I
105TH CONGRESS
2D SESSION
H. R. 4713
To amend the Internal Revenue Code of 1986 to allow a deduction for
State and local real property taxes paid by certain taxpayers aged 65
or older who do not itemize their deductions and to provide for the
establishment of senior citizen real property tax accounts.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 7, 1998
Mr. FRANKS of New Jersey 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 allow a
deduction for State and local real property taxes paid
by certain taxpayers aged 65 or older who do not itemize
their deductions and to provide for the establishment
of senior citizen real property tax 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 ‘‘Seniors Real Property
Tax Relief Act of 1998’’.
term ‘eligible senior taxpayer’ means a tax-
payer—
‘‘(i) who is not married or is married
filing a separate return and—
‘‘(I) who has attained age 65 be-
fore the close of his taxable year, and
‘‘(II) whose modified adjusted
gross income for such taxable year
does not exceed $30,000, or
‘‘(ii) who is filing a joint return or is
a surviving spouse (as defined in section
2(a)) and—
‘‘(I) with respect to whom 1 of
the spouses has attained age 65 be-
fore the close of the taxpayer’s taxable
year, and
‘‘(II) whose modified adjusted
gross income for such taxable year
does not exceed $60,000.
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of subparagraph (C), the
term ‘modified adjusted gross income’ means
the adjusted gross income of the taxpayer for
the taxable year determined—
‘‘(i) without regard to sections 911,
931, and 933, and
‘‘(ii) after the application of sections
86, 469, 219, 220, and 222.
‘‘(E) INFLATION ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of a
taxable year beginning after December 31,
1999, each of the dollar amounts in sub-
paragraphs (C)(i)(II) and (C)(ii)(II) shall
be increased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year in which the tax-
able year begins, determined by sub-
stituting ‘calendar year 1998’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof.
‘‘(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
of $100 such amount shall be rounded to
the next lowest multiple of $100.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 3. SENIOR CITIZEN REAL PROPERTY TAX ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 222 as section 223 and by insert-
ing after section 221 the following new section:
‘‘SEC. 222. SENIOR CITIZEN REAL PROPERTY TAX AC-
COUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction for the tax-
able year an amount equal to the cash contributions made
for such taxable year to a senior citizen real property tax
account maintained for the benefit of such individual.
‘‘(b) MAXIMUM
AMOUNT
OF
DEDUCTION.—The
amount allowable as a deduction under subsection (a) to
any individual for any taxable year shall not exceed
$2,000.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) SENIOR CITIZEN REAL PROPERTY TAX AC-
COUNT.—The term ‘senior citizen real property tax
account’ means a trust created or organized in the
United States exclusively for the purpose of paying
the qualified property tax expenses of the account
beneficiary of the trust, but only if the trust is des-
ignated as a senior citizen real property tax account
at the time created or organized and the written
governing instrument creating the trust meets the
following requirements:
‘‘(A) No contribution (other than a rollover
contribution described in subsection (e)(5)) will
be accepted—
‘‘(i) unless it is in cash,
‘‘(ii) in excess of $2,000 for the tax-
able year, or
‘‘(iii) after the date on which such
beneficiary attains age 591⁄2.
‘‘(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 or who has so dem-
onstrated with respect to any individual retire-
ment plan.
‘‘(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.
‘‘(2) QUALIFIED PROPERTY TAX EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
property tax expenses’ means State and local,
and foreign, real property taxes imposed on the
account beneficiary (determined in accordance
with section 164) with respect to the principal
residence (within the meaning of section 121)
of such beneficiary. Such term shall not include
taxes imposed for any real property tax period
ending before the date such beneficiary attains
age 591⁄2.
‘‘(B) JOINTLY HELD PROPERTY.—In the
case of any residence which is held as joint ten-
ants, tenants by the entirety, or community
property by individuals who are married to each
other, if one spouse satisfies the age require-
ment of subparagraph (A), then both spouses
shall be treated as satisfying such requirement.
‘‘(3) ACCOUNT
BENEFICIARY.—The term ‘ac-
count beneficiary’ means the individual for whose
benefit the senior citizen real property tax account
was established.
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar
to the following rules shall apply for purposes of this
section:
‘‘(A) Section 219(d)(2) (relating to no de-
duction for rollovers).
‘‘(B) Section 219(f)(3) (relating to time
when contributions deemed made).
‘‘(C) Section 408(d)(6) (relating to trans-
fer of account incident to divorce).
‘‘(D) Section 408(g) (relating to commu-
nity property laws).
‘‘(E) Section 408(h) (relating to custodial
accounts).
‘‘(d) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—A senior citizen real prop-
erty tax account is exempt from taxation under this
subtitle unless such account has ceased to be such
an account. Notwithstanding the preceding sentence,
any such account is subject to the taxes imposed by
section 511 (relating to imposition of tax on unre-
lated business income of charitable, etc. organiza-
tions).
‘‘(2) ACCOUNT TERMINATIONS.—Rules similar
to the rules of paragraphs (2) and (4) of section
408(e) shall apply to senior citizen real property tax
accounts, and any amount treated as distributed
under such rules shall be treated as not used to pay
qualified property tax expenses.
