I
107TH CONGRESS
1ST SESSION
H. R. 3599
To promote charitable giving, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 20, 2001
Mr. SOUDER (for himself, Mr. SCOTT, Mr. GREEN of Wisconsin, Mr. ED-
WARDS, Mr. NADLER, and Mr. KIRK) introduced the following bill; which
was referred to the Committee on Ways and Means, and in addition to
the Committee on Education and the Workforce, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
A BILL
To promote charitable giving, and for other purposes.
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
‘‘The Charitable Giving and Compassion Assistance Act
of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents is
as follows:
Sec. 1. Short title; table of contents.
TITLE I—CHARITABLE GIVING INCENTIVES PACKAGE
Sec. 101. Deduction for portion of charitable contributions to be allowed to in-
dividuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement accounts for chari-
table purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food and book inventories.
Sec. 105. Reform of excise tax on net investment income of private foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable remain-
der trusts.
Sec. 107. Adjustment to basis of S corporation stock for certain charitable con-
tributions.
TITLE II—INDIVIDUAL DEVELOPMENT ACCOUNTS
Sec. 201. Short title.
Sec. 202. Findings and purposes.
Sec. 203. Definitions.
Sec. 204. Structure and administration of qualified individual development ac-
count programs.
Sec. 205. Procedures for opening and maintaining an individual development
account and qualifying for matching funds.
Sec. 206. Deposits by qualified individual development account programs.
Sec. 207. Withdrawal procedures.
Sec. 208. Certification and termination of qualified individual development ac-
count programs.
Sec. 209. Reporting, monitoring, and evaluation.
Sec. 210. Authorization of appropriations.
Sec. 211. Account funds disregarded for purposes of certain means-tested Fed-
eral programs.
Sec. 212. Matching funds for individual development accounts provided through
a tax credit for qualified financial institutions.
TITLE III—EZ PASS RECOGNITION OF SECTION 501(C)(3) STATUS
Sec. 301. Ez pass recognition of section 501(c)(3) status.
TITLE IV—GRANTS FOR PROGRAMS FOR MENTORING CHILDREN
OF INCARCERATED PARENTS
Sec. 401. Grants for programs for mentoring children of incarcerated parents.
TITLE V—MATERNITY GROUP HOMES
Sec. 501. Maternity group homes.
TITLE VI—COMPASSION CAPITAL FUND
Sec. 601. Support for nonprofit community-based organizations; Department of
Health and Human Services.
Sec. 602. Support for nonprofit community-based organizations; Corporation
for National and Community Service.
Sec. 603. Support for nonprofit community-based organizations; Department of
Justice.
Sec. 604. Support for nonprofit community-based organizations; Department of
Housing and Urban Development.
Sec. 605. Prohibition on use of funds.
TITLE I—CHARITABLE GIVING
INCENTIVES PACKAGE
SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CON-
TRIBUTIONS TO BE ALLOWED TO INDIVID-
UALS WHO DO NOT ITEMIZE DEDUCTIONS.
(a) IN GENERAL.—Section 170 of the Internal Rev-
enue Code of 1986 (relating to charitable, etc., contribu-
tions and gifts) is amended by redesignating subsection
(m) as subsection (n) and by inserting after subsection
(l) the following new subsection:
‘‘(m) DEDUCTION FOR INDIVIDUALS NOT ITEMIZING
DEDUCTIONS.—In the case of an individual who does not
itemize his deductions for the taxable year, there shall be
taken into account as a direct charitable deduction under
section 63 an amount equal to the lesser of—
‘‘(1) the amount allowable under subsection (a)
for the taxable year for cash contributions, or
‘‘(2) $500 ($1,000 in the case of a joint re-
turn).’’.
(b) DIRECT CHARITABLE DEDUCTION.—
(1) IN GENERAL.—Subsection (b) of section 63
of the Internal Revenue Code of 1986 (defining tax-
able income) is amended by striking ‘‘and’’ at the
end of paragraph (1), by striking the period at the
end of paragraph (2) and inserting ‘‘, and’’, and by
adding at the end thereof the following new para-
graph:
‘‘(3) the direct charitable deduction.’’.
