I
103D CONGRESS
1ST SESSION
H. R. 456
To provide for the establishment of demonstration projects designed to deter-
mine the social, psychological, and economic effects of providing to indi-
viduals with limited means an opportunity to accumulate assets, and
to determine the extent to which an asset-based welfare policy may
be used to enable individuals with low income to achieve economic self-
sufficiency.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 6, 1993
Mr. HALL of Ohio (for himself and Mr. EMERSON) introduced the following
bill; which was referred jointly to the Committees on Ways and Means
and Education and Labor
A BILL
To provide for the establishment of demonstration projects
designed to determine the social, psychological, and eco-
nomic effects of providing to individuals with limited
means an opportunity to accumulate assets, and to deter-
mine the extent to which an asset-based welfare policy
may be used to enable individuals with low income to
achieve economic self-sufficiency.
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 ‘‘Individual Develop-
ment Account Demonstration Act’’.
SEC. 2. FINDINGS.
The Congress finds that—
(1) traditional welfare programs in the United
States have provided millions of low-income persons
with critically needed food, health, and cash benefits,
and such programs should be improved and contin-
ued;
(2) while such programs have sustained millions
of low-income persons, too rarely have such pro-
grams been successful in promoting and supporting
the transition to economic self-sufficiency;
(3) millions of Americans continue to live in
poverty and continue to receive public assistance;
(4) in addition to the social costs of poverty,
the economic costs to the Federal Government to
provide basic necessities to the poor exceeds
$120,000,000,000 each year;
(5) poverty is a loss of human resources and an
assault on human dignity;
(6) poverty rates remain high and welfare de-
pendency continues, in part, because welfare theory
has taken for granted that a certain level of income
or consumption is necessary for one’s economic well-
being when, in fact, very few people manage to
spend or consume their way out of poverty;
(7) economic well-being does not come primarily
through income, spending, and consumption, but is
instead achieved through savings, investment, and
accumulation of assets, since assets can improve eco-
nomic stability, connect people with a viable and
hopeful future, stimulate development of human and
other capital, enable people to focus and specialize,
yield personal, social, and political dividends, and en-
hance the welfare of offspring;
(8) income-based welfare policy should be com-
plemented with asset-based welfare policy, because
while income-based policies ensure that present con-
sumption needs (such as food, child care, rent, cloth-
ing, and health care) are met, asset-based policies
can provide the means to achieve economic self-suffi-
ciency and, accordingly, to leave public assistance;
(9) the Federal Government spends more than
$100,000,000,000 each year to provide middle- and
upper-income persons with many incentives to accu-
mulate savings and assets (especially tax subsidies
for home equity accumulation and retirement pen-
sion accounts), but such benefits are beyond the
reach of most low-income persons;
(10) under current welfare policies, poor fami-
lies must deplete most of their assets before qualify-
ing for public assistance;
(11) the Federal Government should develop
policies that promote higher rates of personal sav-
ings and net private domestic investment, both of
which fall behind the levels attained in other highly
developed industrial nations; and
(12) the Federal Government should undertake
an asset-based welfare policy demonstration project
to determine the social, psychological, and economic
effects of asset accumulation opportunities for low-
income persons and to determine if such a policy
could provide a new foundation for anti-poverty poli-
cies and programs in the United States.
SEC. 3. INDIVIDUAL DEVELOPMENT 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 220 as section 221 and by insert-
ing after section 219 the following new section:
‘‘SEC. 220. INDIVIDUAL DEVELOPMENT ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an eligi-
ble individual, there shall be allowed as a deduction the
sum of amounts paid in cash (other than assistance pro-
vided under section 4(g) of the Individual Development
Account Demonstration Act) during the taxable year by
or on behalf of such individual to an individual develop-
ment account established for the purpose of accumulating
funds to pay the qualified expenses of such individual.
‘‘(b) LIMITATIONS.—
‘‘(1) ACCOUNT MAY NOT BE ESTABLISHED FOR
BENEFIT OF MORE THAN 1 INDIVIDUAL.—An indi-
vidual development account may not be established
for the benefit of more than 1 individual.
‘‘(2) ELIGIBLE INDIVIDUAL TREATED AS ELIGI-
BLE
INDIVIDUAL
ONLY
WITH
RESPECT
TO
AC-
COUNT.—If, at any time during a calendar year, 2
or more individual development accounts are main-
tained for the benefit of an eligible individual, such
individual shall be treated as an eligible individual
for the calendar year only with respect to the 1st of
such accounts.
‘‘(3) MAXIMUM
DEDUCTION
PER
ACCOUNT.—
The amount allowable as a deduction under sub-
section (a) to an eligible individual for amounts paid
to an individual development account for any taxable
year shall not exceed $2,000.
‘‘(4) ADJUSTMENT OF DOLLAR AMOUNT LIMI-
TATIONS FOR INFLATION.—
‘‘(A) IN GENERAL.—If this paragraph ap-
plies to any calendar year, then each applicable
dollar amount for any taxable year beginning in
the adjustment period for such calendar year
shall be equal to the sum of—
‘‘(i) such applicable dollar amount for
taxable years beginning in such calendar
year, plus
‘‘(ii) $500.
