I 
113TH CONGRESS 
2D SESSION 
H. R. 5326 
To amend the Internal Revenue Code of 1986 to provide for dependent 
care savings accounts. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 31, 2014 
Mr. CASSIDY 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 provide 
for dependent care savings accounts. 
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 ‘‘Dependent Care Sav-
ings Account Act of 2014’’. 
SEC. 2. DEPENDENT CARE SAVINGS ACCOUNTS. 
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by redesignating section 224 as section 225 and inserting 
after section 223 the following new section: 
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‘‘SEC. 224. DEPENDENT CARE SAVINGS ACCOUNTS. 
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction for the tax-
able year an amount equal to the aggregate amount paid 
in cash during such taxable year by or on behalf of the 
individual to a dependent care savings account of such in-
dividual. 
‘‘(b) LIMITATION.— 
‘‘(1) IN GENERAL.—The amount allowable as a 
deduction under subsection (a) to an individual for 
the taxable year shall not exceed the lesser of— 
‘‘(A) $5,000, or 
‘‘(B) the individual’s earned income (with-
in the meaning of section 21) for such taxable 
year. 
‘‘(2) COORDINATION WITH DEPENDENT CARE 
ASSISTANCE BENEFITS.—The limitation which would 
(but for this paragraph) apply under paragraph (1) 
to an individual for any taxable year shall be re-
duced (but not below zero) by the aggregate amount 
excludable from the individual’s gross income for 
such taxable year under section 129. 
‘‘(c) DEPENDENT CARE SAVINGS ACCOUNT.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘dependent care 
savings account’ means a trust created or organized 
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in the United States as a dependent care savings ac-
count exclusively for the purpose of paying the quali-
fied dependent care expenses of the account bene-
ficiary, but only if the written governing instrument 
creating the trust meets the following requirements: 
‘‘(A) Except in the case of a rollover con-
tribution described in subsection (e)(5), no con-
tribution will be accepted unless it is in cash, 
and contributions will not be accepted for the 
taxable year on behalf of any account bene-
ficiary in excess of $10,000. 
‘‘(B) The trustee is a bank (as defined in 
section 408(n)) or such other person who dem-
onstrates to the satisfaction of the Secretary 
that the manner in which such other 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. 
‘‘(D) The assets of the trust will not be 
commingled with other property except in a 
common trust fund or common investment 
fund. 
‘‘(E) The interest of an individual in the 
balance in his account is nonforfeitable. 
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‘‘(2) 
QUALIFIED
DEPENDENT
CARE
EX-
PENSES.—The term ‘qualified dependent care ex-
penses’ means the employment-related expenses (as 
defined in section 21(b)(2)) of the account bene-
ficiary with respect to any qualifying individual (as 
defined in section 21(b)(1)) of the account bene-
ficiary. Such term includes qualified long-term care 
services (as defined in section 7702B(c)), and 
amounts paid for qualified long-term care insurance 
contracts (as defined in section 7702B(b)), with re-
spect to such qualifying individuals of the account 
beneficiary. 
‘‘(3) ACCOUNT
BENEFICIARY.—The term ‘ac-
count beneficiary’ means the individual on whose be-
half the dependent care savings account was estab-
lished. 
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar 
to the following rules shall apply for purposes of this 
section: 
‘‘(A) Section 219(d)(2) (relating to no de-
duction for rollovers). 
‘‘(B) Except as provided in section 129, 
section 219(f)(3) (relating to time when con-
tributions deemed made). 
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‘‘(C) Section 219(f)(5) (relating to em-
ployer payments). 
‘‘(D) Section 223(b)(6) (relating to denial 
of deduction to dependents). 
‘‘(E) Section 408(g) (relating to commu-
nity property laws). 
‘‘(F) Section 408(h) (relating to custodial 
accounts). 
