I 
111TH CONGRESS 
1ST SESSION 
H. R. 99 
To amend the Internal Revenue Code of 1986 to reduce taxes by providing 
an alternative determination of income tax liability for individuals, repeal-
ing the estate and gift taxes, reducing corporate income tax rates, reduc-
ing the maximum tax for individuals on capital gains and dividends 
to 10 percent, indexing the basis of assets for purposes of determining 
capital gain or loss, creating tax-free accounts for retirement savings, 
lifetime savings, and life skills, repealing the adjusted gross income 
threshold in the medical care deduction for individuals under age 65 
who have no employer health coverage, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 6, 2009 
Mr. DREIER introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to reduce 
taxes by providing an alternative determination of income 
tax liability for individuals, repealing the estate and gift 
taxes, reducing corporate income tax rates, reducing the 
maximum tax for individuals on capital gains and divi-
dends to 10 percent, indexing the basis of assets for 
purposes of determining capital gain or loss, creating 
tax-free accounts for retirement savings, lifetime savings, 
and life skills, repealing the adjusted gross income 
threshold in the medical care deduction for individuals 
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under age 65 who have no employer health coverage, 
and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Fair and Simple Tax Act of 2009’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.— 
Sec. 1. Short title, etc. 
Sec. 2. Simplified alternative determination of income tax liability for individ-
uals. 
Sec. 3. Repeal of estate and gift taxes. 
Sec. 4. Alternative minimum tax exemption amounts indexed for inflation. 
Sec. 5. Maximum corporate income tax rate reduced to 25 percent. 
Sec. 6. 15 percent rate on dividends and capital gains of individuals reduced 
to 10 percent. 
Sec. 7. Indexing of certain assets for purposes of determining gain or loss. 
Sec. 8. Retirement savings accounts. 
Sec. 9. Lifetime savings accounts. 
Sec. 10. Lifetime skills accounts. 
Sec. 11. Expanded deduction for medical care expenses; expansion of individ-
uals to whom health savings accounts may be passed on death. 
Sec. 12. Research credit made permanent. 
Sec. 13. Tax provisions of prior laws made permanent. 
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SEC. 2. SIMPLIFIED ALTERNATIVE DETERMINATION OF IN-
COME TAX LIABILITY FOR INDIVIDUALS. 
(a) IN GENERAL.—Subchapter A of chapter 1 (relat-
ing to determination of tax liability) is amended by adding 
at the end the following new part: 
‘‘PART VIII—ALTERNATIVE DETERMINATION OF 
TAX LIABILITY FOR INDIVIDUALS 
‘‘Sec. 59B. Alternative determination of tax liability for individuals. 
‘‘SEC. 59B. ALTERNATIVE DETERMINATION OF TAX LIABIL-
ITY FOR INDIVIDUALS. 
‘‘(a) IN GENERAL.—In the case of an individual, the 
net income tax of the taxpayer shall be the tax determined 
under this section. 
‘‘(b) DETERMINATION OF TAX.—The tax determined 
under this section is the amount equal to— 
‘‘(1) the sum of— 
‘‘(A) 10 percent of so much of simplified 
taxable income as does not exceed $40,000, 
‘‘(B) 15 percent of so much of simplified 
taxable income as exceeds $40,000 but does not 
exceed $150,000, and 
‘‘(C) 30 percent of so much of simplified 
taxable income as exceeds $150,000, reduced by 
‘‘(2) the sum of the credits allowed by— 
‘‘(A) section 31 (relating to tax withheld 
on wages), and 
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‘‘(d) NET INCOME TAX.—For purposes of this sec-
tion, the term ‘net income tax’ means the sum of the reg-
ular tax liability and the tax imposed by section 55, re-
duced by the credits allowable under this part. 
‘‘(e) ESTATE AND TRUSTS.—This section shall not 
apply to an estate or trust. 
‘‘(f) SECTION TO BE ELECTIVE.—This section shall 
apply to a taxpayer for a taxable year only if elected by 
the taxpayer for such year. Such election, once made for 
a taxable year, shall be irrevocable without the consent 
of the Secretary.’’. 
