American Dream Down Payment Act of 2022
Bill: S.4722 | Sponsor: Sen. Warnock, Raphael G. (D-GA)
Policy area: Taxation

Summary:
American Dream Down Payment Act of 2022
This bill establishes qualified down payment savings programs that allow taxpayers to establish tax-free accounts to save for down payments, including closing costs, on a principal residence. The Department of the Treasury, in coordination with the Securities and Exchange Commission, must report on matters relating to such accounts, including the number of states that have established down payment savings programs and information about beneficiaries of such programs.

To amend the Internal Revenue Code of 1986 to establish qualified down 
                       payment savings programs.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Dream Down Payment Act of 
2022''.

SEC. 2. QUALIFIED DOWN PAYMENT SAVINGS PROGRAMS.

    (a) In General.--Part VIII of subchapter F of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
529A the following new section:

``SEC. 529B. QUALIFIED DOWN PAYMENT SAVINGS PROGRAMS.

    ``(a) In General.--A qualified down payment savings program shall 
be exempt from taxation under this subtitle. Notwithstanding the 
preceding sentence, such program shall be subject to the taxes imposed 
by section 511 (relating to imposition of tax on unrelated business 
income of charitable organizations).
    ``(b) Qualified Down Payment Savings Program.--For purposes of this 
section--
            ``(1) In general.--The term `qualified down payment savings 
        program' means a program established and maintained by a State 
        or agency or instrumentality thereof--
                    ``(A) under which a person may make contributions 
                to a qualified down payment savings account which is 
                established for the purpose of meeting qualified down 
                payment expenses of the designated beneficiary of the 
                account, and
                    ``(B) which meets the other requirements of this 
                subsection.
            ``(2) Cash contributions.--
                    ``(A) In general.--A program shall not be treated 
                as a qualified down payment savings program unless it 
                provides that no contribution will be accepted--
                            ``(i) unless it is in cash, and
                            ``(ii) except in the case of contributions 
                        under subsection (c)(3)(C), if such 
                        contribution to a qualified down payment 
                        savings account would result in the balance of 
                        such account exceeding $129,440.
                    ``(B) Inflation adjustment.--
                            ``(i) In general.--In the case of any 
                        calendar year beginning after 2022, the 
                        $129,440 amount in subparagraph (A)(ii) shall 
                        be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under clause 
                                (ii).
                            ``(ii) Cost-of-living adjustment.--For 
                        purposes of clause (i), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which--
                                    ``(I) the CPI for the preceding 
                                calendar year, exceeds
                                    ``(II) the CPI for calendar year 
                                2021.
                        For purposes of this clause, the CPI for any 
                        calendar year shall be determined in the same 
                        manner as it is determined under section 
                        1(f)(4).
                            ``(iii) Rounding.--If any increase 
                        determined under clause (i) is not a multiple 
                        of $10, such increase shall be rounded to the 
                        nearest multiple of $10.
            ``(3) Separate accounting.--A program shall not be treated 
        as a qualified down payment savings program unless it provides 
        separate accounting for each designated beneficiary.
            ``(4) Investment direction.--A program shall not be treated 
        as a qualified down payment savings program unless it provides 
        that--
                    ``(A) except as provided in subparagraph (B), any 
                contributor to, or designated beneficiary under, such 
                program may, directly or indirectly, direct the 
                investment of any contributions to the program (or any 
                earnings thereon) no more than 2 times in any calendar 
                year and subject to the regulations established 
                pursuant to this section, and
                    ``(B) in the event that an account's holdings meet 
                the value established under paragraph (2)(B), the 
                account funds will be transferred to investments in 
                United States Treasury securities.
            ``(5) No pledging of interest as a security.--A program 
        shall not be treated as a qualified down payment savings 
        program if it allows any interest in the program or any portion 
        thereof to be used as security for a loan.
            ``(6) Compliance with regulations.--A program shall not be 
        treated as a qualified down payment savings program unless it 
        complies with all regulations issued pursuant to subsection 
        (f).
    ``(c) Tax Treatment of Designated Beneficiaries and Contributors.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, no amount shall be includible in gross income of--
                    ``(A) a designated beneficiary under a qualified 
                down payment savings program, or
                    ``(B) a contributor to such program on behalf of a 
                designated beneficiary,
        with respect to any distribution or earnings under such 
        program.
            ``(2) Gift tax treatment of contributions.--For purposes of 
        chapters 12 and 13--
                    ``(A) In general.--Any contribution to a qualified 
                down payment savings program on behalf of any 
                designated beneficiary shall be treated as a completed 
                gift to such beneficiary which is not a future interest 
                in property.
                    ``(B) Treatment of excess contributions.--If the 
                aggregate amount of contributions described in 
                subparagraph (A) during the calendar year by a donor 
                exceeds the limitation for such year under section 
                2503(b), such aggregate amount shall, at the election 
                of the donor, be taken into account for purposes of 
                such section ratably over the 5-year period beginning 
                with such calendar year.
            ``(3) Distributions.--
                    ``(A) In general.--Any distribution under a 
                qualified down payment savings program shall be 
                includible in the gross income of the distributee in 
                the manner as provided under section 72 to the extent 
                not excluded from gross income under any other 
                provision of this chapter.
                    ``(B) Distributions for qualified down payment 
                expenses.--For purposes of this paragraph, if 
                distributions from a qualified down payment savings 
                program--
                            ``(i) do not exceed the qualified down 
                        payment expenses, no amount shall be includible 
                        in gross income, and
                            ``(ii) in any other case, the amount 
                        otherwise includible in gross income shall be 
                        reduced by an amount which bears the same ratio 
                        to such amount as such expenses bear to such 
                        distributions.
                    ``(C) Rollovers.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply to that portion of any distribution 
                        which, within 60 days of such distribution, is 
                        transferred to another qualified down payment 
                        savings account for the benefit of the 
                        designated beneficiary.
                            ``(ii) Limitation on certain rollovers.--
                        Clause (i) shall not apply to any transfer if 
