I
103D CONGRESS
2D SESSION
H. R. 4546
To strengthen families receiving aid to families with dependent children
through education, job training, savings, and investment opportunities,
and to provide States with greater flexibility in administering such aid
in order to help individuals make the transition from welfare to employ-
ment and economic independence.
IN THE HOUSE OF REPRESENTATIVES
JUNE 8, 1994
Mr. FLAKE introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To strengthen families receiving aid to families with depend-
ent children through education, job training, savings,
and investment opportunities, and to provide States with
greater flexibility in administering such aid in order to
help individuals make the transition from welfare to em-
ployment and economic independence.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Family Investment and Self-Sufficiency Act of 1994’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. State option to increase AFDC income disregards and disregard all
child support payments.
Sec. 3. Tax credit for contributions by low-income individuals to qualified asset
accounts.
Sec. 4. State option to increase AFDC income disregard for certain step-
parents.
Sec. 5. Elimination of rules that treat families differently based on number of
parents in the home.
Sec. 6. Extension of transitional child care benefits for employed AFDC recipi-
ents.
Sec. 7. Denial of AFDC for applicants who have abandoned a child.
Sec. 8. State option to deny AFDC for additional children.
Sec. 9. State option to deny AFDC benefits to parents whose children have not
received required immunizations.
Sec. 10. State option to disregard income and resources designated for edu-
cation, training, employability, or self-employment.
Sec. 11. State option to increase limitation on disregard of equity in an auto-
mobile.
Sec. 12. Treatment of student earnings under the AFDC program.
Sec. 13. Effective date.
SEC. 2. STATE OPTION TO INCREASE AFDC INCOME DIS-
REGARDS AND DISREGARD ALL CHILD SUP-
PORT PAYMENTS.
Section 402(a)(8)(B) of the Social Security Act (42
U.S.C. 602(a)(8)(B)) is amended—
(1) by striking ‘‘and’’ at the end of clause (i);
and
(2) by adding at the end the following:
‘‘(iii) may disregard—
‘‘(I) earned income of any child or rel-
ative receiving aid to families with depend-
ent children, or of any other individual (liv-
ing in the same home as such relative and
child) whose needs are taken into account
in making the determination under para-
graph (7), in accordance with any com-
bination of rules that is not less favorable
than the rules contained in clauses (ii) and
(iv) of subparagraph (A) and clause (ii) of
this subparagraph and not more favorable
than a disregard of the first $200 of the
total of such earned income for such
month plus 1⁄2 of the remainder thereof;
and
‘‘(II) child support payments received
by any such child, relative, or other indi-
vidual, in accordance with any combination
of rules that is not less favorable than the
rules contained in subparagraph (A)(vi)
and not more favorable than a disregard of
all such child support payments received.’’.
SEC. 3. TAX CREDIT FOR CONTRIBUTIONS BY LOW-INCOME
INDIVIDUALS 
TO 
QUALIFIED 
ASSET 
AC-
COUNTS.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by redes-
ignating section 35 as section 36 and by inserting after
section 34 the following new section:
‘‘SEC. 35. QUALIFIED ASSET ACCOUNT CONTRIBUTIONS.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an eligible
individual, there shall be allowed as a credit against
the tax imposed by this subtitle for the taxable year
an amount equal to the applicable percentage of the
qualified asset account contributions of the individ-
ual for the taxable year.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage is—
‘‘(A) 10 percent with respect to so much of
the aggregate qualified asset account contribu-
tions of the individual for the taxable year as
do not exceed $1,000, and
‘‘(B) 20 percent with respect to so much of
such contributions as exceed $1,000 but do not
exceed $2,000.
‘‘(b) LIMITATION.—
‘‘(1) IN
GENERAL.—The amount of qualified
asset account contributions by an eligible individual
which may be taken into account under subsection
(a) for any taxable year shall not exceed the lesser
of—
‘‘(A) $2,000, or
‘‘(B) an amount equal to the compensation
(as defined in section 219(f)) includible in the
individual’s gross income for such taxable year.
‘‘(2) PRORATION OF LIMITATION IF PART-YEAR
ELIGIBILITY.—In the case of an individual who is an
eligible individual only for a portion (but not all) of
the calendar year ending with or within the taxable
year, the limitation under this subsection for such
taxable year shall be an amount which bears the
same ratio to such limitation (determined without
regard to this paragraph) as such portion bears to
the entire calendar year.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED ASSET ACCOUNT.—The term
‘qualified asset account’ means a trust created or or-
ganized in the United States exclusively for the pur-
pose of paying the qualified expenses of the account
beneficiary, but only if the written governing instru-
ment creating the trust meets the following require-
ments:
‘‘(A) No contribution will be accepted un-
less it is in cash, and contributions will not be
accepted during any calendar year in excess of
$2,000.
‘‘(A) 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
‘‘(B) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (B) shall
be included in the gross income of the individual for
the taxable year in which it is received.
‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED
FOR QUALIFIED EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by
this chapter for any taxable year in which there
is a payment or distribution from a qualified
asset account which is not used to pay the
qualified expenses of the account beneficiary
shall be increased by 10 percent of the amount
of such payment or distribution which is includ-
ible in gross income under paragraph (1).
‘‘(B) DISABILITY OR DEATH CASES.—Sub-
paragraph (A) shall not apply if the payment or
distribution is made after the account bene-
ficiary becomes disabled within the meaning of
section 72(m)(7) or dies.
‘‘(f) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—A qualified asset account is
exempt from taxation under this subtitle, unless
such account has ceased to be a qualified asset ac-
count by reason of paragraph (2) or (3). Notwith-
standing 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., organizations).
‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN-
GAGES IN PROHIBITED TRANSACTION.—
‘‘(A) IN GENERAL.—If, during any taxable
year of the account beneficiary engages in any
transaction prohibited by section 4975 with re-
spect to the account, the account ceases to be
a qualified asset account as of the first day of
that taxable year.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a qualified asset account by
reason of subparagraph (A) on the first day of
any taxable year, paragraph (1) of subsection
(e) shall be applied as if there were a distribu-
tion on such first day in an amount equal to
the fair market value (on such first day) of all
assets in the account (on such first day) and no
portion of such distribution were used to pay
qualified expenses.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the account ben-
eficiary uses the account or any portion thereof as
security for a loan, the portion so used is treated as
distributed and not used to pay qualified expenses.
‘‘(g) 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 per-
son 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 a qualified asset
account described in subsection (c).
For purposes of this title, in the case of a custodial ac-
count treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as
the trustee thereof.
‘‘(h) REPORTS.—The trustee of a qualified asset ac-
count shall make such reports regarding such account to
the Secretary and to the account beneficiary 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 reg-
ulations.’’
(b) 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 ‘‘QUALIFIED
ASSET
AC-
COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of
such section,
(2) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following:
‘‘(2) a qualified asset account (within the mean-
ing of section 35(c)),’’,
(3) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a), and
(4) by adding at the end thereof the following
new subsection:
‘‘(d) EXCESS CONTRIBUTIONS TO QUALIFIED ASSET
ACCOUNTS.—For purposes of this section, in the case of
a qualified asset account (within the meaning of section
35(c)), the term ‘excess contributions’ means the amount
by which the amount contributed for the taxable year to
the account exceeds the amount which may be taken into
account in determining the credit under section 35 for
such taxable year. For purposes of this subsection, any
contribution which is distributed out of the qualified asset
account in a distribution to which section 35(e)(2) applies
shall be treated as an amount not contributed.’’
(c) 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 QUALIFIED ASSET AC-
COUNTS.—An individual for whose benefit a quali-
fied asset account (within the meaning of section
35(c)) is established shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect
to such transaction, the account ceases to be a quali-
fied asset account by reason of the application of
section 35(f)(2)(A) to such account.’’, and
(2) by inserting ‘‘or a qualified asset account
described in section 35(c)’’ in subsection (e)(1) after
‘‘described in section 408(a)’’.
(d) FAILURE TO PROVIDE REPORTS ON QUALIFIED
ASSET ACCOUNTS.—Section 6693 of such Code (relating
to failure to provide reports on individual retirement ac-
count or annuities) is amended—
(1) by inserting ‘‘OR ON QUALIFIED ASSET
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of
such section, and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 35(h) to
file a report regarding a qualified asset account at
the time and in the manner required by such section
shall pay a penalty of $50 for each failure unless it
is shown that such failure is due to reasonable
cause.’’
(e) CLERICAL AMENDMENTS.—
(1) The table of sections for subpart C of part
IV of subchapter A of chapter 1 of such Code is
amended by striking the item relating to section 35
and inserting the following:
‘‘Sec. 35. Qualified asset account contributions.
‘‘Sec. 36. Overpayments of tax.’’
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, qualified asset accounts, certain 403(b)
contracts, and certain individual retirement annu-
ities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on qualified asset accounts’’ after ‘‘annuities’’ in the
item relating to section 6693.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions made after De-
cember 31, 1994, in taxable years ending after such date.
SEC. 4. STATE OPTION TO INCREASE AFDC INCOME DIS-
REGARD FOR CERTAIN STEPPARENTS.
Section 402(a)(31) of the Social Security Act (42
U.S.C. 602(a)(31)) is amended—
(1) by striking ‘‘(A)’’ and all that follows
through ‘‘(C)’’ and inserting ‘‘(A) the first $120 of
the total of the stepparent’s earned income for the
month, plus 1⁄3 of the remainder of such earned in-
come, (B)’’; and
(2) by striking ‘‘(D)’’ and inserting ‘‘(C)’’.