‘‘(B) YEARS
TO
WHICH
APPLICABLE.—
This paragraph shall apply to any calendar year
if the excess (if any) of—
‘‘(i) $2,000, increased by the cost-of-
living adjustment for such calendar year,
over
‘‘(ii) the applicable dollar amount in
effect for such calendar year,
is equal to or greater than $500.
‘‘(C) COST-OF-LIVING ADJUSTMENT.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The cost-of-living
adjustment for any calendar year is the
percentage (if any) by which—
‘‘(I) the CPI for such calendar
year, exceeds
‘‘(II) the CPI for 1991.
‘‘(ii) 
CPI 
FOR
ANY
CALENDAR
YEAR.—The CPI for any calendar year
shall be determined in the same manner as
under section 1(f)(4).
‘‘(D) APPLICABLE DOLLAR AMOUNT.—For
purposes of this paragraph, the term ‘applicable
dollar amount’ means the dollar amount in ef-
fect under paragraph (3) and subsection
(c)(3)(A).
‘‘(E) ADJUSTMENT
PERIOD.—For pur-
poses of this paragraph, the term ‘adjustment
period’ means, with respect to any calendar
year to which this subsection applies, the pe-
riod—
‘‘(i) beginning on the 1st day of the
calendar year following such calendar year,
and
‘‘(ii) ending on the last day of the
next calendar year to which this paragraph
applies.
‘‘(5) DENIAL
OF
DEDUCTION
FOR
AMOUNTS
TRANSFERRED FROM ANOTHER IDA.—No deduction
shall be allowed under this section with respect to
any amount paid into an individual development ac-
count pursuant to subsection (c)(1)(E).
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) QUALIFIED EXPENSES.—The term ‘quali-
fied expenses’ means 1 or more of the following, as
provided by the organization providing assistance to
the individual under section 4(g) of the Individual
Development Account Demonstration Act:
‘‘(A) POST-SECONDARY
EDUCATION
EX-
PENSES.—Post-secondary educational expenses
paid from an individual development account di-
rectly to an eligible educational institution. For
purposes of this subparagraph—
‘‘(i) IN
GENERAL.—The term ‘post-
secondary educational expenses’ means—
‘‘(I) tuition and fees required for
the enrollment or attendance of a stu-
dent at an eligible educational institu-
tion,
‘‘(II) fees, books, supplies, and
equipment required for courses of in-
struction at an eligible educational in-
stitution, and
qualified expenses for the capitalization of
a qualified business pursuant to a qualified
plan.
‘‘(ii) 
QUALIFIED
EXPENSES.—The
term ‘qualified expenses’ means expenses
included in a qualified plan, including cap-
ital plant, equipment, working capital, and
inventory expenses.
‘‘(iii) 
QUALIFIED
BUSINESS.—The
term ‘qualified business’ means any busi-
ness that does not contravene any law or
public policy (as determined by the Sec-
retary).
‘‘(iv) QUALIFIED
PLAN.—The term
‘qualified plan’ means a business plan
which—
‘‘(I) is approved by a financial in-
stitution, or by a nonprofit loan fund
having demonstrated fiduciary integ-
rity,
‘‘(II) includes a description of
services or goods to be sold, a market-
ing plan, and projected financial
statements, and
‘‘(III) may require the eligible in-
dividual to obtain the assistance of an
experienced entreprenurial advisor.
‘‘(D) RETIREMENT EXPENSES.—Expenses
for which amounts may be distributed from an
individual retirement plan, subject to the same
requirements and limitations as apply to such
amounts.
‘‘(E) TRANSFERS
TO
IDA’S
OF
FAMILY
MEMBERS.—Amounts paid from an individual
development account directly into another such
account established for the benefit of an eligible
individual who is—
‘‘(i) the taxpayers spouse, or
‘‘(ii) any dependent of the taxpayer
with respect to whom the taxpayer is al-
lowed a deduction under section 151.
‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means an individual for whom assistance
is (or at any prior time was) provided under section
4(g) of the Individual Development Account Dem-
onstration Act.
‘‘(3) INDIVIDUAL
DEVELOPMENT
ACCOUNT.—
The term ‘individual development account’ means a
trust created or organized in the United States ex-
clusively for the purpose of paying the qualified ex-
penses of an eligible individual, but only if the writ-
ten governing instrument creating the trust meets
the following requirements:
‘‘(A) No contribution will be accepted un-
less it is in cash.
‘‘(B) The trustee is a federally insured fi-
nancial institution.
‘‘(C) The assets of the account will be in-
vested in accordance with the direction of the
eligible individual, within the guidelines estab-
lished pursuant to section 4(j)(1)(A)(ii) of the
Individual Development Account Demonstration
Act.
‘‘(D) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(E) Except as provided in subparagraph
(F), any amount in the account which is attrib-
utable to assistance provided under section 4(g)
of the Individual Development Account Dem-
onstration Act may be paid or distributed out
of the account only for the purpose of paying
the qualified expenses of the eligible individual.