(2) DEFINITION.—Section 63 of such Code is
amended by redesignating subsection (g) as sub-
section (h) and by inserting after subsection (f) the
following new subsection:
‘‘(g) DIRECT CHARITABLE DEDUCTION.—For pur-
poses of this section, the term ‘direct charitable deduction’
means that portion of the amount allowable under section
170(a) which is taken as a direct charitable deduction for
the taxable year under section 170(m).’’.
(3) CONFORMING AMENDMENT.—Subsection (d)
of section 63 of such Code is amended by striking
‘‘and’’ at the end of paragraph (1), by striking the
period at the end of paragraph (2) and inserting ‘‘,
and’’, and by adding at the end thereof the following
new paragraph:
‘‘(3) the direct charitable deduction.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE-
TIREMENT 
ACCOUNTS 
FOR 
CHARITABLE
PURPOSES.
(a) IN GENERAL.—Subsection (d) of section 408 of
the Internal Revenue Code of 1986 (relating to individual
retirement accounts) is amended by adding at the end the
following new paragraph:
‘‘(8) DISTRIBUTIONS
FOR
CHARITABLE
PUR-
POSES.—
‘‘(A) IN GENERAL.—No amount shall be
includible in gross income by reason of a quali-
fied charitable distribution.
‘‘(B) QUALIFIED
CHARITABLE
DISTRIBU-
TION.—For purposes of this paragraph, the
term ‘qualified charitable distribution’ means
any distribution from an individual retirement
account—
‘‘(i) which is made directly by the
trustee—
‘‘(I) to an organization described
in section 170(c), or
‘‘(II) to a split-interest entity,
and
‘‘(ii) which is made on or after the
date that the individual for whose benefit
the account is maintained has attained—
‘‘(I) age 65 in the case of a dis-
tribution described in clause (i)(I), or
‘‘(II) age 591⁄2 in the case of dis-
tribution described in clause (i)(II).
A distribution shall be treated as a qualified
charitable distribution only to the extent that
the distribution would be includible in gross in-
come without regard to subparagraph (A) and,
in the case of a distribution to a split-interest
entity, only if no person holds an income inter-
est in the amounts in the split-interest entity
attributable to such distribution other than one
or more of the following: the individual for
whose benefit such account is maintained, the
spouse of such individual, or any organization
described in section 170(c).
‘‘(C) CONTRIBUTIONS
MUST
BE
OTHER-
WISE
DEDUCTIBLE.—For purposes of this
paragraph—
‘‘(i) DIRECT CONTRIBUTIONS.—A dis-
tribution to an organization described in
section 170(c) shall be treated as a quali-
fied charitable distribution only if a deduc-
tion for the entire distribution would be al-
lowable under section 170 (determined
without regard to subsection (b) thereof
and this paragraph).
‘‘(ii) SPLIT-INTEREST GIFTS.—A dis-
tribution to a split-interest entity shall be
treated as a qualified charitable distribu-
tion only if a deduction for the entire value
of the interest in the distribution for the
use of an organization described in section
170(c) would be allowable under section
170 (determined without regard to sub-
section (b) thereof and this paragraph).
‘‘(D) APPLICATION OF SECTION 72.—Not-
withstanding section 72, in determining the ex-
tent to which a distribution is a qualified chari-
table distribution, the entire amount of the dis-
tribution shall be treated as includible in gross
income without regard to subparagraph (A) to
the extent that such amount does not exceed
the aggregate amount which would be so includ-
ible if all amounts were distributed from all in-
dividual retirement accounts otherwise taken
into account in determining the inclusion on
such distribution under section 72. Proper ad-
justments shall be made in applying section 72
to other distributions in such taxable year and
subsequent taxable years.
‘‘(E) SPECIAL RULES FOR SPLIT-INTEREST
ENTITIES.—
‘‘(i) 
CHARITABLE
REMAINDER
TRUSTS.—Distributions made from an in-
dividual retirement account to a trust de-
scribed in subparagraph (G)(i) shall be
treated as income described in section
664(b)(1) except to the extent that the
beneficiary of the individual retirement ac-
count notifies the trustee of the trust of
the amount which is not allocable to in-
come under subparagraph (D).