(b) CLERICAL AMENDMENT.—The table of parts for 
such subchapter is amended by adding at the end the fol-
lowing new item: 
‘‘PART VIII. ALTERNATIVE DETERMINATION OF TAX LIABILITY FOR 
INDIVIDUALS.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
SEC. 3. REPEAL OF ESTATE AND GIFT TAXES. 
(a) IN GENERAL.—Subtitle B is hereby repealed. 
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to the estates of decedents dying, 
and gifts and generation-skipping transfers made, after 
December 31, 2008. 
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SEC. 4. ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNTS 
INDEXED FOR INFLATION. 
(a) IN GENERAL.—Subsection (d) of section 55 (re-
lating to exemption amount) is amended by adding at the 
end the following new paragraph: 
‘‘(4) INFLATION ADJUSTMENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning in a calendar year after 
2008, the dollar amounts contained in para-
graphs (1), (2), and (3) shall be increased by 
an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2006’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
‘‘(B) ROUNDING.—Any increase deter-
mined under subparagraph (A) shall be rounded 
to the nearest multiple of $100.’’. 
(b) PRIOR INCREASE MADE PERMANENT.—Para-
graph (1) of section 55(d) is amended— 
(1) by striking ‘‘$45,000 ($69,950 in the case 
of taxable years beginning in 2007)’’ and inserting 
‘‘$69,950’’, 
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(2) by striking ‘‘$33,750 ($46,200 in the case 
of taxable years beginning in 2007)’’ and inserting 
‘‘$46,200’’, and 
(3) by striking ‘‘paragraph (1)(A)’’ and insert-
ing ‘‘subparagraph (A)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
SEC. 5. MAXIMUM CORPORATE INCOME TAX RATE RE-
DUCED TO 25 PERCENT. 
(a) IN GENERAL.—Paragraph (1) of section 11(b) 
(relating to amount of tax on corporations) is amended 
to read as follows: 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) shall be the sum of— 
‘‘(A) 15 percent of so much of the taxable 
income as does not exceed $50,000, and 
‘‘(B) 25 percent of so much of the taxable 
income as exceeds $50,000.’’. 
(b) PERSONAL
SERVICE
CORPORATIONS.—Para-
graph (2) of section 11(b) is amended by striking ‘‘35 per-
cent’’ and inserting ‘‘25 percent’’. 
(c) CONFORMING AMENDMENTS.—Paragraphs (1) 
and (2) of section 1445(e) are each amended by striking 
‘‘35 percent’’ and inserting ‘‘25 percent’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008; except that the amendments made 
by subsection (c) shall take effect on January 1, 2009. 
SEC. 6. 15 PERCENT RATE ON DIVIDENDS AND CAPITAL 
GAINS OF INDIVIDUALS REDUCED TO 10 PER-
CENT. 
(a) IN GENERAL.—Subparagraph (C) of section 
1(h)(1) (relating to maximum capital gains rate) is 
amended by striking ‘‘15 percent’’ and inserting ‘‘10 per-
cent’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
SEC. 7. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 
DETERMINING GAIN OR LOSS. 
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is 
amended by redesignating section 1023 as section 1024 
and by inserting after section 1022 the following new sec-
tion: 
‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 
OF DETERMINING GAIN OR LOSS. 
‘‘(a) GENERAL RULE.— 
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‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Solely for purposes of determining 
gain or loss on the sale or other disposition by a tax-
payer (other than a corporation) of an indexed asset 
which has been held for more than 3 years, the in-
dexed basis of the asset shall be substituted for its 
adjusted basis. 
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.— 
The deductions for depreciation, depletion, and am-
ortization shall be determined without regard to the 
application of paragraph (1) to the taxpayer or any 
other person. 
‘‘(b) INDEXED ASSET.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means— 
‘‘(A) common stock in a C corporation 
(other than a foreign corporation), and 
‘‘(B) tangible property, 
which is a capital asset or property used in the trade 
or business (as defined in section 1231(b)). 
‘‘(2) STOCK
IN
CERTAIN
FOREIGN
CORPORA-
TIONS INCLUDED.—For purposes of this section— 
‘‘(A) IN
GENERAL.—The term ‘indexed 
asset’ includes common stock in a foreign cor-
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poration which is regularly traded on an estab-
lished securities market. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to— 
‘‘(i) stock in a passive foreign invest-
ment company (as defined in section 
1296), and 
‘‘(ii) stock in a foreign corporation 
held by a United States person who meets 
the requirements of section 1248(a)(2). 