‘‘(F) Any balance in the account on the
day after the date on which the individual for
whose benefit the trust is established dies will
be distributed within 30 days of such date as
directed by such individual to another individual
development account established for the benefit
of an eligible individual.
‘‘(4) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A taxpayer shall be deemed to have made a
contribution 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 tax-
able year (including extensions thereof).
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount paid or distrib-
uted out of an individual development account shall
be included in gross income of the payee or distribu-
tee for the taxable year in which the payment or dis-
tribution is received to the extent such amount is
not the return of a contribution for which no deduc-
tion was allowed under subsection (a).
‘‘(2) DISTRIBUTION USED TO PAY QUALIFIED
EXPENSES.—Paragraph (1) shall not apply to any
payment or distribution out of an individual develop-
ment account to the extent such payment or dis-
tribution is used exclusively to pay the qualified ex-
penses incurred by the eligible individual for whose
benefit the account is established.
‘‘(e) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION
FROM
TAX.—An individual
development account is exempt from taxation under
this subtitle unless such account has ceased to be an
individual development account by reason of para-
graph (2). 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) LOSS OF EXEMPTION OF ACCOUNT WHERE
INDIVIDUAL
ENGAGES
IN
PROHIBITED
TRANS-
ACTION.—
‘‘(A) IN GENERAL.—If the individual for
whose benefit an individual development ac-
count is established or any individual who con-
tributes to such account engages in any trans-
action prohibited by section 4975 with respect
to the account, the account shall cease to be an
individual development account as of the 1st
day of the taxable year (of the individual so en-
gaging in such transaction) during which such
transaction occurs.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be an individual development
account by reason of subparagraph (A) as of
the 1st day of any taxable year—
‘‘(i) all assets in the account on such
1st day which are attributable to assist-
ance provided under section 4(g) of the In-
dividual Development Account Demonstra-
tion Act shall be paid into the general fund
of the Treasury of the United States, and
‘‘(ii) paragraph (1) of subsection (d)
shall apply as if there was a distribution
on such 1st day in an amount equal to the
fair market value of all other assets in the
account on such 1st day.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit an individual development account is
established, or any individual who contributes to
such account, uses the account or any portion there-
of as security for a loan—
‘‘(A) an amount equal to the part of the
portion so used which is attributable to assist-
ance provided under section 4(g) of the Individ-
ual Development Account Demonstration Act
shall be paid into the general fund of the Treas-
ury of the United States, and
‘‘(B) the remaining part of the portion so
used shall be treated as distributed to the indi-
vidual so using such portion.
‘‘(f) ADDITIONAL TAX ON CERTAIN AMOUNTS IN-
CLUDED IN GROSS INCOME.—
‘‘(1) DISTRIBUTION NOT USED FOR QUALIFIED
EXPENSES.—In the case of any payment or distribu-
tion to which subsection (d)(1) applies, the tax li-
ability of each payee or distributee under this chap-
ter for the taxable year in which the payment or dis-
tribution is received shall be increased by an amount
equal to 10 percent of the amount of the distribution
which is includible in the gross income 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 such individual’s 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 development account becomes
disabled within the meaning of section 72(m)(7) or
dies.
‘‘(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 development account described in
subsection (c)(2). 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 develop-
ment account shall—
‘‘(1) prepare reports regarding the account with
respect to contributions, distributions, and any other
matter required by the Secretary under regulations,
and
‘‘(2) submit such reports, at the time and in
the manner prescribed by the Secretary in regula-
tions, to—
‘‘(A) the individual for whose benefit the
account is maintained,
‘‘(B) the organization providing assistance
to the individual under section 4(g) of the Indi-
vidual Development Account Demonstration
Act, and
‘‘(C) the Secretary.’’
(b) DEDUCTION ALLOWED
IN ARRIVING
AT AD-
JUSTED GROSS INCOME.—Paragraph (7) of section 62(a)
of such Code (relating to retirement savings) is amend-
ed—
(1) by inserting ‘‘OR
INDIVIDUAL
DEVELOP-
MENT’’ after ‘‘RETIREMENT’’ in the heading of such
paragraph, and
(2) by inserting before the period at the end the
following: ‘‘and the deduction allowed by section 220
(relating to individual development accounts)’’.
(c) CONTRIBUTION NOT SUBJECT TO GIFT TAX.—
Section 2503 of such Code (relating to taxable gifts) is
amended by adding at the end the following new sub-
section:
‘‘(h) INDIVIDUAL DEVELOPMENT ACCOUNTS.—Any
contribution made by an individual to an individual devel-
opment account described in section 220(c)(3) which is al-
lowable as a deduction under section 220 shall not be
treated as a transfer of property by gift for purposes of
this chapter.’’
(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 DEVELOP-
MENT ACCOUNTS.—An individual for whose benefit
an individual development account is established and
any contributor to such account shall be exempt
from the tax imposed by this section with respect to
any transaction concerning such account (which
would otherwise be taxable under this section) if,
with respect to such transaction, the account ceases
to be an individual development account by reason
of the application of section 220(e)(2)(A) to such ac-
count.’’, and
(2) by inserting ‘‘, an individual development
account described in section 220(c)(3),’’ in sub-
section (e)(1) after ‘‘described in section 408(a)’’.