‘‘(d) TAX TREATMENT OF ACCOUNTS.— 
‘‘(1) IN GENERAL.—A dependent care savings 
account is exempt from taxation under this subtitle 
unless such account has ceased to be a dependent 
care savings account. Notwithstanding the preceding 
sentence, any such account is subject to the taxes 
imposed by section 511 (relating to imposition of tax 
on unrelated business income of charitable, etc. or-
ganizations). 
‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 
to the rules of paragraphs (2) and (4) of section 
408(e) shall apply to dependent care savings ac-
counts, and any amount treated as distributed under 
such rules shall be treated as not used to pay quali-
fied dependent care expenses. 
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.— 
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‘‘(1) AMOUNTS USED FOR QUALIFIED DEPEND-
ENT CARE EXPENSES.—Any amount paid or distrib-
uted out of a dependent care savings account which 
is used exclusively to pay qualified dependent care 
expenses of any account beneficiary shall not be in-
cludible in gross income. 
‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR 
QUALIFIED
DEPENDENT
CARE
EXPENSES.—Any 
amount paid or distributed out of a dependent care 
savings account which is not used exclusively to pay 
the qualified dependent care expenses of the account 
beneficiary shall be included in the gross income of 
such beneficiary. 
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.— 
‘‘(A) IN
GENERAL.—If any excess con-
tribution is contributed for a taxable year to 
any dependent care savings account of an indi-
vidual, paragraph (2) shall not apply to dis-
tributions from the dependent care savings ac-
counts of such individual (to the extent such 
distributions do not exceed the aggregate excess 
contributions to all such accounts of such indi-
vidual for such year) if— 
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‘‘(i) such distribution is received by 
the individual on or before the last day 
prescribed by law (including extensions of 
time) for filing such individual’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 the gross income of the individual 
for the taxable year in which it is received. 
‘‘(B) EXCESS
CONTRIBUTION.—For pur-
poses of subparagraph (A), the term ‘excess 
contribution’ means any contribution (other 
than a rollover contribution described in para-
graph (5)) which is neither excludable from 
gross income under section 129 nor deductible 
under this section. 
‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT 
USED
FOR
QUALIFIED
DEPENDENT
CARE
EX-
PENSES.— 
‘‘(A) IN GENERAL.—The tax imposed by 
this chapter on the account beneficiary for any 
taxable year in which there is a payment or dis-
tribution from a dependent care savings ac-
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count of such beneficiary which is includible in 
gross income under paragraph (2) shall be in-
creased by 20 percent of the amount which is 
so includible. 
‘‘(B) EXCEPTION
FOR
DISABILITY
OR 
DEATH.—Subparagraph (A) shall not apply if 
the payment or distribution is made after the 
account beneficiary becomes disabled within the 
meaning of section 72(m)(7) or dies. 
‘‘(5) ROLLOVER CONTRIBUTION.—An amount is 
described in this paragraph as a rollover contribu-
tion if it meets the requirements of subparagraphs 
(A) and (B). 
‘‘(A) IN
GENERAL.—Paragraph (2) shall 
not apply to any amount paid or distributed 
from a dependent care savings account to the 
account beneficiary to the extent the amount 
received is paid into a dependent care savings 
account for the benefit of such beneficiary not 
later than the 60th day after the day on which 
the beneficiary receives the payment or distribu-
tion. 
‘‘(B) LIMITATION.—This paragraph shall 
not apply to any amount described in subpara-
graph (A) received by an individual from a de-
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pendent care savings account if, at any time 
during the 1-year period ending on the day of 
such receipt, such individual received any other 
amount described in subparagraph (A) from a 
dependent care savings account which was not 
includible in the individual’s gross income be-
cause of the application of this paragraph. 
‘‘(6) COORDINATION WITH DEPENDENT CARE 
CREDIT.—For purposes of determining the amount 
of the credit under section 21, any payment or dis-
tribution out of a dependent care savings account 
for qualified dependent care expenses shall not be 
treated as employment-related expenses. 
