I
106TH CONGRESS
2D SESSION
H. R. 4074
To amend the Internal Revenue Code of 1986 to treat State Developmental
Disabilities Endowment Programs as tax exempt organizations.
IN THE HOUSE OF REPRESENTATIVES
MARCH 23, 2000
Ms. DUNN 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 treat State
Developmental Disabilities Endowment Programs as tax
exempt organizations.
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 ‘‘Developmental Dis-
ability Endowment Act’’.
SEC. 2. STATE DEVELOPMENTAL DISABILITIES ENDOW-
MENT PROGRAMS
(a) IN GENERAL.—Subchapter F of chapter 1 of the
Internal Revenue Code of 1986 (relating to exempt organi-
‘‘(B) which meets the other requirements
of this subsection.
‘‘(2) CASH CONTRIBUTIONS.—A program shall
not be treated as a qualified State developmental
disabilities endowment program unless it provides
that contributions may only be made in cash.
‘‘(3) REFUNDS.—A program shall not be treat-
ed as a qualified State developmental disabilities en-
dowment program unless it imposes a more than de
minimis penalty on any refund of earnings from the
account which are not—
‘‘(A) used for qualified services with re-
spect to the designated beneficiary, or
‘‘(B) made on account of the death or dis-
ability of the designated beneficiary.
‘‘(4) SEPARATE ACCOUNTING.—A program shall
not be treated as a qualified State developmental
disabilities endowment program unless it provides
separate accounting for each designated beneficiary.
‘‘(5) NO INVESTMENT DIRECTION.—A program
shall not be treated as a qualified State develop-
mental disabilities endowment program unless it pro-
vides that any contributor to, or designated bene-
ficiary under, such program may not directly or indi-
rectly direct the investment of any contributions to
the program (or any earnings thereon).
‘‘(6) NO
PLEDGING
OF
INTEREST
AS
SECU-
RITY.—A program shall not be treated as a qualified
State developmental disabilities endowment program
if it allows any interest in the program or any por-
tion thereof to be used as security for a loan.
‘‘(7) PROHIBITION
ON
EXCESS
CONTRIBU-
TIONS.—A program shall not be treated as a quali-
fied State developmental disabilities endowment pro-
gram unless it provides adequate safeguards to pre-
vent contributions on behalf of a designated bene-
ficiary in excess of those necessary to provide for the
qualified services with respect to the beneficiary.
‘‘(c) TAX
TREATMENT
OF
DESIGNATED
BENE-
FICIARIES AND CONTRIBUTORS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, no amount shall be includ-
ible in gross income of—
‘‘(A) a designated beneficiary under a
qualified State developmental disabilities endow-
ment program, or
‘‘(B) a contributor to such program on be-
half of a designated beneficiary,
with respect to any distribution or earnings under
such program.
‘‘(2) GIFT
TAX
TREATMENT
OF
CONTRIBU-
TIONS.—For purposes of chapters 12 and 13—
‘‘(A) IN GENERAL.—Any contribution to a
qualified developmental disabilities endowment
program 
on 
behalf 
of 
any 
designated
beneficiary—
‘‘(i) shall be treated as a completed
gift to such beneficiary which is not a fu-
ture interest in property, and
‘‘(ii) shall not be treated as a qualified
transfer under section 2503(e).
‘‘(B) TREATMENT OF EXCESS CONTRIBU-
TIONS.—If the aggregate amount of contribu-
tions described in subparagraph (A) during the
calendar year by a donor exceeds the limitation
for such year under section 2503(b), such ag-
gregate amount shall, at the election of the
donor, be taken into account for purposes of
such section ratably over the 5-year period be-
ginning with such calendar year.
‘‘(3) DISTRIBUTIONS.—
‘‘(A) 
IN
GENERAL.—Any 
distribution
under a qualified State developmental disabil-
ities endowment program shall be includible in
the gross income of the distributee in the man-
ner as provided under section 72 to the extent
not excluded from gross income under any
other provision of this chapter.
‘‘(B) IN-KIND DISTRIBUTIONS.—Any ben-
efit furnished to a designated beneficiary under
a qualified State developmental disabilities en-
dowment program shall be treated as a dis-
tribution to the beneficiary.
‘‘(C) CHANGE IN BENEFICIARIES.—
‘‘(i) ROLLOVERS.—Subparagraph (A)
shall not apply to that portion of any dis-
tribution which, within 60 days of such
distribution, is transferred to the credit of
another designated beneficiary under a
qualified State developmental disabilities
endowment program.
‘‘(ii) CHANGE IN DESIGNATED BENE-
FICIARIES.—Any change in the designated
beneficiary of an interest in a qualified
State developmental disabilities endowment
program shall not be treated as a distribu-
tion for purposes of subparagraph (A).
‘‘(D) OPERATING RULES.—For purposes of
applying section 72—
‘‘(i) to the extent provided by the Sec-
retary, all qualified State developmental
disabilities endowment programs of which
an individual is a designated beneficiary
shall be treated as one program,
‘‘(ii) all distributions during a taxable
year shall be treated as one distribution,
and
‘‘(iii) the value of the contract, income
on the contract, and investment in the con-
tract shall be computed as of the close of
the calendar year in which the taxable year
begins.
‘‘(4) ESTATE TAX TREATMENT.—
‘‘(A) IN GENERAL.—No amount shall be
includible in the gross estate of any individual
for purposes of chapter 11 by reason of an in-
terest in a qualified developmental disabilities
endowment program.
‘‘(B) AMOUNTS INCLUDIBLE IN ESTATE OF
DESIGNATED
BENEFICIARY
IN
CERTAIN
CASES.—Subparagraph (A) shall not apply to