(e) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
DEVELOPMENT ACCOUNTS.—Section 6693 of such Code
(relating to failure to provide reports on individual retire-
ment accounts or annuities) is amended—
(1) by inserting ‘‘OR ON INDIVIDUAL DEVEL-
OPMENT 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
development 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.’’
(f) SPECIAL RULE FOR DETERMINING AMOUNTS OF
SUPPORT FOR DEPENDENT.—Subsection (b) of section
152 of such Code (relating to definition of dependent) is
amended by adding at the end the following new para-
graph:
‘‘(6) A distribution from an individual develop-
ment account described in section 220(c)(3) to the
individual for whose benefit such account has been
established shall not be taken into account in deter-
mining support for purposes of this section to the
extent such distribution is excluded from gross in-
come of such individual under section 220(d)(2).’’
(g) 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 development accounts.
‘‘Sec. 221. Cross references.’’
(2) The table of sections for subchapter B of
chapter 68 of such Code is amended by striking the
item relating to section 6693 and inserting the fol-
lowing new item:
‘‘Sec. 6693. Failure to provide reports on individual retirement
accounts or annuities or on individual development
accounts.’’
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions made after June
30, 1992.
SEC. 
4. 
INDIVIDUAL 
DEVELOPMENT 
ACCOUNT 
DEM-
ONSTRATION PROJECTS.
(a) PURPOSE.—The purpose of this section is to pro-
vide for the establishment of demonstration projects de-
signed to determine—
(1) the social, psychological, and economic ef-
fects of providing to individuals with limited means
an opportunity to accumulate assets; and
(2) the extent to which an asset-based welfare
policy may be used to enable individuals with low in-
come to achieve economic self-sufficiency.
(b) APPLICATIONS.—
(1) SUBMISSION.—Not later than April 1,
1992, any organization may submit to the Secretary
of the Treasury (in this section referred to as the
‘‘Secretary’’) an application to conduct a demonstra-
tion project under this section.
(2) CONTENTS.—The application shall con-
tain—
(A) a description of the demonstration
project;
(B) information about the ability of the or-
ganization to—
(i) assist project participants in
achieving economic self-sufficiency through
the project; and
(ii) administer the project;
(C) a commitment made to the organiza-
tion by the State in which the project is to be
conducted that the State will provide a specified
amount of funds to the organization for the
project, and any similar commitment made to
the organization by any other non-Federal pub-
lic entity or by any private entity; and
(D) a plan to provide the organization
evaluating the project with such information
with respect to the project as may be required
for the evaluation.
(3) CRITERIA.—In considering whether or not
to approve any application to conduct a demonstra-
tion project under this section, the Secretary shall
assess the following:
(A) SUFFICIENCY OF PROJECT.—The de-
gree to which the project described in the appli-
cation appears likely to aid project participants
in achieving economic self-sufficiency through
activities requiring qualified expenses (as de-
fined in section 220(c)(1) of the Internal Reve-
nue Code of 1986). In making such assessment,
the Secretary shall consider the overall quality
of project activities and shall not consider aid
in making any particular kind or combination
of qualified expenses (as so defined) to be an
essential feature of any project.
(B) ADMINISTRATIVE ABILITY.—The abil-
ity of the applicant to responsibly administer
the project.
(C) 
COMMITMENT
OF
NON-FEDERAL
FUNDS.—The aggregate amount of funds from
non-Federal sources that are committed to the
project.
(D) ADEQUACY OF PLAN FOR PROVIDING
INFORMATION
FOR
EVALUATION.—The ade-
quacy of the plan for providing information rel-
evant to an evaluation of the project.
(4) APPROVAL.—Not later than June 1, 1994,
the Secretary shall, on a competitive basis, approve
such applications to conduct demonstration projects
under this section as the Secretary deems appro-
priate, taking into account the assessment required
by paragraph (3).
(c) 
DEMONSTRATION
AUTHORITY; 
ANNUAL
GRANTS.—
(1) DEMONSTRATION AUTHORITY.—If the Sec-
retary approves an application to conduct a dem-
onstration project under this section, the Secretary
shall, not later than July 1, 1994, authorize the ap-
plicant to conduct the project for 5 project years in
accordance with the approved application therefor
and this section.
(2) GRANT AUTHORITY.—For each project year
of a demonstration project conducted under this sec-
tion, the Secretary shall make a grant to the organi-
zation authorized to conduct the project, on the first
day of the project year.
(3) LIMITATIONS ON GRANT AMOUNTS.—
(A) MAXIMUM.—The amount of each grant
under paragraph (2) shall be not more than
$20,000,000.
(B) FIRST
YEAR
GRANT
LEVEL
AS-
SURED.—The amount of each grant to an orga-
nization under paragraph (2) after the first
such grant shall be not less than the amount of
such first grant.