                        such transfer occurs within 12 months from the 
                        date of a previous transfer to any qualified 
                        down payment savings account for the benefit of 
                        the designated beneficiary.
            ``(4) Estate tax treatment.--
                    ``(A) In general.--No amount shall be includible in 
                the gross estate of any individual for purposes of 
                chapter 11 by reason of an interest in a qualified down 
                payment savings program.
                    ``(B) Amounts includible in estate of designated 
                beneficiary in certain cases.--Subparagraph (A) shall 
                not apply to amounts distributed on account of the 
                death of a beneficiary.
                    ``(C) Amounts includible in estate of donor making 
                excess contributions.--In the case of a donor who makes 
                the election described in paragraph (2)(B) and who dies 
                before the close of the 5-year period referred to in 
                such paragraph, notwithstanding subparagraph (A), the 
                gross estate of the donor shall include the portion of 
                such contributions properly allocable to periods after 
                the date of death of the donor.
            ``(5) Other gift tax rules.--For purposes of chapters 12 
        and 13, in no event shall a distribution from a qualified down 
        payment savings account be treated as a taxable gift.
            ``(6) Additional tax.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year on any taxpayer who receives a 
                distribution from a qualified down payment savings 
                program which is includible in gross income shall be 
                increased by 10 percent of the amount which is so 
                includible.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                if the payment or distribution is--
                            ``(i) made to a beneficiary (or to the 
                        estate of the designated beneficiary) on or 
                        after the death of the designated beneficiary, 
                        or
                            ``(ii) attributable to the designated 
                        beneficiary's being disabled (within the 
                        meaning of section 72(m)(7)).
                    ``(C) Contributions returned before certain date.--
                Subparagraph (A) shall not apply to the distribution of 
                any contribution made during a taxable year on behalf 
                of the designated beneficiary if--
                            ``(i) such distribution is received on or 
                        before the day prescribed by law (including 
                        extensions of time) for filing such designated 
                        beneficiary's return for such taxable year, and
                            ``(ii) such distribution is accompanied by 
                        the amount of net income attributable to such 
                        excess contribution.
    ``(d) Reports.--Each officer or employee having control of the 
qualified down payment savings program or their designee shall make 
such reports regarding such program to the Secretary and to designated 
beneficiaries with respect to contributions, distributions, and such 
other matters as the Secretary may require. The reports required by 
this subsection shall be filed at such time and in such manner and 
furnished to such individuals at such time and in such manner as may be 
required by the Secretary.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Designated beneficiary.--The term `designated 
        beneficiary' means the individual designated at the 
        commencement of participation in the qualified down payment 
        savings program as the beneficiary of amounts paid (or to be 
        paid) to the program.
            ``(2) Qualified down payment expenses.--The term `qualified 
        down payment expenses' means amounts (including closing costs) 
        paid or incurred to purchase a principal residence (within the 
        meaning of section 121).
            ``(3) Qualified down payment savings account.--The term 
        `qualified down payment savings account' means an account 
        maintained under a qualified down payment savings program.
    ``(f) Regulations.--Notwithstanding any other provision of this 
section, the Secretary, in consultation with the Chairman of the 
Securities and Exchange Commission, shall prescribe such regulations as 
may be necessary or appropriate to carry out the purposes of this 
section and to prevent abuse of such purposes. Such regulations shall 
include--
            ``(1) impermissible investments for qualified down payment 
        savings programs;
            ``(2) permissible fees, including the maximum amount of 
        overall fees and commissions, that may be charged in 
        association with a qualified down payment savings program 
        account; and
            ``(3) minimum required disclosures to account 
        beneficiaries, including disclosures related to any possible 
        losses that could be incurred in a qualified down payment 
        savings account.''.
    (b) Tax on Excess Contributions.--
            (1) In general.--Subsection (a) of section 4973 of the 
        Internal Revenue Code of 1986 is amended by striking ``or'' at 
        the end of paragraph (5), by inserting ``or'' at the end of 
        paragraph (6), and by inserting after paragraph (6) the 
        following new paragraph:
            ``(7) a qualified down payment savings account (within the 
        meaning of section 529B),''.
            (2) Excess contribution.--Section 4973 of such Code is 
        amended by adding at the end the following new subsection:
    ``(i) Excess Contributions to Qualified Down Payment Savings 
Accounts.--For purposes of this section--
            ``(1) In general.--In the case of a qualified down payment 
        savings account (within the meaning of section 529B), the term 
        `excess contributions' means the amount by which the amount 
        contributed for the taxable year to such account (other than 
        contributions under section 529B(c)(3)(C)) exceeds the 
        contribution limit under section 529B(b)(2)(B).
            ``(2) Special rule.--For purposes of this subsection, any 
        contribution which is distributed out of the qualified down 
        payment savings account in a distribution to which section 
        529B(c)(6)(C) applies shall be treated as an amount not 
        contributed.''.
    (c) Penalty for Failure To File Reports.--Section 6693(a)(2) is 
amended by striking ``and'' at the end of subparagraph (E), by 
redesignating subparagraph (F) as subparagraph (G), and by inserting 
after subparagraph (E) the following:
                    ``(E) section 529B(d) (relating to qualified down 
                payment savings programs), and''.
    (d) Other Conforming Amendments.--
            (1) Section 26(b)(2) of the Internal Revenue Code of 1986 
        is amended by striking ``and'' at the end of subparagraph (Y), 
        by striking the period at the end of subparagraph (Z) and 
        inserting ``, and'', and by inserting after subparagraph (Y) 
        the following:
                    ``(AA) section 529B(c)(6) (relating to additional 
                tax on qualified down payment savings program 
                distributions not used for qualified down payment 
                expenses).''.
            (2) Section 877A of such Code is amended--
                    (A) in subsection (e)(2) by inserting ``a qualified 
                down payment savings program (as defined in section 
                529B),'' after ``a qualified ABLE program (as defined 
                in section 529A),'', and
                    (B) in subsection (g)(6) by inserting 
                ``529B(c)(6),'' after ``529A(c)(3),''.
            (3) Section 4965(c) of such Code is amended by striking 
        ``or'' at the end of paragraph (7), by striking the period at 
        the end of paragraph (8) and inserting ``, or'', and by 
        inserting after paragraph (8) the following new paragraph:
            ``(9) a program described in section 529B.''.
            (4) The table of sections for part VIII of subchapter F of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 529A the following new item:

