY BUSINESS PROP-
ERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
community business property’ means tangible
property if—
‘‘(i) such property was acquired by
the taxpayer by purchase (as defined in
section 179(d)(2)) after the date on which
the designation of the renewal community
took effect,
‘‘(ii) the original use of such property
in the renewal community commences with
the taxpayer, and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such prop-
erty, substantially all of the use of such
property was in a renewal community busi-
ness of the taxpayer.
‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM-
PROVEMENTS.—
‘‘(i) IN GENERAL.—The requirements
of clauses (i) and (ii) of subparagraph (A)
shall be treated as satisfied with respect
to—
‘‘(I) property which is substan-
tially improved by the taxpayer, and
‘‘(II) any land on which such
property is located.
‘‘(ii) SUBSTANTIAL IMPROVEMENT.—
For purposes of clause (i), property shall
be treated as substantially improved by the
taxpayer only if, during any 24-month pe-
riod beginning after the date on which the
designation of the renewal community took
effect, additions to basis with respect to
such property in the hands of the taxpayer
exceed the greater of—
‘‘(I) an amount equal to the ad-
justed basis at the beginning of such
24-month period in the hands of the
taxpayer, or
‘‘(II) $5,000.
‘‘(C) LIMITATION
ON
LAND.—The term
‘qualified community business property’ shall
not include land which is not an integral part
of a renewal community business.
‘‘(4) QUALIFIED COMMUNITY PARTNERSHIP IN-
TEREST.—The term ‘qualified community partner-
ship interest’ means any interest in a partnership
if—
‘‘(A) such interest is acquired by the tax-
payer from the partnership solely in exchange
for cash,
‘‘(B) as of the time such interest was ac-
quired, such partnership was a renewal commu-
nity business (or, in the case of a new partner-
ship, such partnership was being organized for
purposes of being a renewal community busi-
ness), and
‘‘(C) during substantially all of the tax-
payer’s holding period for such interest, such
partnership qualified as a renewal community
business.
A rule similar to the rule of paragraph (2)(C) shall
apply for purposes of this paragraph.
‘‘(5) 
TREATMENT
OF
SUBSEQUENT
PUR-
CHASERS.—The term ‘qualified community asset’ in-
cludes any property which would be a qualified com-
munity asset but for paragraph (2)(A)(i), (3)(A)(ii),
or (4)(A) in the hands of the taxpayer if such prop-
erty was a qualified community asset in the hands
of all prior holders.
‘‘(6) 10-YEAR SAFE HARBOR.—If any property
ceases to be a qualified community asset by reason
of paragraph (2)(A)(iii), (3)(A)(iii), or (4)(C) after
the 10-year period beginning on the date the tax-
payer acquired such property, such property shall
continue to be treated as meeting the requirements
of such paragraph; except that the amount of gain
to which subsection (a) applies on any sale or ex-
change of such property shall not exceed the amount
which would be qualified capital gain had such prop-
erty been sold on the date of such cessation.
‘‘(7) TREATMENT OF COMMUNITY DESIGNATION
TERMINATIONS.—The termination of any designa-
tion of an area as a renewal community shall be dis-
regarded for purposes of determining whether any
property is a qualified community asset.
‘‘(c) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) QUALIFIED
CAPITAL
GAIN.—Except as
otherwise provided in this subsection, the term
‘qualified capital gain’ means any long-term capital
gain recognized on the sale or exchange of a quali-
fied community asset held for more than 5 years
(determined without regard to any period before the
designation of the renewal community).
‘‘(2) CERTAIN GAIN ON REAL PROPERTY NOT
QUALIFIED.—The term ‘qualified capital gain’ shall
not include any gain which would be treated as ordi-
nary income under section 1250 if section 1250 ap-
plied to all depreciation rather than the additional
depreciation.
‘‘(3) GAIN ATTRIBUTABLE TO PERIODS AFTER
TERMINATION
OF
COMMUNITY
DESIGNATION
NOT
QUALIFIED.—The term ‘qualified capital gain’ shall
not include any gain attributable to periods after the
termination of any designation of an area as a re-
newal community.
‘‘(4) RELATED
PARTY
TRANSACTIONS.—The
term ‘qualified capital gain’ shall not include any
gain attributable, directly or indirectly, in whole or
in part, to a transaction with a related person. For
purposes of this paragraph, persons are related to
each other if such persons are described in section
267(b) or 707(b)(1).