(C) GRANTS REDUCED, IF NECESSARY, IN
PROPORTION TO ANY REDUCTIONS IN APPRO-
PRIATIONS AFTER FIRST YEAR.—If the amount
appropriated to carry out this section for any
particular fiscal year after fiscal year 1994 is
less than the amount so appropriated for fiscal
year 1994, then the limitations of subpara-
graphs (A) and (B) shall each be reduced for
the particular fiscal year in equal proportion to
the reduction of such appropriations, but only
to the extent that the reduction of such limita-
tions is made necessary by the reduction in
such appropriations.
(d) RESERVE FUND.—
(1) ESTABLISHMENT.—Each organization au-
thorized to conduct a demonstration project under
this section shall establish a Reserve Fund which
shall be used in accordance with this subsection.
(2) AMOUNTS IN RESERVE FUND.—
(A) IN GENERAL.—As soon after receipt as
is practicable, the organization shall place in
the Reserve Fund established under paragraph
(1)—
(i) all funds provided to the organiza-
tion by any public or private entity to con-
duct the demonstration project;
(ii) the proceeds of any investment
made under paragraph (3)(B).
(B) INDIVIDUAL DEVELOPMENT ACCOUNT
PENALTIES.—
(i) PENALTY AMOUNTS AUTHORIZED
TO BE APPROPRIATED FOR PAYMENT TO
THE RESERVE FUND.—For payment to the
Reserve Fund established by an organiza-
tion that provides financial assistance
under subsection (g) of this section to any
individual who pays, or from whose individ-
ual development account is paid, a penalty
amount, there is authorized to be appro-
priated to the Secretary, without fiscal
year limitation, an amount equal to the
penalty amount.
(ii) PAYMENT TO RESERVE FUND OF
PENALTY
AMOUNTS
APPROPRIATED
THEREFOR.—The Secretary shall imme-
diately pay to the Reserve Fund any
amount appropriated pursuant to clause (i)
for payment to the Reserve Fund.
(C) 
UNIFORM
ACCOUNTING
REGULA-
TIONS.—The Secretary shall prescribe regula-
tions with respect to accounting for amounts in
Reserve Funds.
(3) USE OF RESERVE FUND.—
(A) IN GENERAL.—The organization shall
use the amounts in the Reserve Fund estab-
lished under paragraph (1) to—
(i) assist participants in the dem-
onstration project in obtaining the skills
and information necessary to achieve eco-
nomic self-sufficiency through activities re-
quiring qualified expenses (as defined in
section 220(c)(1) of the Internal Revenue
Code of 1986);
(ii) provide financial assistance in ac-
cordance with subsection (g) to individuals
selected by the organization to participate
in the project;
(iii) administer the project; and
(iv) provide the organization evaluat-
ing the project under a contract entered
into under subsection (m) with such infor-
mation with respect to the project as may
be required for the evaluation.
(B) AUTHORITY TO INVEST FUNDS.—The
organization shall invest such amounts in the
Reserve Fund as are not immediately needed to
carry out subparagraph (A) of this paragraph,
in accordance with guidelines which shall—
(i) be developed by the panel estab-
lished pursuant to subsection (k); and
(ii) require such investments to be
highly liquid and of low risk.
(C) LIMITATION ON ADMINISTRATIVE EX-
PENSES.—Not more than 10 percent of the
amounts provided to the organization under
subsection (c)(2) may be used to administer, or
notify the public about, the demonstration
project, without the approval of the panel estab-
lished pursuant to subsection (k).
(4) UNUSED FEDERAL GRANT FUNDS TRANS-
FERRED TO THE SECRETARY WHEN PROJECT TERMI-
NATES.—Notwithstanding paragraph (3), upon the
termination of any demonstration project authorized
under this section, the organization conducting the
project shall transfer to the Secretary an amount
equal to—
(A) the amounts in the Reserve Fund at
time of the termination; multiplied by
(B) a percentage equal to—
(i) the aggregate amount of grants
made to the organization under subsection
(c)(2); divided by
(ii) the aggregate of the amounts pro-
vided to the organization by all entities to
conduct the project.
tion under subsection (f) of this section an amount deter-
mined in accordance with the following table:
If the income of the individ-
ual for the applicable period
is the following percentage of
the poverty threshold:
The amount is not to exceed the lesser of:
The following percentage
of the qualified savings of
the individual for the pe-
riod:
OR
The fol-
lowing
dollar
amount:
Not more than 50 percent ....
900
or ....
$1,800
More than 50 percent but not
more than 85 percent.
500
or ....
$1,650
More than 85 percent but not
more than 125 percent.
200
or ....
$1,400
More than 125 percent but
not more than 160 percent.
or ....
$700
More than 160 percent but
not more than 200 percent.
or ....
$350.
(h) 
LOCAL
CONTROL
OVER
DEMONSTRATION
PROJECTS.—Each organization authorized to conduct a
demonstration project under this section shall, subject to
subsections (j) and (l), have sole authority over the admin-
istration of the project. The Secretary may prescribe only
such regulations with respect to demonstration projects
under this section as are necessary to ensure compliance
with the approved applications therefor and this section.