‘‘(ii) POOLED
INCOME
FUNDS.—No
amount shall be includible in the gross in-
come of a pooled income fund (as defined
in subparagraph (G)(ii)) by reason of a
qualified charitable distribution to such
fund.
‘‘(iii) 
CHARITABLE
GIFT
ANNU-
ITIES.—Qualified charitable distributions
made for a charitable gift annuity shall not
be treated as an investment in the con-
tract.
‘‘(F) DENIAL
OF
DEDUCTION.—Qualified
charitable distributions shall not be taken into
account in determining the deduction under sec-
tion 170.
‘‘(G) SPLIT-INTEREST ENTITY DEFINED.—
For purposes of this paragraph, the term ‘split-
interest entity’ means—
‘‘(i) a charitable remainder annuity
trust or a charitable remainder unitrust
(as such terms are defined in section
664(d)),
‘‘(ii) a pooled income fund (as defined
in section 642(c)(5)), and
‘‘(iii) a charitable gift annuity (as de-
fined in section 501(m)(5)).’’.
(b) MODIFICATIONS RELATING TO INFORMATION RE-
TURNS BY CERTAIN TRUSTS.—
(1) RETURNS.—Section 6034 of the Internal
Revenue Code of 1986 (relating to returns by trusts
described in section 4947(a)(2) or claiming chari-
table deductions under section 642(c)) is amended to
read as follows:
‘‘SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION
4947(a)(2) OR CLAIMING CHARITABLE DEDUC-
TIONS UNDER SECTION 642(c).
‘‘(a) TRUSTS DESCRIBED IN SECTION 4947(a)(2).—
Every trust described in section 4947(a)(2) shall furnish
such information with respect to the taxable year as the
Secretary may by forms or regulations require.
‘‘(b) TRUSTS CLAIMING A CHARITABLE DEDUCTION
UNDER SECTION 642(c).—
‘‘(1) IN GENERAL.—Every trust not required to
file a return under subsection (a) but claiming a
charitable, etc., deduction under section 642(c) for
the taxable year shall furnish such information with
respect to such taxable year as the Secretary may by
forms or regulations prescribe, including:
‘‘(A) the amount of the charitable, etc., de-
duction taken under section 642(c) within such
year,
‘‘(B) the amount paid out within such year
which represents amounts for which charitable,
etc., deductions under section 642(c) have been
taken in prior years,
‘‘(C) the amount for which charitable, etc.,
deductions have been taken in prior years but
which has not been paid out at the beginning
of such year,
‘‘(D) the amount paid out of principal in
the current and prior years for charitable, etc.,
purposes,
‘‘(E) the total income of the trust within
such year and the expenses attributable thereto,
and
‘‘(F) a balance sheet showing the assets, li-
abilities, and net worth of the trust as of the
beginning of such year.
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply in the case of a taxable year if all the net in-
come for such year, determined under the applicable
principles of the law of trusts, is required to be dis-
tributed currently to the beneficiaries. Paragraph (1)
shall not apply in the case of a trust described in
section 4947(a)(1).’’.
(2) INCREASE IN PENALTY RELATING TO FIL-
ING OF INFORMATION RETURN BY SPLIT-INTEREST
TRUSTS.—Paragraph (2) of section 6652(c) of such
Code (relating to returns by exempt organizations
and by certain trusts) is amended by adding at the
end the following new subparagraph:
‘‘(C) SPLIT-INTEREST
TRUSTS.—In the
case of a trust which is required to file a return
under section 6034(a), subparagraphs (A) and
(B) of this paragraph shall not apply and para-
graph (1) shall apply in the same manner as if
such return were required under section 6033,
except that—
‘‘(i) the 5 percent limitation in the
second sentence of paragraph (1)(A) shall
not apply,
‘‘(ii) in the case of any trust with
gross income in excess of $250,000, the
first sentence of paragraph (1)(A) shall be
applied by substituting ‘$100’ for ‘$20’,
and the second sentence thereof shall be
applied by substituting ‘$50,000’ for
‘$10,000’, and
‘‘(iii) the third sentence of paragraph
(1)(A) shall be disregarded.