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—If any distribution is made
from a senior citizen real property tax account dur-
ing the taxable year, the account beneficiary’s tax
imposed by this chapter for such taxable year shall
be increased by an amount equal to—
‘‘(A) 50 percent of any such distribution
which is made before the date the account bene-
ficiary attains age 591⁄2, and
‘‘(B) 25 percent of any such distribution
which is made on or after such date.
The increase in tax under the preceding sentence
shall be in lieu of any inclusion in gross income.
‘‘(2) AMOUNTS
USED
FOR
QUALIFIED
PROP-
ERTY TAX EXPENSES.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to the extent that the aggregate dis-
tributions during the taxable year from the sen-
ior citizen real property tax accounts of the ac-
count beneficiary do not exceed the aggregate
qualified property tax expenses of such bene-
ficiary for such year.
‘‘(B) EXCLUSION FROM GROSS INCOME.—
Gross income shall not include any distribution
excluded from paragraph (1) by reason of sub-
paragraph (A).
‘‘(3) TREATMENT AFTER DEATH OF ACCOUNT
BENEFICIARY; DISABILITY.—Paragraph (1) shall not
apply to a distribution—
‘‘(A) which is made by reason of the death
of the account beneficiary and is made (either
directly or by the estate of such beneficiary) to
any senior citizen real property tax account or
individual retirement plan of any individual, or
‘‘(B) which is attributable to the account
beneficiary’s being disabled (within the meaning
of section 72(m)(7)).
In the case of a distribution which is made by rea-
son of the death of the account beneficiary and to
which paragraph (1) applies after the application of
the preceding sentence, the tax on such distribution
shall be determined under paragraph (1)(A).
‘‘(4) EXCESS CONTRIBUTIONS RETURNED BE-
FORE THE DUE DATE OF RETURN.—
‘‘(A) IN
GENERAL.—If any excess con-
tribution is contributed for a taxable year to a
senior citizen real property tax account of an
individual, paragraph (1) shall not apply to dis-
tributions from the senior citizen real property
tax accounts of such individual (to the extent
such distributions do not exceed the aggregate
excess contributions to all such accounts of
such individual for such year) if—
‘‘(i) 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
‘‘(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 the gross income of the individual
for the taxable year in which it is received.
‘‘(B) EXCESS
CONTRIBUTION.—For pur-
poses of subparagraph (A), the term ‘excess
contribution’ means any contribution (other
than a rollover contribution) that is not deduct-
ible under this section.
‘‘(5) ROLLOVER CONTRIBUTION.—An amount is
described in this paragraph as a rollover contribu-
tion if it meets the requirements of subparagraphs
(A) and (B).
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any amount distributed from a
senior citizen real property tax account to the
account beneficiary to the extent the amount
received is paid into a senior citizen real prop-
erty tax account for the benefit of such bene-
ficiary not later than the 60th day after the day
on which the beneficiary receives the payment
or distribution.
‘‘(B) LIMITATION.—This paragraph shall
not apply to any amount described in subpara-
graph (A) received by an individual from a sen-
ior citizen real property tax account if, at any
time during the 1-year period ending on the day
of such receipt, such individual received any
other amount described in subparagraph (A)
from a senior citizen real property tax account
which was not includible in the individual’s
gross income because of the application of this
paragraph.
‘‘(f) SPECIAL RULES.—
‘‘(1) MARRIED
INDIVIDUALS.—The maximum
deduction under subsection (b) shall be computed
separately for each individual.
‘‘(2) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
senior citizen real property tax account on the last
day of the preceding taxable year if the contribution
is made on account of such taxable year and is made
not later than the time prescribed by law for filing
the return for such taxable year (not including ex-
tensions thereof).
‘‘(g) REPORTS.—The Secretary may require the
trustee of a senior citizen real property tax account to
make such reports regarding such account to the Sec-
retary and to the account beneficiary with respect to con-
tributions, distributions, and such other matters as the
Secretary determines appropriate. The reports required by
this subsection shall be filed at such time and in such a
manner and furnished to such individuals at such time and
in such manner as may be required by the Secretary.’’.
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code, as amended by section 2, is
amended by inserting after paragraph (18) the following
new paragraph:
‘‘(19) SENIOR
CITIZEN
REAL
PROPERTY
TAX
ACCOUNTS.—The deduction allowed by section
222.’’.
(c) TAX ON PROHIBITED TRANSACTIONS.—
(1) IN
GENERAL.—Paragraph (1) of section
4975(e) of such Code (relating to prohibited trans-
actions) is amended by redesignating subparagraphs
(E) and (F) as subparagraphs (F) and (G), respec-
tively, and by inserting after subparagraph (D) the
following new subparagraph:
‘‘(E) a senior citizen real property tax ac-
count described in section 222(c),’’.
(2) SPECIAL RULE.—Subsection (c) of section
4975 of such Code is amended by adding at the end
the following new paragraph:
‘‘(6) SPECIAL RULE FOR SENIOR CITIZEN REAL
PROPERTY
TAX
ACCOUNTS.—The individual for
whose benefit a senior citizen real property tax ac-
count is established shall be exempt from the tax im-
posed by this section with respect to any transaction
concerning such account (which would otherwise be
taxable under this section) if section 222(d)(2) ap-
plies with respect to such transaction.’’.