‘‘(d) TREATMENT OF PASS-THRU ENTITIES.—
‘‘(1) SALES
AND
EXCHANGES.—Gain on the
sale or exchange of an interest in a pass-thru entity
held by the taxpayer (other than an interest in an
entity which was a renewal community business dur-
ing substantially all of the period the taxpayer held
such interest) for more than 5 years shall be treated
as gain described in subsection (a) to the extent
such gain is attributable to amounts which would be
qualified capital gain on qualified community assets
(determined as if such assets had been sold on the
date of the sale or exchange) held by such entity for
more than 5 years (determined without regard to
any period before the date of the designation of the
renewal community) and throughout the period the
taxpayer held such interest. A rule similar to the
rule of paragraph (2)(C) shall apply for purposes of
the preceding sentence.
‘‘(2) INCOME INCLUSIONS.—
‘‘(A) IN GENERAL.—Any amount included
in income by reason of holding an interest in a
pass-thru entity (other than an entity which
was a renewal community business during sub-
stantially all of the period the taxpayer held the
interest to which such inclusion relates) shall be
treated as gain described in subsection (a) if
such amount meets the requirements of sub-
paragraph (B).
‘‘(B) REQUIREMENTS.—An amount meets
the requirements of this subparagraph if—
‘‘(i) such amount is attributable to
qualified capital gain recognized on the
sale or exchange by the pass-thru entity of
property which is a qualified community
asset in the hands of such entity and
which was held by such entity for the pe-
riod required under subsection (a), and
‘‘(ii) such amount is includible in the
gross income of the taxpayer by reason of
the holding of an interest in such entity
which was held by the taxpayer on the date
on which such pass-thru entity acquired
such asset and at all times thereafter be-
fore the disposition of such asset by such
pass-thru entity.
‘‘(C) LIMITATION
BASED
ON
INTEREST
ORIGINALLY
HELD
BY
TAXPAYER.—Subpara-
graph (A) shall not apply to any amount to the
extent such amount exceeds the amount to
which subparagraph (A) would have applied if
such amount were determined by reference to
the interest the taxpayer held in the pass-thru
entity on the date the qualified community
asset was acquired.
‘‘(3) PASS-THRU ENTITY.—For purposes of this
subsection, the term ‘pass-thru entity’ means—
‘‘(A) any partnership,
‘‘(B) any S corporation,
‘‘(C) any regulated investment company,
and
‘‘(D) any common trust fund.
‘‘(e) SALES
AND EXCHANGES
OF INTERESTS
IN
PARTNERSHIPS
AND
S CORPORATIONS
WHICH
ARE
QUALIFIED COMMUNITY BUSINESSES.—In the case of the
sale or exchange of an interest in a partnership, or of
stock in an S corporation, which was a renewal community
business during substantially all of the period the taxpayer
held such interest or stock, the amount of qualified capital
gain shall be determined without regard to—
‘‘(1) any intangible, and any land, which is not
an integral part of any qualified business entity (as
defined in section 1400G(b)), and
‘‘(2) gain attributable to periods before the des-
ignation of an area as a renewal community.
‘‘(f) CERTAIN TAX-FREE AND OTHER TRANSFERS.—
For purposes of this section—
‘‘(1) IN GENERAL.—In the case of a transfer of
a qualified community asset to which this subsection
applies, the transferee shall be treated as—
‘‘(A) having acquired such asset in the
same manner as the transferor, and
‘‘(B) having held such asset during any
continuous period immediately preceding the
transfer during which it was held (or treated as
held under this subsection) by the transferor.
‘‘(2) TRANSFERS TO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to any trans-
fer—
‘‘(A) by gift,
‘‘(B) at death, or
‘‘(C) from a partnership to a partner
thereof, of a qualified community asset with re-
spect to which the requirements of subsection
(d)(2) are met at the time of the transfer (with-
out regard to the 5-year holding requirement).
‘‘(3) CERTAIN
RULES
MADE
APPLICABLE.—
Rules similar to the rules of section 1244(d)(2) shall
apply for purposes of this section.
‘‘SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
‘‘(a) IN GENERAL.—For purposes of this part, the
term ‘renewal community business’ means—
‘‘(1) any qualified business entity, and
‘‘(2) any qualified proprietorship.