‘‘(C) TREATMENT OF AMERICAN DEPOSI-
TORY RECEIPTS.—An American depository re-
ceipt for common stock in a foreign corporation 
shall be treated as common stock in such cor-
poration. 
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The indexed basis for any 
asset is— 
‘‘(A) the adjusted basis of the asset, in-
creased by 
‘‘(B) the applicable inflation adjustment. 
‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 
The applicable inflation adjustment for any asset is 
an amount equal to— 
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‘‘(A) the adjusted basis of the asset, multi-
plied by 
‘‘(B) the percentage (if any) by which— 
‘‘(i) 
the 
gross 
domestic 
product 
deflator for the last calendar quarter end-
ing before the asset is disposed of, exceeds 
‘‘(ii) the gross domestic product 
deflator for the last calendar quarter end-
ing before the asset was acquired by the 
taxpayer (or, if later, the calendar quarter 
ending on December 31, 2007). 
The percentage under subparagraph (B) shall 
be rounded to the nearest 1⁄10 of 1 percentage 
point. 
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 
The gross domestic product deflator for any cal-
endar quarter is the implicit price deflator for the 
gross domestic product for such quarter (as shown 
in the last revision thereof released by the Secretary 
of Commerce before the close of the following cal-
endar quarter). 
‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI-
MINISHED
RISK
OF
LOSS; TREATMENT
OF
SHORT 
SALES.— 
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‘‘(1) IN GENERAL.—If the taxpayer (or a re-
lated person) enters into any transaction which sub-
stantially reduces the risk of loss from holding any 
asset, such asset shall not be treated as an indexed 
asset for the period of such reduced risk. 
‘‘(2) SHORT SALES.— 
‘‘(A) IN GENERAL.—In the case of a short 
sale of an indexed asset with a short sale period 
in excess of 3 years, for purposes of this title, 
the amount realized shall be an amount equal 
to the amount realized (determined without re-
gard to this paragraph) increased by the appli-
cable inflation adjustment. In applying sub-
section (c)(2) for purposes of the preceding sen-
tence, the date on which the property is sold 
short shall be treated as the date of acquisition 
and the closing date for the sale shall be treat-
ed as the date of disposition. 
‘‘(B) SHORT SALE PERIOD.—For purposes 
of subparagraph (A), the short sale period be-
gins on the day that the property is sold and 
ends on the closing date for the sale. 
‘‘(e) TREATMENT
OF
REGULATED
INVESTMENT 
COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 
‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 
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‘‘(A) IN GENERAL.—Except as otherwise 
provided in this paragraph, the adjustment 
under subsection (a) shall be allowed to any 
qualified investment entity (including for pur-
poses of determining the earnings and profits of 
such entity). 
‘‘(B) EXCEPTION FOR CORPORATE SHARE-
HOLDERS.—Under regulations— 
‘‘(i) in the case of a distribution by a 
qualified investment entity (directly or in-
directly) to a corporation— 
‘‘(I) the determination of whether 
such distribution is a dividend shall be 
made without regard to this section, 
and 
‘‘(II) the amount treated as gain 
by reason of the receipt of any capital 
gain dividend shall be increased by the 
percentage by which the entity’s net 
capital gain for the taxable year (de-
termined without regard to this sec-
tion) exceeds the entity’s net capital 
gain for such year determined with re-
gard to this section, and 
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‘‘(ii) there shall be other appropriate 
adjustments (including deemed distribu-
tions) so as to ensure that the benefits of 
this section are not allowed (directly or in-
directly) to corporate shareholders of quali-
fied investment entities. 
For purposes of the preceding sentence, any 
amount includible in gross income under section 
852(b)(3)(D) shall be treated as a capital gain 
dividend and an S corporation shall not be 
treated as a corporation. 
‘‘(C) 
EXCEPTION
FOR
QUALIFICATION 
PURPOSES.—This section shall not apply for 
purposes of sections 851(b) and 856(c). 