``Sec. 529B. Qualified down payment savings programs.''.
    (e) Reports on Down Payment Savings Programs.--Beginning on that 
date that is 12 months after the regulations established pursuant to 
section 529B(f) are finalized, and every two years thereafter, the 
Secretary of the Treasury (or the Secretary's delegate), in 
coordination with the Chairman of the Securities and Exchange 
Commission and the States offering qualified down payment savings 
programs, shall issue a public report detailing the following:
            (1) The number of States that have established qualified 
        down payment savings programs.
            (2) The number of down payment savings program accounts in 
        existence during the time specified in the report and the 
        number of such accounts that have been established over the 
        life of the program.
            (3) The age distribution of down payment savings account 
        beneficiaries.
            (4) The percentage of qualified down payment savings 
        account beneficiaries that would be first-time homebuyers.
            (5) A summary of the account balances held in qualified 
        down payment savings program accounts.
            (6) The race and gender distribution of qualified down 
        payment savings program account designated beneficiaries.
            (7) The income distribution of the designated beneficiaries 
        of qualified down payment savings program accounts.
            (8) The number of down payment savings program 
        distributions that have been made since the previous report.
            (9) Such other information as the Secretary (or the 
        Secretary's designee) shall determine is required to assess 
        whether qualified down payment savings accounts have 
        contributed to facilitating access to affordable homeownership, 
        including first-time homeownership, particularly among young 
        people, low- and moderate-income people, and people from 
        communities with historically low rates of homeownership.
    (f) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2021.
            (2) Regulations.--The Secretary of the Treasury (or the 
        Secretary's designee) shall promulgate the regulations or other 
        guidance required under section 529B(f) of the Internal Revenue 
        Code of 1986, as added by subsection (a), not later than 6 
        months after the date of the enactment of this Act.
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