Such term shall include any trades or businesses which
would qualify as a renewal community business if such
trades or businesses were separately incorporated. Such
term shall not include any trade or business of producing
property of a character subject to the allowance for deple-
tion under section 611.
‘‘(b) QUALIFIED BUSINESS ENTITY.—For purposes
of this section, the term ‘qualified business entity’ means,
with respect to any taxable year, any corporation or part-
nership if for such year—
‘‘(1) every trade or business of such entity is
the active conduct of a qualified business within a
renewal community,
‘‘(2) at least 80 percent of the total gross in-
come of such entity is derived from the active con-
duct of such business,
‘‘(3) substantially all of the use of the tangible
property of such entity (whether owned or leased) is
within a renewal community,
‘‘(4) substantially all of the intangible property
of such entity is used in, and exclusively related to,
the active conduct of any such business,
‘‘(5) substantially all of the services performed
for such entity by its employees are performed in a
renewal community,
‘‘(6) at least 35 percent of its employees are
residents of a renewal community,
‘‘(7) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
entity is attributable to collectibles (as defined in
section 408(m)(2)) other than collectibles that are
held primarily for sale to customers in the ordinary
course of such business, and
‘‘(8) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
entity is attributable to nonqualified financial prop-
erty.
‘‘(c) QUALIFIED PROPRIETORSHIP.—For purposes of
this section, the term ‘qualified proprietorship’ means,
with respect to any taxable year, any qualified business
carried on by an individual as a proprietorship if for such
year—
‘‘(1) at least 80 percent of the total gross in-
come of such individual from such business is de-
rived from the active conduct of such business in a
renewal community,
‘‘(2) substantially all of the use of the tangible
property of such individual in such business (wheth-
er owned or leased) is within a renewal community,
‘‘(3) substantially all of the intangible property
of such business is used in, and exclusively related
to, the active conduct of such business,
‘‘(4) substantially all of the services performed
for such individual in such business by employees of
such business are performed in a renewal commu-
nity,
‘‘(5) at least 35 percent of such employees are
residents of a renewal community,
‘‘(6) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
individual which is used in such business is attrib-
utable 
to 
collectibles 
(as 
defined 
in 
section
408(m)(2)) other than collectibles that are held pri-
marily for sale to customers in the ordinary course
of such business, and
‘‘(7) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
individual which is used in such business is attrib-
utable to nonqualified financial property.
For purposes of this subsection, the term ‘employee’ in-
cludes the proprietor.
‘‘(d) QUALIFIED BUSINESS.—For purposes of this
section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified business’
means any trade or business.
‘‘(2) RENTAL OF REAL PROPERTY.—The rental
to others of real property located in a renewal com-
munity shall be treated as a qualified business if and
only if—
‘‘(A) the property is not residential rental
property (as defined in section 168(e)(2)), and
‘‘(B) at least 50 percent of the gross rental
income from the real property is from renewal
community businesses.
‘‘(3) RENTAL OF TANGIBLE PERSONAL PROP-
ERTY.—The rental to others of tangible personal
property shall be treated as a qualified business if
and only if substantially all of the rental of such
property is by renewal community businesses or by
residents of a renewal community.
‘‘(4) TREATMENT OF BUSINESS HOLDING IN-
TANGIBLES.—The term ‘qualified business’ shall not
include any trade or business consisting predomi-
nantly of the development or holding of intangibles
for sale or license.
‘‘(5) CERTAIN
BUSINESSES
EXCLUDED.—The
term ‘qualified business’ shall not include—
‘‘(A) any trade or business consisting of
the operation of any facility described in section
144(c)(6)(B), and
‘‘(B) any trade or business the principal
activity of which is farming (within the meaning
of subparagraph (A) or (B) of section
2032A(e)(5)), but only if, as of the close of the
preceding taxable year, the sum of—
‘‘(i) the aggregate unadjusted bases
(or, if greater, the fair market value) of
the assets owned by the taxpayer which are
used in such a trade or business, and
‘‘(ii) the aggregate value of assets
leased by the taxpayer which are used in
such a trade or business,
exceeds $500,000.
‘‘(6) CONTROLLED GROUPS.—For purposes of
paragraph (5)(B), all persons treated as a single em-
ployer under subsection (a) or (b) of section 52 shall
be treated as a single taxpayer.