(i) SEMIANNUAL PROGRESS REPORTS.—
(1) IN GENERAL.—Each organization author-
ized to conduct a demonstration project under this
section shall prepare 10 semiannual reports on the
progress of the project, including—
(A) information on participation of individ-
uals in the project;
(B) information on amounts in the Reserve
Fund established with respect to the project;
(C) information on amounts in the individ-
ual development accounts of the individuals to
whom assistance is provided under the project;
and
(D) such other information as the panel
established pursuant to subsection (k) may re-
quire to assess the project.
(2) SUBMISSION OF REPORTS.—The organiza-
tion shall submit each report required to be prepared
under paragraph (1) with respect to a demonstration
project to—
(A) the panel established pursuant to sub-
section (k);
(B) the Secretary; and
(C) the Treasurer (or equivalent official) of
the State in which the project is conducted.
(3) TIMING.—The first report required by para-
graph (1) shall be submitted at the end of the 6-
month period beginning on the date the Secretary
authorized the organization to conduct the dem-
onstration project, and subsequent reports shall be
submitted 6 months apart.
(j) OVERSIGHT.—
(1) ESTABLISHMENT
OF
PANEL.—The Sec-
retary shall establish a panel pursuant to subsection
(k) of this section to—
(A) develop guidelines governing the in-
vestment of—
(i) funds in the Reserve Funds estab-
lished under subsection (d) of this section;
and
(ii) funds in individual development
accounts established under section 220 of
the Internal Revenue Code of 1986;
(B) monitor the progress of the projects;
(C) make recommendations with respect to
projects that do not progress adequately or are
not conducted in substantial compliance with
the approved application therefor and this sec-
tion; and
(D) determine the percentage of the
amounts appropriated to carry out this section
that are to be used for evaluations under sub-
section (m) of this section, subject to the re-
quirement that such percentage shall be not less
than 3 percent nor more than 8 percent.
(2) RECOMMENDATIONS BY PANEL.—The panel
shall make recommendations to any organization
conducting a demonstration project under this sec-
tion on measures to be taken to ensure that the
project progresses adequately and is conducted in
substantial compliance with the approved application
therefor and this section. The panel shall transmit
copies of such recommendations to the Secretary
and the Treasurer (or equivalent official) of the
State in which the project is conducted.
(3) PANEL TO REVIEW IMPLEMENTATION OF
RECOMMENDATIONS.—After a reasonable time has
elapsed since the organization conducting a dem-
onstration project under this section has been pro-
vided recommendations made by the panel, the panel
shall—
(A) determine whether or not the organiza-
tion has implemented the recommendations;
and
(B) if the panel finds that the organization
has failed to implement the recommendations,
immediately notify the Secretary of such fail-
ure.
(k) OVERSIGHT PANEL.—
(1) MEMBERSHIP.—
(A) IN GENERAL.—
(i) 8 FEDERAL MEMBERS.—The Sec-
retary shall appoint to the panel 8 mem-
bers who shall be officers or employees of
the Federal Government. Such members
may vote on any matter before the panel.
(ii) 2 ROTATING STATE MEMBERS.—
The Secretary, in consultation with the
Treasurer (or equivalent official) of each
State in which a demonstration project is
conducted under this section, shall appoint
to the panel 2 members from each such
State who are representatives of the gov-
ernment of the State. The members ap-
pointed under this clause from a State may
vote only on the matters before the panel
relating to demonstration projects con-
ducted under this section in the State.
(iii) 5 PRIVATE MEMBERS.—The Sec-
retary shall appoint to the panel 5 mem-
bers who shall be business leaders and wel-
fare and social policy innovators. Such
members may vote on any matter before
the panel.
(B) QUALIFICATIONS.—Each member of
the panel shall be qualified to review the con-
duct of demonstration projects conducted under
this section by virtue of the education, training,
or experience of the member.
(C) POLITICAL
AFFILIATION.—Not more
than 50 percent of the members of the panel
may be of the same political party.
(2) TERMS.—
(A) GENERAL RULE.—Except as provided
in subparagraph (B), each member of the panel
shall be appointed for the life of the panel.
(B) SPECIAL RULE.—Any individual who is
appointed to the panel because of the status of
the individual as an officer or employee of a
government or because of the status of the indi-
vidual as not an officer or employee of any gov-
ernment, and whose status changes, may not
continue as a member of the panel.
(C) VACANCIES.—A vacancy in the panel
shall be filled in the manner in which the origi-
nal appointment was made.
(3) COMPENSATION.—
(A) BASIC PAY.—
(i) GENERAL RULE.—Except as pro-
vided in clause (ii), each member of the
panel shall be entitled to receive not more
(B) CHAIRPERSON.—The Chairperson of
the panel shall be elected by the members of the
panel appointed under paragraph (1)(A)(i).
(C) MEETINGS.—
(i) HOW
CALLED.—The panel shall
meet on a matter relating to a demonstra-
tion project conducted under this section in
a State, at the call of the Chairperson or
of a majority of the members of the panel
who may vote on the matter.
(ii) FREQUENCY.—
(I) GENERAL
OVERSIGHT.—The
panel shall meet not less frequently
than twice yearly with respect to the
monitoring of the progress of dem-
onstration projects conducted under
this section.