If the person required to file such return know-
ingly fails to file the return, such person shall
be personally liable for the penalty imposed
pursuant to this subparagraph.’’.
(3) CONFIDENTIALITY
OF
NONCHARITABLE
BENEFICIARIES.—Subsection (b) of section 6104 of
such Code (relating to inspection of annual informa-
tion returns) is amended by adding at the end the
following new sentence: ‘‘In the case of a trust which
is required to file a return under section 6034(a),
this subsection shall not apply to information re-
garding beneficiaries which are not organizations de-
scribed in section 170(c).’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendment made
by subsection (a) shall apply to taxable years begin-
ning after December 31, 2001.
(2) SUBSECTION (b).—The amendments made
by subsection (b) shall apply to returns for taxable
years beginning after December 31, 2001.
SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE
CONTRIBUTIONS.
(a) IN GENERAL.—Paragraph (2) of section 170(b)
of the Internal Revenue Code of 1986 (relating to corpora-
tions) is amended by striking ‘‘10 percent’’ and inserting
‘‘the applicable percentage’’.
(b) APPLICABLE PERCENTAGE.—Subsection (b) of
section 170 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new para-
graph:
‘‘(3) APPLICABLE PERCENTAGE DEFINED.—For
purposes of paragraph (2), the applicable percentage
shall be determined in accordance with the following
table:
‘‘For taxable years beginning
The applicable
in calendar year—
percentage is—
2001 through 2005 ......................................................
2006 .............................................................................
2007 .............................................................................
2008 .............................................................................
2009 .............................................................................
2010 and thereafter .....................................................
25.’’.
(c) CONFORMING AMENDMENTS.—
(1) Sections 512(b)(10) and 805(b)(2)(A) of
the Internal Revenue Code of 1986 are each amend-
ed by striking ‘‘10 percent’’ each place it occurs and
inserting ‘‘the applicable percentage (determined
under section 170(b)(3))’’.
(2) Sections 545(b)(2) and 556(b)(2) of such
Code are each amended by striking ‘‘10-percent limi-
tation’’ and inserting ‘‘applicable percentage limita-
tion’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS
OF FOOD AND BOOK INVENTORIES.
(a) FOOD INVENTORY.—Subsection (e) of section
170 of the Internal Revenue Code of 1986 (relating to
certain contributions of ordinary income and capital gain
property) is amended by adding at the end the following
new paragraph:
‘‘(7) SPECIAL RULE FOR CONTRIBUTIONS OF
FOOD INVENTORY.—For purposes of this section—
‘‘(A) IN GENERAL.—In the case of a chari-
table contribution of food by a taxpayer, para-
graph (3)(A) shall be applied without regard to
whether or not the contribution is made by a
corporation.
‘‘(B) LIMIT ON REDUCTION.—In the case
of a charitable contribution of food which is a
qualified contribution (within the meaning of
paragraph (3)(A), as modified by subparagraph
(A) of this paragraph)—
‘‘(i) paragraph (3)(B) shall not apply,
and
‘‘(ii) the reduction under paragraph
(1)(A) for such contribution shall be no
greater than the amount (if any) by which
the amount of such contribution exceeds
twice the basis of such food.
‘‘(C) DETERMINATION
OF
BASIS.—For
purposes of this paragraph, if a taxpayer uses
the cash method of accounting, the basis of any
qualified contribution of such taxpayer shall be
deemed to be 50 percent of the fair market
value of such contribution.
‘‘(D) DETERMINATION
OF
FAIR
MARKET
VALUE.—In the case of a charitable contribu-
tion of food which is a qualified contribution
(within the meaning of paragraph (3), as modi-
fied by subparagraphs (A) and (B) of this para-
graph) and which, solely by reason of internal
standards of the taxpayer, lack of market, or
similar circumstances, or which is produced by
the taxpayer exclusively for the purposes of
transferring the food to an organization de-
scribed in paragraph (3)(A), cannot or will not
be sold, the fair market value of such contribu-
tion shall be determined—
‘‘(i) without regard to such internal
standards, such lack of market, such cir-
cumstances, or such exclusive purpose, and
‘‘(ii) if applicable, by taking into ac-
count the price at which the same or simi-
lar food items are sold by the taxpayer at
the time of the contribution (or, if not so
sold at such time, in the recent past).’’.