‘‘(D) EXCEPTION FOR CERTAIN TAXES IM-
POSED AT ENTITY LEVEL.— 
‘‘(i) TAX ON FAILURE TO DISTRIBUTE 
ENTIRE GAIN.—If any amount is subject to 
tax under section 852(b)(3)(A) for any 
taxable year, the amount on which tax is 
imposed under such section shall be in-
creased by the percentage determined 
under subparagraph (B)(i)(II). A similar 
rule shall apply in the case of any amount 
subject to tax under paragraph (2) or (3) 
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of section 857(b) to the extent attributable 
to the excess of the net capital gain over 
the deduction for dividends paid deter-
mined with reference to capital gain divi-
dends only. The first sentence of this 
clause shall not apply to so much of the 
amount subject to tax under section 
852(b)(3)(A) as is designated by the com-
pany under section 852(b)(3)(D). 
‘‘(ii) OTHER
TAXES.—This section 
shall not apply for purposes of determining 
the amount of any tax imposed by para-
graph (4), (5), or (6) of section 857(b). 
‘‘(2) ADJUSTMENTS
TO
INTERESTS
HELD
IN 
ENTITY.— 
‘‘(A) REGULATED
INVESTMENT
COMPA-
NIES.—Stock in a regulated investment com-
pany (within the meaning of section 851) shall 
be an indexed asset for any calendar quarter in 
the same ratio as— 
‘‘(i) the average of the fair market 
values of the indexed assets held by such 
company at the close of each month during 
such quarter, bears to 
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‘‘(ii) the average of the fair market 
values of all assets held by such company 
at the close of each such month. 
‘‘(B) 
REAL
ESTATE
INVESTMENT 
TRUSTS.—Stock in a real estate investment 
trust (within the meaning of section 856) shall 
be an indexed asset for any calendar quarter in 
the same ratio as— 
‘‘(i) the fair market value of the in-
dexed assets held by such trust at the close 
of such quarter, bears to 
‘‘(ii) the fair market value of all as-
sets held by such trust at the close of such 
quarter. 
‘‘(C) RATIO OF 80 PERCENT OR MORE.—If 
the ratio for any calendar quarter determined 
under subparagraph (A) or (B) would (but for 
this subparagraph) be 80 percent or more, such 
ratio for such quarter shall be 100 percent. 
‘‘(D) RATIO OF 20 PERCENT OR LESS.—If 
the ratio for any calendar quarter determined 
under subparagraph (A) or (B) would (but for 
this subparagraph) be 20 percent or less, such 
ratio for such quarter shall be zero. 
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‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For 
purposes of this paragraph, a qualified invest-
ment entity which holds a partnership interest 
shall be treated (in lieu of holding a partnership 
interest) as holding its proportionate share of 
the assets held by the partnership. 
‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS-
TRIBUTIONS.—Except as otherwise provided by the 
Secretary, a distribution with respect to stock in a 
qualified investment entity which is not a dividend 
and which results in a reduction in the adjusted 
basis of such stock shall be treated as allocable to 
stock acquired by the taxpayer in the order in which 
such stock was acquired. 
‘‘(4) QUALIFIED
INVESTMENT
ENTITY.—For 
purposes of this subsection, the term ‘qualified in-
vestment entity’ means— 
‘‘(A) a regulated investment company 
(within the meaning of section 851), and 
‘‘(B) a real estate investment trust (within 
the meaning of section 856). 
‘‘(f) OTHER PASS-THRU ENTITIES.— 
‘‘(1) PARTNERSHIPS.— 
‘‘(A) IN GENERAL.—In the case of a part-
nership, the adjustment made under subsection 
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(a) at the partnership level shall be passed 
through to the partners. 
‘‘(B) SPECIAL RULE IN THE CASE OF SEC-
TION 754 ELECTIONS.—In the case of a transfer 
of an interest in a partnership with respect to 
which the election provided in section 754 is in 
effect— 
‘‘(i) the adjustment under section 
743(b)(1) shall, with respect to the trans-
feror partner, be treated as a sale of the 
partnership assets for purposes of applying 
this section, and 
‘‘(ii) with respect to the transferee 
partner, the partnership’s holding period 
for purposes of this section in such assets 
shall be treated as beginning on the date 
of such adjustment. 
‘‘(2) S CORPORATIONS.—In the case of an S 
corporation, the adjustment made under subsection 
(a) at the corporate level shall be passed through to 
the shareholders. This section shall not apply for 
purposes of determining the amount of any tax im-
posed by section 1374 or 1375. 
