I
105TH CONGRESS
1ST SESSION
H. R. 194
To enhance the financial security of children by providing for contributions
by the Federal Government to Child Retirement Accounts.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 7, 1997
Mr. HOUGHTON (for himself and Mrs. KENNELLY) introduced the following
bill; which was referred to the Committee on Ways and Means
A BILL
To enhance the financial security of children by providing
for contributions by the Federal Government to Child
Retirement 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 ‘‘Children’s Financial
Security Act of 1997’’.
SEC. 2. FEDERAL CONTRIBUTIONS TO CHILD RETIREMENT
ACCOUNTS.
(a) IN GENERAL.—As soon as practicable after the
close of each calendar year, the Secretary of the Treasury
or his delegate shall transfer for such calendar year, from
amounts in the general fund of the Treasury not otherwise
appropriated, $1,000 to the Child Retirement Account of
each individual who is an eligible child for such calendar
year.
(b) ELIGIBLE CHILD.—For purposes of this section,
the term ‘‘eligible child’’ means, with respect to any cal-
endar year, any individual who, as of the close of such
calendar year—
(1) is a citizen or resident alien of the United
States, and
(2) has not attained age 6.
(c) REDUCTION IN CONTRIBUTION FOR CHILDREN
OF HIGH INCOME PARENTS.—
(1) IN GENERAL.—If, with respect to an eligible
child, the adjusted gross income of the applicable
taxpayer for the taxable year ending with or within
a calendar year exceeds the threshold amount, the
$1,000 amount in subsection (a) with respect to
such child for such calendar year shall be reduced
(but not below zero) by the amount which bears the
same ratio to $1,000 as such excess bears to the
phaseout range.
(2) APPLICABLE TAXPAYER MAY MAKE-UP RE-
DUCED
CONTRIBUTION.—If there is a reduction
under this subsection in the amount transferred
under subsection (a) to the Child Retirement Ac-
count of an eligible child for any calendar year, the
applicable taxpayer with respect to such child may
(at such time and in such manner as the Secretary
may prescribe) transfer an amount equal to the
amount of such reduction to the Child Retirement
Account of such child.
(d) CHILDREN BELOW AGE 19 AS OF ENACTMENT.—
(1) IN GENERAL.—In the case of an individual
who, as of the close of 1997—
(A) is a citizen or resident alien of the
United States, and
(B) has not attained age 19,
the applicable taxpayer with respect to such individ-
ual may (at such time and in such manner as the
Secretary may prescribe) contribute to the Child Re-
tirement Account of such child an amount equal to
the lesser of $6,000 or the product of $1,000 and
the age of such child as of the close of 1997. Any
contribution under the preceding sentence may be
made only during 1998 and 1999.
(2) REDUCTION OF CONTRIBUTION FOR CHIL-
DREN OF HIGH INCOME PARENTS.—If, with respect
to an individual described in paragraph (1), the ad-
justed gross income of the applicable taxpayer for
the taxable year ending with or within 1998 exceeds
the threshold amount, the amount otherwise deter-
mined under paragraph (1) with respect to such in-
dividual shall be reduced (but not below zero) by the
amount which bears the same ratio to the amount
so otherwise determined as such excess bears to the
phaseout range.
(e) DEFINITIONS.—For purposes of subsections (c)
and (d)—
(1) PHASEOUT
RANGE.—The term ‘‘phaseout
range’’ means—
(A) $50,000 in the case of a joint return,
(B) $33,000 in the case of an individual
who is not married, and
(C) $25,000 in the case of a married indi-
vidual filing a separate return.
(2) THRESHOLD AMOUNT.—The term ‘‘thresh-
old amount’’ means—
(A) $100,000 in the case of a joint return
for such taxable year,
(B) $67,000 in the case of an individual
who is not married, and
(C) $50,000 in the case of a married indi-
vidual filing a separate return.
(3) APPLICABLE TAXPAYER.—The term ‘‘appli-
cable taxpayer’’ means, with respect to an eligible
child—
(A) the taxpayer to whom a deduction is
allowable under section 151(c) of the Internal
Revenue Code of 1986 for such child, or
(B) if no taxpayer is described in subpara-
graph (A), such child.
SEC. 3. CHILD RETIREMENT ACCOUNTS.
(a) IN GENERAL.—Subchapter F of chapter 1 of the
Internal Revenue Code of 1986 (relating to exempt organi-
zations) is amended by adding at the end the following
new part:
‘‘PART IX—CHILD RETIREMENT
ACCOUNTS
‘‘Sec. 530. Child Retirement Accounts.
‘‘SEC. 530. CHILD RETIREMENT ACCOUNTS.
‘‘(a) CHILD RETIREMENT ACCOUNT.—For purposes
of this part, the term ‘Child Retirement Account’ means
any trust created or organized in the United States for
the exclusive benefit of the account beneficiary but only
if the written governing instrument creating the trust
meets the following requirements:
‘‘(1) No contribution will be accepted unless it
is in cash.
‘‘(2) The only contributions which will be ac-
cepted are—
‘‘(A) contributions under section 2 of the
Children’s Financial Security Act of 1997,
‘‘(B) contributions of not more than $100
for each calendar year after the calendar year
in which the account beneficiary attains age 5
and before the calendar year in which such ben-
eficiary attains age 19, and
‘‘(C) trustee-to-trustee transfers to such
trust from another Child Retirement Account of
the account beneficiary.
‘‘(3) The assets of the trust are invested only
in an approved mutual fund.
‘‘(4) The requirements of paragraphs (2)
through (6) of section 408(a) are met.
‘‘(b) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN
GENERAL.—A Child Retirement Ac-
count is exempt from taxation under this subtitle
unless such account has ceased to be a Child Retire-
ment Account. Notwithstanding the preceding sen-
tence, any such Account is subject to the taxes im-
posed by section 511 (relating to imposition of tax
on unrelated business income of charitable, etc., or-
ganizations).