tribution is received shall be increased by an amount
equal to 10 percent of the amount of the payment
or distribution which is includible in the gross in-
come of such payee or distributee for such taxable
year.
‘‘(2) DISQUALIFICATION CASES.—If an amount
is includible in the gross income of an individual for
a taxable year because such amount is required to
be treated as a distribution under paragraph (2) or
(3) of subsection (e), such individual’s tax liability
under this chapter for such taxable year shall be in-
creased by an amount equal to 10 percent of such
amount required to be treated as a distribution and
included in his gross income.
‘‘(3) DISABILITY
OR
DEATH
CASES.—Para-
graphs (1) and (2) shall not apply if the payment
or distribution is made after the individual for whose
benefit the individual training account is maintained
becomes disabled within the meaning of section
72(m)(7) or dies.
‘‘(4) DISTRIBUTIONS AFTER AGE 591⁄2.—Para-
graphs (1) and (2) shall not apply if the payment
or distribution is made after the date the individual
for whose benefit the individual training account is
maintained attains age 591⁄2.
‘‘(g) COMMUNITY PROPERTY LAWS.—This section
shall be applied without regard to any community property
laws.
‘‘(h) 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 individual training account described in sub-
section (c)(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.
‘‘(i) REPORTS.—The trustee of an individual training
account shall make such reports regarding such account
to the Secretary and to the individual for whose benefit
the account is maintained with respect to contributions,
distributions, and such other matters as the Secretary
may require under regulations. 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 by those regulations.’’
(b) DEDUCTION ALLOWED
IN ARRIVING
AT AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of
such Code (relating to retirement savings) is amended by
inserting after paragraph (15) the following new para-
graph:
‘‘(16) INDIVIDUAL TRAINING ACCOUNTS.—The
deduction allowed by section 220 (relating to individ-
ual training accounts).’’
(c) TAX ON EXCESS CONTRIBUTIONS.—Section 4973
of such Code (relating to tax on excess contributions to
individual retirement accounts, certain section 403(b) con-
tracts, and certain individual retirement annuities) is
amended—
(1) by inserting ‘‘INDIVIDUAL
TRAINING
AC-
COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of such
section,
(2) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a),
(3) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following new paragraph:
‘‘(2) an individual training account (within the
meaning of section 220(c)(1)), or’’, and
(4) by adding at the end the following new sub-
section:
‘‘(d) EXCESS
CONTRIBUTIONS
TO
INDIVIDUAL
TRAINING ACCOUNTS.—For purposes of this section, in
the case of an individual training account, the term ‘excess
contributions’ means the amount by which the amount
contributed for the taxable year to the account exceeds
the amount allowable as a deduction under section 220
for such taxable year. For purposes of this subsection, any
contribution which is distributed out of the individual
training account in a distribution to which section
220(d)(2) applies shall be treated as an amount not con-
tributed.’’
(d) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR INDIVIDUAL TRAINING
ACCOUNTS.—An individual for whose benefit an indi-
vidual training account is established shall be ex-
empt from the tax imposed by this section with re-
spect to any transaction concerning such account
(which would otherwise be taxable under this sec-
tion) if, with respect to such transaction, the ac-
count ceases to be an individual training account by
reason of the application of section 220(e)(2)(A) to
such account.’’, and
(2) by inserting ‘‘, an individual training ac-
count described in section 220(c)(1),’’ in subsection
(e)(1) after ‘‘described in section 408(a)’’.
(e) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
TRAINING ACCOUNTS.—Section 6693 of such Code (relat-
ing to failure to provide reports on individual retirement
accounts or annuities) is amended—
(1) by inserting ‘‘OR ON INDIVIDUAL TRAINING
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of
such section, and
(2) by adding at the end of subsection (a) the
following new sentence: ‘‘The person required by sec-
tion 220(i) to file a report regarding an individual
training account at the time and in the manner re-
quired by such section shall pay a penalty of $50 for
each failure, unless it is shown that such failure is
due to reasonable cause.’’.
(f) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the item relating to section 220 and insert-
ing the following new items:
‘‘Sec. 220. Individual training accounts.
‘‘Sec. 221. Cross reference.’’