‘‘(3) COMMON TRUST FUNDS.—In the case of a 
common trust fund, the adjustment made under sub-
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section (a) at the trust level shall be passed through 
to the participants. 
‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN 
DETERMINING LOSS ON SALE OF INTEREST IN ENTI-
TY.—Notwithstanding the preceding provisions of 
this subsection, for purposes of determining the 
amount of any loss on a sale or exchange of an in-
terest in a partnership, S corporation, or common 
trust fund, the adjustment made under subsection 
(a) shall not be taken into account in determining 
the adjusted basis of such interest. 
‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.— 
‘‘(1) IN GENERAL.—This section shall not apply 
to any sale or other disposition of property between 
related persons except to the extent that the basis 
of such property in the hands of the transferee is a 
substituted basis. 
‘‘(2) RELATED PERSONS DEFINED.—For pur-
poses of this section, the term ‘related persons’ 
means— 
‘‘(A) persons bearing a relationship set 
forth in section 267(b), and 
‘‘(B) persons treated as single employer 
under subsection (b) or (c) of section 414. 
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‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST-
MENT.—If any person transfers cash, debt, or any other 
property to another person and the principal purpose of 
such transfer is to secure or increase an adjustment under 
subsection (a), the Secretary may disallow part or all of 
such adjustment or increase. 
‘‘(i) SPECIAL RULES.—For purposes of this section— 
‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If 
there is an addition to the adjusted basis of any tan-
gible property or of any stock in a corporation dur-
ing the taxable year by reason of an improvement to 
such property or a contribution to capital of such 
corporation— 
‘‘(A) such addition shall never be taken 
into account under subsection (c)(1)(A) if the 
aggregate amount thereof during the taxable 
year with respect to such property or stock is 
less than $1,000, and 
‘‘(B) such addition shall be treated as a 
separate asset acquired at the close of such tax-
able year if the aggregate amount thereof dur-
ing the taxable year with respect to such prop-
erty or stock is $1,000 or more. 
A rule similar to the rule of the preceding sentence 
shall apply to any other portion of an asset to the 
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extent that separate treatment of such portion is ap-
propriate to carry out the purposes of this section. 
‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS 
THROUGHOUT HOLDING PERIOD.—The applicable in-
flation adjustment shall be appropriately reduced for 
periods during which the asset was not an indexed 
asset. 
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a 
corporation which is not a dividend shall be treated 
as a disposition. 
‘‘(4) SECTION
CANNOT
INCREASE
ORDINARY 
LOSS.—To the extent that (but for this paragraph) 
this section would create or increase a net ordinary 
loss to which section 1231(a)(2) applies or an ordi-
nary loss to which any other provision of this title 
applies, such provision shall not apply. The taxpayer 
shall be treated as having a long-term capital loss in 
an amount equal to the amount of the ordinary loss 
to which the preceding sentence applies. 
‘‘(5) ACQUISITION
DATE
WHERE
THERE
HAS 
BEEN
PRIOR
APPLICATION
OF
SUBSECTION
(A)(1) 
WITH RESPECT TO THE TAXPAYER.—If there has 
been a prior application of subsection (a)(1) to an 
asset while such asset was held by the taxpayer, the 
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date of acquisition of such asset by the taxpayer 
shall be treated as not earlier than the date of the 
most recent such prior application. 
‘‘(j) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part II of subchapter O of chapter 1 is amended by 
striking the item relating to section 1023 and inserting 
after the item relating to section 1022 the following new 
items: 
‘‘Sec. 1023. Indexing of certain assets for purposes of determining gain or loss. 
‘‘Sec. 1024. Cross references.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to dispositions after December 31, 
2008, in taxable years ending after such date. 
SEC. 8. RETIREMENT SAVINGS ACCOUNTS. 
(a) IN GENERAL.—Subpart A of part I of subchapter 
D of chapter 1 (relating to pension, profit-sharing, stock 
bonus plans, etc.) is amended by inserting after section 
408A the following new section: 
‘‘SEC. 408B. RETIREMENT SAVINGS ACCOUNTS. 
‘‘(a) GENERAL RULE.—Except as provided in this 
section, a Retirement Savings Account shall be treated for 
purposes of this title in the same manner as an individual 
retirement plan. 