(II) 
REVIEW
OF
PROBLEM
PROJECTS.—The panel shall meet as
necessary with respect to projects that
do not progress adequately or are not
conducted in substantial compliance
with the approved application therefor
and this section.
(5) POWERS.—
(A) HEARINGS AND SESSIONS.—The panel
may, for the purpose of carrying out this sub-
section, hold hearings, sit and act at times and
places, take testimony, and receive evidence as
the panel considers appropriate. The panel may
administer oaths or affirmations to witnesses
appearing before it.
(B) POWERS OF MEMBERS AND AGENTS.—
Any member or agent of the panel who is not
an officer or employee of a State government
may, if authorized by the panel, take any action
which the panel is authorized to take by this
section.
(C) OBTAINING OFFICIAL DATA.—Subject
to other law, the panel may secure directly from
any department or agency of the United States
information necessary to enable it to carry out
any duty of the panel under this section. Upon
request of the Chairperson of the panel, the
head of that department or agency shall furnish
that information to the panel.
(D) MAIL.—The panel may use the United
States mail in the same manner and under the
same conditions as other departments and
agencies of the United States.
(6) ADMINISTRATIVE SUPPORT.—Upon request
of the panel, the Secretary may detail any of the
personnel of the Department of the Treasury to the
panel to assist it in carrying out its duties under
this section.
(7) TERMINATION.—The panel shall terminate
on a date designated by the Secretary.
(l) SANCTIONS.—
(1) AUTHORITY TO REVOKE DEMONSTRATION
AUTHORITY.—If the Secretary receives a notice
under subsection (j)(3)(B) with respect to a dem-
onstration project, the Secretary may revoke the
original authorization to conduct the project.
(2) ACTIONS REQUIRED UPON REVOCATION.—If
the Secretary revokes the original authorization to
conduct a demonstration project, the Secretary—
(A) shall suspend the project;
(B) shall take control of the Reserve Fund
established pursuant to subsection (d) as part
of the project;
(C) shall make every effort to find another
organization willing and able to conduct the
project in accordance with the approved appli-
cation therefor (as modified, if necessary, to
incorporate the recommendations) and this
section;
(D) may obtain the assistance of the panel
to find such an organization;
(E) if the Secretary finds such an organi-
zation, shall—
(i) authorize the organization to con-
duct the project in accordance with the ap-
proved application therefor (as modified, if
necessary, to incorporate the recommenda-
tions) and this section;
(ii) transfer to the organization con-
trol over the Reserve Fund established
pursuant to subsection (d) as part of the
project; and
(iii) for purposes of this section, con-
sider—
(I) such other organization to be
the organization originally authorized
to conduct the project; and
(II) the date of such authoriza-
tion to be the date of the original au-
thorization; and
(F) if, by the end of the 1-year period be-
ginning on the date of such revocation, the Sec-
retary has not found such an organization,
shall—
(i) terminate the project; and
(ii) from the Reserve Fund estab-
lished as part of the project, remit to each
entity that has provided amounts to the or-
ganization originally authorized to conduct
the project, an amount equal to that per-
centage of the aggregate of the amounts so
provided by all entities that is represented
by the amount so provided by such entity.
(m) EVALUATIONS.—
(1) IN GENERAL.—Not later than July 1, 1994,
the panel established pursuant to subsection (k)
shall enter into a contract with an independent re-
search organization that requires the organization,
in accordance with this subsection, to evaluate the
demonstration projects conducted under this section,
individually and as a group.
(2) RESEARCH QUESTIONS.—In evaluating any
demonstration project conducted under this section,
the research organization shall address the following
questions:
(A) What types of information and public
education efforts are successful in attracting
project participants?
(B) How can participation in the dem-
onstration project be made as easy and acces-
sible as possible for participants?
(C) What level of financial incentives is re-
quired to stimulate participation in the dem-
onstration project, and does this vary among
different populations?
(D) What program features in conjunction
with individual development accounts (such as
peer support, structured planning exercises,
mentoring, and case management) increase the
rate and consistency of participation in the
demonstration project?
(E) What are the economic, psychological,
and social effects of asset accumulation, and for
whom? To what extent, under what cir-
cumstances, and for whom does asset accumula-
tion under the demonstration project lead to
any or all of the following:
(i) A greater sense of security and
control?
(ii) Greater stability in the household?
(iii) A more positive future outlook?
(iv) More long-term planning?
(v) Increased efforts to maintain and
develop assets?
(vi) Greater knowledge about savings,
investments, and other financial matters?
(vii) Increased effort and success in
educational achievement (including those
of parents working to provide for the edu-
cation of their children)?
(viii) Increased specialization in career
development?
(ix) Greater self-esteem and personal
efficacy?
(x) Improved social status?
(xi) Increased political participation?
(xii) Increased community involve-
ment?
(xiii) Increased labor earnings in the
long term?
(xiv) Decreased reliance on traditional
forms of public assistance in the long
term?