‘‘(7) TRANSFER OF ACCOUNT INCIDENT TO DI-
VORCE; TREATMENT AFTER DEATH.—Rules similar 
to the rules of paragraphs (7) and (8) of section 223 
shall apply with respect to dependent care savings 
accounts. 
‘‘(f) REPORTS.—The Secretary may require the 
trustee of a dependent care savings account to make such 
reports regarding such account to the Secretary and to 
the account beneficiary with respect to contributions, dis-
tributions, the return of excess contributions, and such 
other matters as the Secretary determines appropriate. 
The reports required by this subsection shall be filed at 
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such time and in such manner and furnished to such indi-
viduals at such time and in such manner as may be re-
quired by the Secretary.’’. 
(b) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of 
such Code is amended by inserting before the last sentence 
the following new paragraph: 
‘‘(22) DEPENDENT CARE SAVINGS ACCOUNTS.— 
The deduction allowed by section 224(a).’’. 
(c) EXCLUSION OF EMPLOYER CONTRIBUTIONS.— 
Section 129 of such Code is amended by adding at the 
end the following new subsection: 
‘‘(f) CONTRIBUTIONS TO DEPENDENT CARE SAVINGS 
ACCOUNTS.— 
‘‘(1) IN GENERAL.—Gross income of an em-
ployee does not include amounts contributed by an 
employee’s employer to any dependent care savings 
account (as defined in section 224) of such employee 
to the extent such amounts do not exceed the limita-
tion under section 224(b)(1) which is applicable to 
such employee for such taxable year. 
‘‘(2) CROSS REFERENCE.—For penalty on fail-
ure by employer to make comparable contributions 
to the dependent care savings accounts of com-
parable employees, see section 4980H.’’. 
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(c) TAX ON EXCESS CONTRIBUTIONS.—Section 4973 
of such Code is amended— 
(1) in subsection (a), by striking ‘‘or’’ at the 
end of paragraph (4), by adding ‘‘or’’ at the end of 
paragraph (5), and by inserting after paragraph (5) 
the following new paragraph: 
‘‘(6) a dependent care savings account (as de-
fined in section 224),’’, and 
(2) by adding at the end the following new sub-
section: 
‘‘(h) EXCESS CONTRIBUTIONS TO DEPENDENT CARE 
SAVINGS ACCOUNTS.—For purposes of this section, in the 
case of dependent care savings accounts (as defined in sec-
tion 224), the term ‘excess contributions’ means the sum 
of— 
‘‘(1) the aggregate amount contributed for the 
taxable year to the accounts (other than a rollover 
contribution described in section 224(e)(5)) which is 
neither excludable from gross income under section 
129 nor allowable as a deduction under section 224 
for such year, and 
‘‘(2) the amount determined under this sub-
section for the preceding taxable year, reduced by 
the sum of— 
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‘‘(A) the distributions out of the accounts 
which were included in gross income under sec-
tion 224(e)(2), and 
‘‘(B) the excess (if any) of— 
‘‘(i) the maximum amount allowable 
as a deduction under section 224(b)(1) for 
the taxable year, over 
‘‘(ii) the amount contributed to the 
accounts for the taxable year.’’. 
(d) FAILURE OF EMPLOYER TO MAKE COMPARABLE 
DEPENDENT
CARE
SAVINGS
ACCOUNT
CONTRIBU-
TIONS.—Chapter 43 of such Code is amended by adding 
at the end the following new section: 
‘‘SEC. 4980H. FAILURE OF EMPLOYER TO MAKE COM-
PARABLE DEPENDENT CARE SAVINGS AC-
COUNT CONTRIBUTIONS. 
‘‘(a) GENERAL RULE.—In the case of an employer 
who makes a contribution to the dependent care savings 
account of any employee during a calendar year, there is 
hereby imposed a tax on the failure of such employer to 
meet the requirements of subsection (b) for such calendar 
year. 
‘‘(b) RULES AND REQUIREMENTS.—Rules and re-
quirements similar to the rules and requirements of sec-
tion 4980E shall apply for purposes of this section. 
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