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‘‘(b) RETIREMENT SAVINGS ACCOUNT.—For pur-
poses of this title, the term ‘Retirement Savings Account’ 
means an individual retirement plan (as defined in section 
7701(a)(37) which is designated at the time of establish-
ment of the plan as a Retirement Savings Account). Such 
designation shall be made in such manner as the Secretary 
may prescribe. 
‘‘(c) TREATMENT OF CONTRIBUTIONS.— 
‘‘(1) NO DEDUCTION ALLOWED.—No deduction 
shall be allowed under section 219 for a contribution 
to a Retirement Savings Account. 
‘‘(2) CONTRIBUTION
LIMIT.—The aggregate 
amount of contributions for any taxable year to all 
Retirement Savings Accounts maintained for the 
benefit of an individual shall not exceed $5,000. 
‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE 
701⁄2.—Contributions to a Retirement Savings Ac-
count may be made even after the individual for 
whom the account is maintained has attained age 
701⁄2. 
‘‘(4) MANDATORY
DISTRIBUTION
RULES
NOT 
TO APPLY BEFORE DEATH.—Notwithstanding sub-
sections (a)(6) and (b)(3) of section 408 (relating to 
required distributions), the following provisions shall 
not apply to any Retirement Savings Account: 
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‘‘(A) Section 401(a)(9)(A). 
‘‘(B) The incidental death benefit require-
ments of section 401(a). 
‘‘(5) ROLLOVER CONTRIBUTIONS.— 
‘‘(A) IN GENERAL.—No rollover contribu-
tion may be made to or from a Retirement Sav-
ings Account except from or to another such 
Account, as the case may be. 
‘‘(B) COORDINATION
WITH
LIMIT.—Any 
rollover permitted under subparagraph (A) shall 
not be taken into account for purposes of para-
graph (2). 
‘‘(6) TIME WHEN CONTRIBUTIONS MADE.—For 
purposes of this section, the rule of section 219(f)(3) 
shall apply. 
‘‘(d) DISTRIBUTION RULES.—Any qualified distribu-
tion (as defined in section 408B(d)(2)) from a Retirement 
Savings Account shall not be includible in gross income.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Clause (vi) of section 1361(c)(2)(A) is 
amended by inserting ‘‘or a Retirement Savings Ac-
count under section 408B’’ after ‘‘Roth IRA under 
section 408A’’. 
(2) Section 4973 (relating to tax on excess con-
tributions to certain tax-favored accounts and annu-
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ities) is amended by inserting after subsection (g) 
the following new subsection: 
‘‘(h) EXCESS CONTRIBUTIONS TO RETIREMENT SAV-
INGS ACCOUNTS.—For purposes of this section, in the 
case of contributions to a Retirement Savings Account 
(within the meaning of section 408B(b)), the term ‘excess 
contributions’ means the sum of— 
‘‘(1) the excess (if any) of— 
‘‘(A) the amount contributed for the tax-
able year to Retirement Savings Accounts 
(other than a rollover contribution from another 
such Account), over 
‘‘(B) $5,000, and 
‘‘(2) the amount determined under this sub-
section for the preceding taxable year, reduced by 
the sum of— 
‘‘(A) the distributions out of the Accounts 
for the taxable year, and 
‘‘(B) the excess (if any) of $5,000 over the 
amount contributed by the individual to all Re-
tirement Savings Accounts for the taxable year. 
For purposes of this subsection, any contribution 
which is distributed from a Retirement Savings Ac-
count in a distribution described in section 
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408(d)(4) shall be treated as an amount not contrib-
uted.’’. 
(3) The table of sections for subpart A of part 
I of subchapter D of chapter 1 is amended by insert-
ing after the item relating to section 408A the fol-
lowing new item: 
‘‘Sec. 408B. Retirement Savings Accounts.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts contributed for taxable 
years beginning after December 31, 2008. 
SEC. 9. LIFETIME SAVINGS ACCOUNTS. 
(a) IN GENERAL.—Subchapter F of chapter 1 (relat-
ing to exempt organizations) is amended by adding at the 
end the following new part: 
‘‘PART IX—LIFETIME SAVINGS ACCOUNTS. 
