I 
109TH CONGRESS 
2D SESSION 
H. R. 6277 
To amend the Internal Revenue Code of 1986 to provide for the establishment 
of disabled American financial security accounts for the care of family 
members with disabilities. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 29, 2006 
Mr. CRENSHAW 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 the establishment of disabled American financial se-
curity 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 ‘‘Disabled American Fi-
nancial Security Act of 2006’’. 
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SEC. 2. DISABLED AMERICAN FINANCIAL SECURITY AC-
COUNTS. 
(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. Disabled American Financial Security Accounts. 
‘‘SEC. 530A. DISABLED AMERICAN FINANCIAL SECURITY AC-
COUNTS. 
‘‘(a) GENERAL RULE.—A Disabled American Finan-
cial Security Account shall be exempt from taxation under 
this subtitle. Notwithstanding the preceding sentence, 
such account shall be subject to the taxes imposed by sec-
tion 511 (relating to imposition of tax on unrelated busi-
ness income of charitable organizations). 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) DISABLED
AMERICAN
FINANCIAL
SECU-
RITY ACCOUNT.—The term ‘Disabled American Fi-
nancial Security Account’ means a trust created or 
organized in the United States (and designated as a 
Disabled American Financial Security Account at 
the time created or organized) exclusively for the 
purpose of paying qualified disability expenses of an 
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individual 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)) 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. 
‘‘(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. 
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‘‘(2) QUALIFIED DISABILITY EXPENSES.—The 
term ‘qualified disability expenses’ means, with re-
spect to an individual with a disability, amounts paid 
or incurred for— 
‘‘(A) education, medical care, employment 
training, moving, daily subsistence, and assist-
ive technology, and 
‘‘(B) after the designated beneficiary has 
attained the age of 18, housing and transpor-
tation. 
‘‘(3) INDIVIDUAL WITH A DISABILITY.— 
‘‘(A) IN GENERAL.—An individual is an in-
dividual with a disability if such individual has 
been certified by a physician as having a dis-
ability. 
‘‘(B) DISABILITY.—The term ‘disability’ 
means disabled (within the meaning of section 
1614(a)(3) of the Social Security Act (42 
U.S.C. 1382c(a)(3)). 
‘‘(C) PHYSICIAN.—The term ‘physician’ 
has the meaning given to such term by section 
1861(r)(1) of the Social Security Act (42 
U.S.C. 1395x(r)(1)). 
‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.— 
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‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount paid or distrib-
uted out of a Disabled American Financial Security 
Account shall be included in gross income by the 
payee or distributee, as the case may be, for the tax-
able year in which received in the manner as pro-
vided 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 
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. 
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‘‘(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 Disabled American Financial Security 
Account shall be increased by 10 percent of the 
amount thereof which is includible in gross in-
come under paragraph (1). 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply if the payment or distribution is 
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 
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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 Dis-
abled American Financial Security 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 another Disabled American Fi-
nancial Security Account for the benefit of the same 
beneficiary. The preceding sentence shall not apply 
to any payment or distribution if it applied to any 
prior payment or distribution during the 12-month 
period ending on the date of the payment or dis-
tribution. 
‘‘(5) CHANGE IN BENEFICIARY.—Any change in 
the beneficiary of a Disabled American Financial Se-
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curity Account 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 beneficiary. 
‘‘(d) TAX TREATMENT OF ACCOUNTS.—Rules similar 
to the rules of paragraphs (2) and (4) of section 408(e) 
shall apply to any Disabled American Financial Security 
Account. 
‘‘(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 
‘‘(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-
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tence, the custodian of such account shall be treated as 
the trustee thereof. 
‘‘(g) REPORTS.—The trustee of a Disabled American 
Financial Security Account shall make such reports re-
garding such account to the Secretary and to the bene-
ficiary of the account with respect to contributions, dis-
tributions, and such other matters as the Secretary may 
require. The reports required 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. 
‘‘(h) COORDINATION WITH MEANS-TESTED PRO-
GRAMS.—Amounts held by, or paid or distributed from, 
a Disabled American Financial Security Account shall not 
be taken into account in determining eligibility for, or the 
amount or extent of, benefits provided by any program 
funded in whole or in part with Federal funds.’’. 
(b) CONFORMING AMENDMENTS.— 
(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: 
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‘‘(6) any Disabled American Financial Security 
Account (as defined in section 530A(b)).’’. 
(2) TAX ON PROHIBITED TRANSACTIONS.—Sub-
section (c) of section 4975 of such Code (relating to 
tax on prohibited transactions) is amended by add-
ing at the end the following new paragraph: 
‘‘(7) SPECIAL RULE FOR DISABLED AMERICAN 
FINANCIAL SECURITY ACCOUNTS.—An individual for 
whose benefit a Disabled American Financial Secu-
rity Account is established and any contributor to 
such account shall be exempt from the tax imposed 
by this section with respect to any transaction con-
cerning such account (which would otherwise be tax-
able under this section) if section 530A(d) applies 
with respect to such transaction.’’. 
(3) 
REPORTS.—Paragraph 
(2) 
of 
section 
6693(a) of such Code is amended by redesignating 
subparagraphs (D) and (E) as subparagraphs (E) 
and (F), respectively, and by inserting after sub-
paragraph (C) the following new subparagraph: 
‘‘(D) section 530A(g) (relating to Disabled 
American Financial SecurityAccounts).’’. 
(c) CLERICAL AMENDMENT.—The table of parts for 
subchapter F of chapter 1 of such Code is amended by 
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inserting after the item relating to part VIII the following 
new item: 
‘‘PART IX. SAVINGS FOR INDIVIDUALS WITH DISABILITIES.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
Æ 
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