(b) BOOK INVENTORY.—Section 170(e)(3) of the In-
ternal Revenue Code of 1986 (relating to certain contribu-
tions of ordinary income and capital gain property) is
amended by redesignating subparagraph (C) as subpara-
graph (D) and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(D) SPECIAL RULE FOR CONTRIBUTIONS
OF BOOK INVENTORY FOR EDUCATIONAL PUR-
POSES.—
‘‘(i) CONTRIBUTIONS OF BOOK INVEN-
TORY.—In determining whether a qualified
book contribution is a qualified contribu-
tion, subparagraph (A) shall be applied
without regard to whether or not—
‘‘(I) the donee is an organization
described in the matter preceding
clause (i) of subparagraph (A), and
‘‘(II) the property is to be used
by the donee solely for the care of the
ill, the needy, or infants.
‘‘(ii) QUALIFIED
BOOK
CONTRIBU-
TION.—For purposes of this paragraph,
the term ‘qualified book contribution’
means a charitable contribution of books,
but only if the contribution is to an
organization—
‘‘(I) described in subclause (I) or
(III) of paragraph (6)(B)(i), or
‘‘(II) 
described 
in 
section
501(c)(3) and exempt from tax under
section 501(a) which is organized pri-
marily to make books available to the
general public at no cost or to operate
a literacy program.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 105. REFORM OF EXCISE TAX ON NET INVESTMENT IN-
COME OF PRIVATE FOUNDATIONS.
(a) IN GENERAL.—Subsection (a) of section 4940 of
the Internal Revenue Code of 1986 (relating to excise tax
based on investment income) is amended by striking ‘‘2
percent’’ and inserting ‘‘1 percent’’.
(b) REPEAL OF REDUCTION IN TAX WHERE PRI-
VATE FOUNDATION MEETS CERTAIN DISTRIBUTION RE-
QUIREMENTS.—Section 4940 of the Internal Revenue
Code of 1986 is amended by striking subsection (e).
(c) EXCLUSION OF ADMINISTRATIVE COSTS FROM
QUALIFYING DISTRIBUTIONS.—Section 4942(g)(1)(A) of
the Internal Revenue Code of 1986 (defining qualifying
distributions) is amended by striking ‘‘(including that por-
tion of reasonable and necessary administrative ex-
penses)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE
INCOME 
OF 
CHARITABLE 
REMAINDER
TRUSTS.
(a) IN GENERAL.—Subsection (c) of section 664 of
the Internal Revenue Code of 1986 (relating to exemption
from income taxes) is amended to read as follows:
‘‘(c) TAXATION OF TRUSTS.—
‘‘(1) INCOME TAX.—A charitable remainder an-
nuity trust and a charitable remainder unitrust
shall, for any taxable year, not be subject to any tax
imposed by this subtitle.
‘‘(2) EXCISE TAX.—
‘‘(A) IN GENERAL.—In the case of a chari-
table remainder annuity trust or a charitable
remainder unitrust that has unrelated business
taxable income (within the meaning of section
512, determined as if part III of subchapter F
applied to such trust) for a taxable year, there
is hereby imposed on such trust or unitrust an
excise tax equal to the amount of such unre-
lated business taxable income.
‘‘(B) CERTAIN RULES TO APPLY.—The tax
imposed by subparagraph (A) shall be treated
as imposed by chapter 42 for purposes of this
title other than subchapter E of chapter 42.
‘‘(C) CHARACTER OF DISTRIBUTIONS AND
COORDINATION WITH DISTRIBUTION REQUIRE-
MENTS.—The amounts taken into account in
determining unrelated business taxable income
(as defined in subparagraph (A)) shall not be
taken into account for purposes of—
‘‘(i) subsection (b),
‘‘(ii) determining the value of trust
assets under subsection (d)(2), and
‘‘(iii) determining income under sub-
section (d)(3).
‘‘(D) TAX
COURT
PROCEEDINGS.—For
purposes of this paragraph, the references in
section 6212(c)(1) to section 4940 shall be
deemed to include references to this para-
graph.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 107. ADJUSTMENT TO BASIS OF S CORPORATION
STOCK 
FOR 
CERTAIN 
CHARITABLE 
CON-
TRIBUTIONS.
(a) IN GENERAL.—Paragraph (1) of section 1367(a)
of the Internal Revenue Code of 1986 (relating to adjust-
ments to basis of stock of shareholders, etc.) is amended
by striking ‘‘and’’ at the end of subparagraph (B), by
striking the period at the end of subparagraph (C) and
inserting ‘‘, and’’, and by adding at the end the following
new subparagraph:
‘‘(D) the excess of the amount of the
shareholder’s deduction for any charitable con-
tribution made by the S corporation over the
shareholder’s proportionate share of the ad-
justed basis of the property contributed.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
TITLE II—INDIVIDUAL
DEVELOPMENT ACCOUNTS
SEC. 201. SHORT TITLE.
This title may be cited as the ‘‘Savings for Working
Families Act of 2001’’.
SEC. 202. FINDINGS AND PURPOSES.
(a) FINDINGS.—Congress makes the following find-
ings:
(1) For the vast majority of households the
pathway to the economic mainstream and financial
security is not through spending and consumption,
but through saving, investing, and the accumulation
of assets. Assets promote economic household sta-
bility, decrease economic strain on households, pro-
mote educational attainment, decrease marital dis-
solution, decrease the risk of intergenerational pov-
erty transmission, increase health and satisfaction
among adults, increase property values, decrease res-
idential mobility, increase property maintenance, and
increase local civic involvement.
(2) One-third of all Americans have no assets
available for investment and another 20 percent
have only negligible assets. Assets are distributed far
more unevenly than income. Whereas the top 20 per-
cent of American households earn over 43 percent of
all income, such households hold over 68 percent of
net worth and almost 87 percent of net financial as-
sets. Moreover, asset poverty and wealth gaps are
even higher among minority households by a ratio of
more than 11 to 1. Up to 20 percent of all house-
holds are unbanked and do not have access to the
basic financial tools that make asset accumulation
possible.
(3) Public policy has contributed to large asset
gaps in the United States. Traditional public assist-
ance programs based on income and consumption
have rarely been successful in supporting the transi-
tion to economic self-sufficiency. Tax policy, through
$288,000,000,000 in annual tax incentives, has
helped lay the foundation for the great American
middle class, but only for some citizens. Fully 90
percent of such current tax benefits accrue to house-
holds earning more than $50,000 per year, roughly
half of all American households. Lacking an income
tax liability, low-income working families cannot
take advantage of asset development incentives.
Moreover, low-income families seeking public assist-
ance must first spend down their assets and face se-
vere asset limits once on assistance.
(4) Individual Development Accounts, or IDAs,
have proven to be successful in helping low-income
working families save and accumulate assets. In one
national demonstration project, 2,378 low-income
families saved a total of $834,442 in one year which
generated another $1,644,510 in private matching
funds. Thus far, IDA savings have been used to pur-
chase 
long-term, 
high-return 
assets, 
including
homes, post-secondary education and training, and
small businesses. Presently, about 10,000 IDAs are
in existence in the United States, held by a very
small fraction of the at least 70 million Americans
who are asset poor.
(5) Therefore, the Federal Government should
support, through the tax code, a significant expan-
sion of Individual Development Accounts so that
millions of low-income working families across the
country can save, accumulate assets, and move their
lives forward, and thus make positive contributions
to the economic and social well-being of the United
States, as well as to its future.
(b) PURPOSES.—The purposes of this Act are to pro-
vide for the establishment of individual development ac-
count programs that will—
(1) provide individuals and families with limited
means an opportunity to accumulate assets and to
enter the financial mainstream;
(2) promote education, homeownership, and the
development of small businesses;
(3) stabilize families and build communities;
and
(4) support continued United States economic
expansion.
SEC. 203. DEFINITIONS.
As used in this Act:
(1) ELIGIBLE INDIVIDUAL.—
(A) IN GENERAL.—The term ‘‘eligible indi-
vidual’’ means, with respect to any taxable year,
an individual who—
(i) has attained the age of 18 years
but not the age of 61 as of the last day of
such taxable year;
(ii) is a citizen or legal resident of the
United States as of the last day of such
taxable year;
(iii) was not a student (as defined in
section 151(c)(4) of the Internal Revenue
Code of 1986) for the immediately pre-
ceding taxable year;
(iv) is not an individual with respect
to whom a deduction under section 151 of
such Code is allowable to another taxpayer
for a taxable year of the other taxpayer
ending during the immediately preceding
taxable year of the individual; and
(v) is a taxpayer the adjusted gross
income of whom for the immediately pre-
ceding taxable year does not exceed—
(I) $20,000, in the case of a tax-
payer described in section 1(c) or 1(d)
of such Code;
(II) $30,000, in the case of a
taxpayer described in section 1(b) of
such Code; and
(III) $40,000, in the case of a
taxpayer described in section 1(a) of
such Code.
(B) INFLATION ADJUSTMENT.—
(i) IN GENERAL.—In the case of any
taxable year beginning after 2003, each
dollar amount referred to in subparagraph
(A)(v) shall be increased by an amount
equal to—
(I) such dollar amount, multi-
plied by
(II) the cost-of-living adjustment
determined under section (1)(f)(3) of
the Internal Revenue Code of 1986
for the calendar year in which the tax-
able year begins, by substituting
‘‘2002’’ for ‘‘1992’’.
(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
of $50, such amount shall be rounded to
the nearest multiple of $50.
(2) INDIVIDUAL
DEVELOPMENT
ACCOUNT.—
The term ‘‘Individual Development Account’’ means
an account established for an eligible individual as
part of a qualified individual development account
program, but only if the written governing instru-
ment creating the account meets the following re-
quirements:
(A) The sole owner of the account is the
individual for whom the account was estab-
lished.
(B) No contribution will be accepted unless
it is in cash.
(C) The holder of the account is a quali-
fied financial institution.
(D) The assets of the account will not be
commingled with other property except in a
common trust fund or common investment
fund.
(E) Except as provided in section 207(b),
any amount in the account may be paid out
only for the purpose of paying the qualified ex-
penses of the account owner.
(3) PARALLEL ACCOUNT.—The term ‘‘parallel
account’’ means a separate, parallel individual or
pooled account for all matching funds and earnings
dedicated to an Individual Development Account
owner as part of a qualified individual development
account program, the sole owner of which is a quali-
fied financial institution, a qualified nonprofit orga-
nization, or an Indian tribe.
(4) QUALIFIED FINANCIAL INSTITUTION.—
(A) IN GENERAL.—The term ‘‘qualified fi-
nancial institution’’ means any person author-
ized to be a trustee of any individual retirement
account under section 408(a)(2) of the Internal
Revenue Code of 1986.
(B) RULE OF CONSTRUCTION.—Nothing in
this paragraph shall be construed as preventing
a person described in subparagraph (A) from
collaborating with 1 or more qualified nonprofit
organizations or Indian tribes to carry out an
individual development account program estab-
lished under section 204.
(5) QUALIFIED
NONPROFIT
ORGANIZATION.—
The 
term 
‘‘qualified 
nonprofit 
organization’’
means—
(A) any organization described in section
501(c)(3) of the Internal Revenue Code of 1986
and exempt from taxation under section 501(a)
of such Code;
(B) any community development financial
institution certified by the Community Develop-
ment Financial Institution Fund;
(C) any credit union chartered under Fed-
eral or State law; or
(D) any public housing agency as defined
in section 3(b)(6) of the United States Housing
Act of 1937 (42 U.S.C. 1437a(b)(6)).