‘‘Sec. 530B. Lifetime Savings Accounts. 
‘‘SEC. 530B. LIFETIME SAVINGS ACCOUNTS. 
‘‘(a) IN GENERAL.—A Lifetime Savings Account 
shall be exempt from taxation under this subtitle. Not-
withstanding the preceding sentence, the Lifetime Savings 
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— 
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‘‘(1) LIFETIME SAVINGS ACCOUNT.—The term 
‘Lifetime Savings Account’ means a trust created or 
organized in the United States exclusively for the 
benefit of an individual who is the designated bene-
ficiary of the trust (and designated as a Lifetime 
Savings Account at the time created or organized), 
but only if the written governing instrument creating 
the trust meets the following requirements: 
‘‘(A) No contribution will be accepted— 
‘‘(i) unless it is in cash, and 
‘‘(ii) except in the case of rollover con-
tributions from another Lifetime Savings 
Account, if such contribution would result 
in aggregate contributions for the taxable 
year exceeding $5,000. 
‘‘(B) The trustee is a bank (as defined in 
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary 
that the manner in which that person will ad-
minister the trust will be consistent with the re-
quirements of this section or who has so dem-
onstrated with respect to any individual retire-
ment plan. 
‘‘(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) TIME
WHEN
CONTRIBUTIONS
DEEMED 
MADE.—An individual shall be deemed to have made 
a contribution to a Lifetime Savings Account on the 
last day of the preceding taxable year if the con-
tribution is made on account of such taxable year 
and is made not later than the time prescribed by 
law for filing the return for such taxable year (not 
including extensions thereof). 
‘‘(3) CONTRIBUTIONS RETURNED BEFORE DUE 
DATE OF RETURN.—A rule similar to the rule of sec-
tion 408(d)(4) shall apply for purposes of this sec-
tion. 
‘‘(c) DISTRIBUTION NOT INCLUDIBLE.—Distribu-
tions from a Lifetime Savings Account shall not be includ-
ible in gross income. 
‘‘(d) TAX TREATMENT OF ACCOUNTS.—Rules similar 
to the rules of paragraphs (2) and (4) of section 408(e) 
shall apply to any Lifetime Savings Account. 
‘‘(e) COMMUNITY PROPERTY LAWS.—This section 
shall be applied without regard to any community property 
laws. 
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‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this 
section, a custodial account shall be treated as a trust if 
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 Secretary, that the manner in which 
he will administer the account will be consistent with the 
requirements of this section, and if the custodial account 
would, except for the fact that it is not a trust, constitute 
an account described in subsection (b)(1)). For purposes 
of this title, in the case of a custodial account treated as 
a trust by reason of the preceding sentence, the custodian 
of such account shall be treated as the trustee thereof. 
‘‘(g) REPORTS.—The trustee of a Lifetime Savings 
Account shall make such reports regarding such Account 
to the Secretary and to the beneficiary of the Account with 
respect to contributions, distributions, and such other 
matters as the Secretary may require. The reports re-
quired by this subsection 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.’’. 
(b) TAX OF EXCESS CONTRIBUTIONS.— 
(1) Subsection (a) of section 4973 (relating to 
tax on excess contributions to certain tax-favored ac-
counts and annuities) is amended by striking ‘‘or’’ 
at the end of paragraph (4), by adding ‘‘or’’ at the 
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end of paragraph (5), and by inserting after para-
graph (5) the following new paragraph: 
‘‘(6) a Lifetime Savings Account (as defined by 
section 530B(b)),’’. 
(2) Section 4973 is amended by inserting after 
subsection (h) the following new subsection: 
‘‘(i) EXCESS CONTRIBUTIONS TO LIFETIME SAVINGS 
ACCOUNTS.—For purposes of this section, in the case of 
contributions to a Lifetime Savings Account (within the 
meaning of section 530B(b)), the term ‘excess contribu-
tions’ means the sum of— 
‘‘(1) the excess (if any) of— 
‘‘(A) the amount contributed for the tax-
able year to Lifetime Savings Accounts (other 
than a rollover contribution from another such 
Account), over 
‘‘(B) $5,000, and 
‘‘(2) the amount determined under this sub-
section for the preceding taxable year, reduced by 
the sum of— 
‘‘(A) the distributions out of such Accounts 
for the taxable year, and 
‘‘(B) the excess (if any) of $5,000 over the 
amount contributed by the individual to all such 
Accounts for the taxable year. 
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For purposes of this subsection, any contribution 
which is distributed from a Lifetime Savings Ac-
count in a distribution described in section 
530C(b)(3) shall be treated as an amount not con-
tributed.’’. 
(c) TAX ON PROHIBITED TRANSACTIONS.— 
(1) IN
GENERAL.—Paragraph (1) of section 
4975(e) (relating to prohibited transactions) is 
amended by striking ‘‘or’’ at the end of subpara-
graph (F), by redesignating subparagraph (G) as 
subparagraph (H), and by inserting after subpara-
graph (F) the following new subparagraph: 
‘‘(G) a Lifetime Savings Account described 
in section 530B, or’’. 
(2) SPECIAL RULE.—Subsection (c) of section 
4975 is amended by inserting after paragraph (6) 
the following new paragraph: 
‘‘(7) SPECIAL RULES FOR LIFETIME SAVINGS 
ACCOUNTS.—An individual for whose benefit a Life-
time Savings Account is established and any contrib-
utor to such account shall be exempt from the tax 
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if section 
530B(d) applies with respect to such transaction.’’. 
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(d) FAILURE TO PROVIDE REPORTS.—Paragraph 
(2) of section 6693(a) (relating to failure to provide re-
ports on certain tax-favored accounts or annuities; pen-
alties relating to designated nondeductible contributions) 
is amended by striking ‘‘and’’ at the end of subparagraph 
(D), by striking the period at the end of subparagraph 
(E) and inserting ‘‘, and’’, and by inserting after subpara-
graph (E) the end the following new subparagraph: 
‘‘(F) section 530B(g) (relating to Lifetime 
Savings Accounts).’’. 
(e) CLERICAL AMENDMENT.—The table of parts for 
subchapter F of chapter 1 is amended by adding at the 
end the following new item: 
‘‘Part IX. Lifetime Savings Accounts.’’. 
SEC. 10. LIFETIME SKILLS ACCOUNTS. 
(a) IN GENERAL.—Part VIII of subchapter F of 
chapter 1 (relating to higher education savings entities) 
is amended by adding at the end the following new section: 
‘‘SEC. 530A. LIFETIME SKILLS ACCOUNTS. 
‘‘(a) IN GENERAL.—A Lifetime Skills Account shall 
be exempt from taxation under this subtitle. Notwith-
standing the preceding sentence, the Lifetime Skills Ac-
count shall be subject to the taxes imposed by section 511 
(relating to imposition of tax on unrelated business income 
of charitable organizations). 
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‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) LIFETIME
SKILLS
ACCOUNT.—The term 
‘Lifetime Skills Account’ means a trust created or 
organized in the United States exclusively for the 
purpose of paying the qualified life skills expenses of 
an individual who is the designated beneficiary of 
the trust (and designated as a Lifetime Skills Ac-
count at the time created or organized), but only if 
the written governing instrument creating the trust 
meets the following requirements: 
‘‘(A) No contribution will be accepted— 
‘‘(i) unless it is in cash, and 
‘‘(ii) except in the case of rollover con-
tributions from another such Account, if 
such contribution would result in aggregate 
contributions for the taxable year exceed-
ing $1,000. 
‘‘(B) The trustee is a bank (as defined in 
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary 
that the manner in which that person will ad-
minister the trust will be consistent with the re-
quirements of this section or who has so dem-
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onstrated with respect to any individual retire-
ment plan. 
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts. 
‘‘(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 LIFE SKILLS EXPENSES.—The 
term ‘qualified life skills expenses’ means expenses 
for any of the following services: 
‘‘(A) Comprehensive and specialized as-
sessments of the skill levels and service needs of 
adults and dislocated workers, which may in-
clude— 
‘‘(i) diagnostic testing and use of 
other assessment tools, and 
‘‘(ii) in-depth interviewing and evalua-
tion to identify employment barriers and 
appropriate employment goals. 
‘‘(B) Development of an individual employ-
ment plan, to identify the employment goals, 
appropriate achievement objectives, and appro-
priate combination of services for the partici-
pant to achieve the employment goals. 
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