‘‘(e) NONQUALIFIED FINANCIAL PROPERTY.—For
purposes of this section, the term ‘nonqualified financial
property’ means debt, stock, partnership interests, op-
tions, futures contracts, forward -contracts, warrants, no-
tional principal contracts, annuities, and other similar
property specified in regulations; except that such term
shall not include—
‘‘(1) reasonable amounts of working capital
held in cash, cash equivalents, or debt instruments
with a term of 18 months or less, or
‘‘(2) debt instruments described in section
1221(4).
‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS
‘‘Sec. 1400H. Family development accounts.
‘‘Sec. 1400I. Demonstration program to provide matching con-
tributions to family development accounts in certain
renewal communities.
‘‘Sec. 1400J. Designation of earned income tax credit payments
for deposit to family development account.
‘‘SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RE-
NEWAL COMMUNITY EITC RECIPIENTS.
‘‘(a) ALLOWANCE OF DEDUCTION.—
‘‘(1) IN GENERAL.—There shall be allowed as a
deduction—
‘‘(A) in the case of a qualified individual,
the amount paid in cash for the taxable year by
such individual to any family development ac-
count for such individual’s benefit, and
‘‘(B) in the case of any person other than
a qualified individual, the amount paid in cash
for the taxable year by such person to any fam-
ily development account for the benefit of a
qualified individual.
No deduction shall be allowed under this paragraph
for any amount deposited in a family development
account under section 1400I (relating to demonstra-
tion program to provide matching amounts in re-
newal communities).
‘‘(2) LIMITATION.—
‘‘(A) IN GENERAL.—The amount allowable
as a deduction to any individual for any taxable
year by reason of paragraph (1)(A) shall not
exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
‘‘(B) PERSONS DONATING TO FAMILY DE-
VELOPMENT
ACCOUNTS
OF
OTHERS.—The
amount allowable as a deduction to any person
for any taxable year by reason of paragraph
(1)(B) shall not exceed $1,000 with respect to
any qualified individual.
‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED
INDIVIDUALS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual to whom this subparagraph applies for
the taxable year, the limitation of subparagraph
(A) of paragraph (2) shall be equal to the lesser
of—
‘‘(i) the dollar amount in effect under
paragraph (2)(A)(i) for the taxable year,
or
‘‘(ii) the sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus—
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount allowed as a de-
duction under paragraph (1) to such
spouse for such taxable year.
‘‘(B) INDIVIDUALS
TO
WHOM
SUBPARA-
GRAPH (A) APPLIES.—Subparagraph (A) shall
apply to any individual if—
‘‘(i) such individual files a joint return
for the taxable year, and
‘‘(ii) the amount of compensation (if
any) includible in such individual’s gross
income for the taxable year is less than the
compensation includible in the gross in-
come of such individual’s spouse for the
taxable year.
‘‘(4) ROLLOVERS.—No deduction shall be al-
lowed under this section with respect to any rollover
contribution.
‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION
OF
AMOUNTS
IN
GROSS
IN-
COME.—Except as otherwise provided in this sub-
section, any amount paid or distributed out of a
family development account shall be included in
gross income by the payee or distributee, as the case
may be.
‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL-
OPMENT DISTRIBUTIONS.—Paragraph (1) shall not
apply to any qualified family development distribu-
tion.
‘‘(6) QUALIFIED
MEDICAL
EXPENSES.—The
term ‘qualified medical expenses’ means any amount
paid during the taxable year, not compensated for by
insurance or otherwise, for medical care (as defined
in section 213(d)) of the taxpayer, his spouse, or his
dependent (as defined in section 152).
‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali-
fied rollover’ means any amount paid from a family
development account of a taxpayer into another such
account established for the benefit of—
‘‘(A) such taxpayer, or
‘‘(B) any qualified individual who is—
‘‘(i) the spouse of such taxpayer, or
‘‘(ii) any dependent (as defined in sec-
tion 152) of the taxpayer. Rules similar to
the rules of section 408(d)(3) shall apply
for purposes of this paragraph.
‘‘(d) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—Any family development ac-
count is exempt from taxation under this subtitle
unless such account has ceased to be a family devel-
opment account by reason of paragraph (2). Not-
withstanding the preceding sentence, any such ac-
count is subject to the taxes imposed by section 511