(3) 
METHODOLOGICAL
REQUIREMENTS.—In
evaluating any demonstration project conducted
under this section, the research organization shall—
(A) use control groups to compare partici-
pants with nonparticipants as much as possible;
(B) before, during, and after the project,
obtain such quantitative data as are necessary
to thoroughly evaluate the project; and
(C) develop a qualitative assessment, de-
rived from sources such as in depth interviews,
of how asset accumulation affects individuals
and families.
(4) STAFFING REQUIREMENTS.—In evaluating
any demonstration project conducted under this sec-
tion, the research organization shall use skilled, pro-
fessional, and independent staff.
(n) DEFINITIONS.—As used in this section:
(1) APPLICABLE PERIOD.—The term ‘‘applica-
ble period’’ means, with respect to amounts to be
paid from a grant made for a project year, the cal-
endar year immediately preceding the calendar year
in which the grant is made.
(2) 
HOUSEHOLD.—The 
term 
‘‘household’’
means all individuals who share use of a dwelling
unit as primary quarters for living and eating sepa-
rate from other individuals.
(3) HOUSEHOLD NET WORTH.—
(A) IN GENERAL.—The term ‘‘net worth’’
means, with respect to a household, the aggre-
gate market value of all assets not excluded
under subparagraph (B) that are owned in
whole or in part by any member of the house-
hold, minus the obligations or debts of any
member of the household.
(B) ASSETS
EXCLUDED.—The following
assets (and obligations or debts with respect
thereto) shall be excluded in determining the
net worth of any household:
(i) $35,000 OF HOME EQUITY.—The
lesser of—
(I) the equity of the members of
the household in the dwelling unit in
which the members reside; or
(II) $35,000.
(ii) MOTOR VEHICLE.—The most val-
uable motor vehicle owned by any member
of the household.
(iii) 
FURNITURE; 
APPLIANCES;
CLOTHING.—All furniture, appliances, and
clothing used by any member of the house-
hold in the course of daily living.
(iv) ART
OBJECTS.—All art objects
displayed in the dwelling unit in which the
members of the household reside.
(v) JEWELRY.—All jewelry owned by
any member of the household.
(4) INDIVIDUAL
DEVELOPMENT
ACCOUNT.—
The term ‘‘individual development account’’ has the
same meaning given such term in section 220 of the
Internal Revenue Code of 1986.
(5) PENALTY
AMOUNT.—The term ‘‘penalty
amount’’ means any of the following:
(A) FINANCIAL ASSISTANCE FORFEITED.—
Any amount paid into the general fund of the
Treasury of the United States under section
220(e) of the Internal Revenue Code of 1986.
(B) 10 PERCENT ADDITION TO TAX.—Any
additional tax imposed by section 220(f) of the
Internal Revenue Code of 1986.
(C) OTHER PENALTY TAXES.—Any tax im-
posed with respect to an individual development
account by section 4973, 4975, or 6693 of the
Internal Revenue Code of 1986.
(6) POVERTY THRESHOLD.—The term ‘‘poverty
threshold’’ means, with respect to a calendar year,
the Federal poverty line for the calendar year for the
relevant family size, as defined annually by the Bu-
reau of the Census.
(7) PROJECT YEAR.—The term ‘‘project year’’
means, with respect to a demonstration project, any
of the 5 consecutive 12-month periods beginning on
the date the project is originally authorized to be
conducted.
(8) QUALIFIED SAVINGS OF THE INDIVIDUAL
FOR THE PERIOD.—The term ‘‘qualified savings of
the individual for the period’’ means the aggregate
of the amounts contributed by the individual to the
individual development account of the individual
during the period.
(o) LIMITATIONS
ON AUTHORIZATION
OF APPRO-
PRIATIONS.—
(1) IN GENERAL.—To carry out this section,
there are authorized to be appropriated to the Sec-
retary of the Treasury not to exceed $100,000,000
for each of fiscal years 1994, 1995, 1996, 1997, and
1998.
(2) CERTAIN AMOUNTS TO BE USED FOR EVAL-
UATIONS.—To obtain evaluations of the projects in
accordance with subsection (m), the Secretary shall
expend an amount equal to the amounts appro-
priated pursuant to paragraph (1) of this subsection
for any fiscal year, multiplied by the percentage de-
termined by the panel established pursuant to sub-
section (k).
SEC. 5. FUNDS IN INDIVIDUAL DEVELOPMENT ACCOUNTS
OF 
DEMONSTRATION 
PROJECT 
PARTICI-
PANTS DISREGARDED FOR PURPOSES OF ALL
MEANS-TESTED FEDERAL PROGRAMS.
Notwithstanding any Federal law (other than the In-
ternal Revenue Code of 1986) that requires consideration
of 1 or more financial circumstances of an individual, for
the purpose of determining eligibility to receive, or the
amount of, any assistance or benefit authorized by such
law to be provided to or for the benefit of such individual,
funds (including interest accruing) in an individual devel-
opment account (as defined in section 220 of the Internal
Revenue Code of 1986) shall be disregarded for such pur-
pose with respect to any period during which such individ-
ual participates in a demonstration project conducted
under section 4 of this Act (or would be participating in
such a project but for the suspension of the project).
Æ
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