SEC. 5. ELIMINATION OF RULES THAT TREAT FAMILIES
DIFFERENTLY BASED ON NUMBER OF PAR-
ENTS IN THE HOME.
(a) IN GENERAL.—Section 402(a) of the Social Secu-
rity Act (42 U.S.C. 602(a)) is amended by striking para-
graph (41).
(b) CONFORMING AMENDMENTS.—
(1) Section 402(a)(19)(B)(i)(II) of such Act
(42 U.S.C. 602(a)(19)(B)(i)(II)) is amended by
striking ‘‘(and’’ and all that follows through
‘‘407(b)(2)(B)(i))’’.
(2) Section 402(a)(19)(D) of such Act (42
U.S.C. 602(a)(19)(D)) is amended by striking ‘‘eligi-
ble’’ and all that follows through ‘‘earner’’ and in-
serting ‘‘in which both parents are living at home’’.
(3) Section 402(a)(19)(G)(i) of such Act (42
U.S.C. 602(a)(19)(G)(i)) is amended—
(A) in subclause (I), by striking ‘‘(whether
or not section 407 applies)’’; and
(B) in subclause (II), by striking ‘‘which is
eligible for aid to families with dependent chil-
dren by reason of section 407’’ and inserting
‘‘in which both parents are living at home’’.
(4) Section 402(a)(38)(B) of such Act (42
U.S.C. 602(a)(38)(B)) is amended by striking ‘‘or in
section 407(a)’’.
(5) Section 402(a) of such Act (42 U.S.C.
602(a)) is amended by striking paragraph (42).
(6) Section 403(l)(4)(A)(i) of such Act (42
U.S.C. 603(l)(4)(A)(i)) is amended by striking
‘‘family eligible’’ and all that follows through ‘‘earn-
er’’ and inserting ‘‘2-parent family’’.
(7) Section 406(a)(1) of such Act (42 U.S.C.
606(a)(1)) is amended by striking ‘‘who has been
deprived’’ and all that follows through ‘‘incapacity of
a parent’’.
(8) Section 406(b)(1) of such Act (42 U.S.C.
606(b)(1)) is amended by striking ‘‘and if such rel-
ative’’ and all that follows through ‘‘section 407’’.
(9) Section 407 of such Act (42 U.S.C. 607) is
hereby repealed.
(10) Section 472(a) of such Act (42 U.S.C.
672(a)) is amended by striking ‘‘or of section 407’’.
(11) Section 473(a)(2)(A)(i) of such Act (42
U.S.C. 672(a)(2)(A)(i)) is amended by striking ‘‘or
section 407’’.
(12) Section 1115(b) of such Act (42 U.S.C.
1315(b)) is amended by striking paragraph (5).
(13) Section 1115 of such Act (42 U.S.C.
1315) is amended by striking subsection (d).
(14) Section 1902(a)(10)(A)(i) of such Act (42
U.S.C. 1396a(a)(10)(A)(i)) is amended by striking
subclause (V) and by redesignating subclauses (VI)
and (VII) as subclauses (V) and (VI), respectively.
(15) Section 1905 of such Act (42 U.S.C.
1396d) is amended by striking subsection (m).
(16) Section 1905(n)(1) of such Act (42 U.S.C.
1396d(n)(1)) is amended—
(A) in subparagraph (A)—
(i) by striking ‘‘(or’’ and all that fol-
lows through ‘‘407)’’; and
(ii) by adding ‘‘or’’ at the end; and
(B) by striking subparagraph (B).
(17) Section 204(b)(2) of the Family Support
Act of 1988 (42 U.S.C. 681 note) is amended by
striking the semicolon and all that follows through
‘‘1998’’.
SEC. 6. EXTENSION OF TRANSITIONAL CHILD CARE BENE-
FITS FOR EMPLOYED AFDC RECIPIENTS.
Section 402(g)(1)(A)(iii) of the Social Security Act
(42 U.S.C. 602(g)(1)(A)(iii)) is amended by inserting
‘‘(or, if and for so long as the caretaker relative of the
family is employed, 24 months)’’ after ‘‘12 months’’.
SEC. 7. DENIAL OF AFDC FOR APPLICANTS WHO HAVE
ABANDONED A CHILD.
Section 402(a) of the Social Security Act (42 U.S.C.
602(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(44);
(2) by striking the period at the end of para-
graph (45) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (45) the fol-
lowing:
‘‘(46) notwithstanding any other provision of
this part, provide that an applicant for aid under the
State plan shall not be eligible for such aid if a court
has found that the applicant has abandoned a
child.’’.
SEC. 8. STATE OPTION TO DENY AFDC FOR ADDITIONAL
CHILDREN.
Section 402(a) of the Social Security Act (42 U.S.C.
602(a)), as amended by section 7 of this Act, is amend-
ed—
(1) by striking ‘‘and’’ at the end of paragraph
(45);
(2) by striking the period at the end of para-
graph (46) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (46) the fol-
lowing: