Seniors Real Property Tax Relief Act of 1998

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Seniors Real Property Tax Relief Act 
of 1998''.

SEC. 2. ALLOWANCE OF DEDUCTION FOR STATE AND LOCAL REAL PROPERTY TAXES 
              TO CERTAIN SENIORS WHO DO NOT ITEMIZE THEIR DEDUCTIONS.

    (a) In General.--Subsection (a) of section 62 of the Internal 
Revenue Code of 1986 (relating to definition of adjusted gross income) 
is amended by adding at the end the following new paragraph:
            ``(18) Real property taxes of eligible senior taxpayers.--
                    ``(A) In general.--In the case of an eligible 
                senior taxpayer, the deduction for State and local real 
                property taxes (within the meaning of section 164).
                    ``(B) Limitation.--Subparagraph (A) shall apply 
                only to the portion of State and local real property 
                taxes which exceeds the aggregate amount distributed 
                for the taxable year from the senior citizen real 
                property tax account (as defined by section 222). The 
                preceding sentence shall not apply to a distribution 
                described in paragraph (3), (4), or (5) of section 
                222(e).
                    ``(C) Eligible senior taxpayer defined.--For 
                purposes of subparagraph (A), the term `eligible senior 
                taxpayer' means a taxpayer--
                            ``(i) who is not married or is married 
                        filing a separate return and--
                                    ``(I) who has attained age 65 
                                before 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 before 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 income.--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 subparagraphs (C)(i)(II) 
                        and (C)(ii)(II) shall be increased by an amount 
                        equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 1998' for 
                                `calendar 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 chapter 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 inserting after section 221 the following new 
section:

``SEC. 222. SENIOR CITIZEN REAL PROPERTY TAX ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction for the taxable 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 account.--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 
        designated 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 taxable 
                        year, or
                            ``(iii) after the date on which such 
                        beneficiary attains age 59\1/2\.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                that person will administer the trust will be 
                consistent with the requirements of this section or who 
                has so demonstrated with respect to any individual 
                retirement plan.
                    ``(C) No part of the trust assets will be invested 
                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 59\1/2\.
                    ``(B) Jointly held property.--In the case of any 
                residence which is held as joint tenants, tenants by 
                the entirety, or community property by individuals who 
                are married to each other, if one spouse satisfies the 
                age requirement of subparagraph (A), then both spouses 
                shall be treated as satisfying such requirement.
            ``(3) Account beneficiary.--The term `account 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 deduction 
                for rollovers).
                    ``(B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                    ``(C) Section 408(d)(6) (relating to transfer of 
                account incident to divorce).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
    ``(d) Tax Treatment of Accounts.--
            ``(1) In general.--A senior citizen real property 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 
        unrelated business income of charitable, etc. organizations).
            ``(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 during 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 beneficiary attains 
                age 59\1/2\, 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 property tax expenses.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the extent that the aggregate distributions during the 
                taxable year from the senior citizen real property tax 
                accounts of the account beneficiary do not exceed the 
                aggregate qualified property tax expenses of such 
                beneficiary for such year.
                    ``(B) Exclusion from gross income.--Gross income 
                shall not include any distribution excluded from 
                paragraph (1) by reason of subparagraph (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 reason 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 before the due date of 
        return.--
                    ``(A) In general.--If any excess contribution is 
                contributed for a taxable year to a senior citizen real 
                property tax account of an individual, paragraph (1) 
                shall not apply to distributions 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 purposes of 
                subparagraph (A), the term `excess contribution' means 
                any contribution (other than a rollover contribution) 
                that is not deductible under this section.
            ``(5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution 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 property tax account for the benefit of 
                such beneficiary 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 subparagraph (A) received by 
                an individual from a senior 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 extensions 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 Secretary and to the account beneficiary with respect to 
contributions, 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 Taxpayer 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 transactions) is amended by 
        redesignating subparagraphs (E) and (F) as subparagraphs (F) 
        and (G), respectively, and by inserting after subparagraph (D) 
        the following new subparagraph:
                    ``(E) a senior citizen real property tax account 
                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 account is established 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 section 222(d)(2) applies with respect to such 
        transaction.''.
    (d) Failure To Provide Reports on Senior Citizen Real Property Tax 
accounts.--Paragraph (2) of section 6693(a) of such Code (relating to 
failure to provide reports on individual retirement accounts or 
annuities) is amended by redesignating subparagraphs (C) and (D) as 
subparagraphs (D) and (E), respectively, and by inserting after 
subparagraph (B) the following new subparagraph:
                    ``(C) section 222(g) (relating to senior citizen 
                real property tax accounts),''.
    (e) Tax on Excess Contributions.--
            (1) In general.--Subsection (a) of section 4973 of such 
        Code is amended by redesignating paragraphs (3) and (4) as 
        paragraphs (4) and (5), respectively, and by inserting after 
        paragraph (2) the following new paragraph:
            ``(3) a senior citizen real property tax account (as 
        defined in section 222(c)),''.
            (2) Excess contributions defined.--Section 4973 of such 
        Code is amended by adding at the end the following new 
        subsection:
    ``(g) Excess Contributions to Senior Citizen Real Property Tax 
Accounts.--For purposes of this section--
            ``(1) In general.--In the case of senior citizen real 
        property tax accounts maintained for the benefit of any 1 
        beneficiary, the term `excess contributions' means the amount 
        by which the amount contributed for the taxable year to such 
        accounts exceeds $2,000.
            ``(2) Special rules.--For purposes of paragraph (1), the 
        following contributions shall not be taken into account:
                    ``(A) Any contribution which is distributed out of 
                the senior citizen real property tax account in a 
                distribution to which section 222(e)(4) applies.
                    ``(B) Any rollover contribution.''.
    (f) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 222. Senior citizen real property 
                                        tax accounts.
                              ``Sec. 223. Cross reference.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

Summary: Seniors Real Property Tax Relief Act of 1998 - Amends the Internal Revenue Code to:  (1) 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 (2) provide for the establishment of "senior citizen real property tax accounts" (trusts created exclusively for the purpose of paying the qualified property tax expenses of qualified beneficiaries).