(6) INDIAN TRIBE.—The term ‘‘Indian tribe’’
means any Indian tribe as defined in section 4(12)
of the Native American Housing Assistance and
Self-Determination 
Act 
of 
1996 
(25 
U.S.C.
4103(12), and includes any tribally designated hous-
ing entity (as defined in section 4(21) of such Act
(25 U.S.C. 4103(21)), tribal subsidiary, subdivision,
or other wholly owned tribal entity.
(7) QUALIFIED INDIVIDUAL DEVELOPMENT AC-
COUNT PROGRAM.—The term ‘‘qualified individual
development account program’’ means a program es-
tablished under section 204 under which—
(A) Individual Development Accounts and
parallel accounts are held by a qualified finan-
cial institution; and
(B) additional activities determined by the
Secretary, in consultation with the Secretary of
Health and Human Services, as necessary to re-
sponsibly develop and administer accounts, in-
cluding recruiting, providing financial education
and other training to account owners, and reg-
ular program monitoring, are carried out by the
qualified financial institution, a qualified non-
profit organization, or an Indian tribe.
(8) QUALIFIED EXPENSE DISTRIBUTION.—
(A) IN GENERAL.—The term ‘‘qualified ex-
pense distribution’’ means any amount paid (in-
cluding through electronic payments) or distrib-
uted out of an Individual Development Account
and a parallel account established for an eligible
individual if such amount—
(i) is used exclusively to pay the quali-
fied expenses of the Individual Develop-
ment Account owner or such owner’s
spouse or dependents, as approved by the
qualified financial institution, qualified
nonprofit organization, or Indian tribe;
(ii) is paid by the qualified financial
institution, qualified nonprofit organiza-
tion, or Indian tribe—
(I) except as otherwise provided
in this clause, directly to the unre-
lated third party to whom the amount
is due;
(II) in the case of distributions
for working capital under a qualified
business plan (as defined in subpara-
graph (B)(iv)(IV)), directly to the ac-
count owner;
(III) in the case of any qualified
rollover, directly to another Individual
Development Account and parallel ac-
count; or
(IV) in the case of a qualified
final distribution, directly to the
spouse, dependent, or other named
beneficiary of the deceased account
owner; and
(iii) is paid after the account owner
has completed a financial education course
if required under section 205(b).
(B) QUALIFIED EXPENSES.—
(i) IN GENERAL.—The term ‘‘qualified
expenses’’ means any of the following:
(I) Qualified higher education ex-
penses.
(II) Qualified first-time home-
buyer costs.
(III) Qualified business capital-
ization or expansion costs.
(IV) Qualified rollovers.
(V) Qualified final distribution.
(ii) QUALIFIED
HIGHER
EDUCATION
EXPENSES.—
(I) 
IN
GENERAL.—The 
term
‘‘qualified higher education expenses’’
means qualified higher education ex-
penses 
(as 
defined 
in 
section
529(e)(3) of the Internal Revenue
Code of 1986) incurred while attend-
ing an eligible educational institution.
(II) ELIGIBLE EDUCATIONAL IN-
STITUTION.—The term ‘‘eligible edu-
cational institution’’ means an institu-
tion of higher education which meets
the definition of an institution of
higher education under section 101(a)
of the Higher Education Act of 1965
(42 U.S.C. 1001(a)) (as in effect on
the date of the enactment of this Act)
or the definition of a postsecondary
vocational institution under section
102(c) of such Act (42 U.S.C.
1002(c)) (as so in effect) and which
is eligible to participate in programs
under title IV of such Act (42 U.S.C.
1070 et seq.).
(III) 
COORDINATION
WITH
OTHER
BENEFITS.—The amount of
qualified higher education expenses
for any taxable year shall be reduced
as provided in section 25A(g)(2) of
the Internal Revenue Code of 1986
and may not be taken into account for
purposes 
of 
determining 
qualified
higher education expenses under sec-
tion 135, 529, or 530 of such Code.
(iii) QUALIFIED
FIRST-TIME
HOME-
BUYER COSTS.—The term ‘‘qualified first-
time homebuyer costs’’ means qualified ac-
quisition costs (as defined in section
72(t)(8)(C) of the Internal Revenue Code