Emergency Savings Accounts Act of 2021
Bill: H.R.1449 | Sponsor: Rep. Cloud, Michael (R-TX)
Policy area: Taxation

Summary:
Emergency Savings Accounts Act of 2021
This bill allows an individual taxpayer occupying a residence a deduction from gross income for up to $5,000 of amounts paid into such taxpayer's emergency savings account. The bill defines emergency savings account as an account established exclusively to pay the qualified disaster and public health emergency expenses of the account beneficiary.
The bill defines qualified disaster and public health emergency expenses as disaster mitigation expenses, disaster recovery expenses, public health emergency expenses, and unemployment-related expenses.

To amend the Internal Revenue Code of 1986 to provide emergency savings 
                       accounts for individuals.

    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 ``Emergency Savings Accounts Act of 
2021''.

SEC. 2. DEDUCTION FOR CONTRIBUTIONS TO EMERGENCY SAVINGS 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 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. EMERGENCY SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of a eligible individual, 
there shall be allowed as a deduction for the taxable year an amount 
equal to the aggregate amount paid during such taxable year by or on 
behalf of such individual to an emergency savings account of such 
individual.
    ``(b) Limitation.--
            ``(1) In general.--The amount allowed as a deduction under 
        subsection (a) to an individual for the taxable year shall not 
        exceed $5,000.
            ``(2) Partial year of eligibility.--In the case of an 
        individual who is an eligible individual for only a portion of 
        the taxable year, the limitation under paragraph (1) shall be 
        same proportion of $5,000 as such portion bears to the entire 
        taxable year.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual if such individual occupied 
any residence in the United States at any time during the taxable year.
    ``(d) Emergency Savings Account.--For purposes of this section--
            ``(1) In general.--The term `emergency savings account' 
        means a trust created or organized in the United States as an 
        emergency savings account exclusively for the purpose of paying 
        the qualified disaster and public health emergency expenses of 
        the account beneficiary, but only if the written governing 
        instrument creating the trust meets the following requirements:
                    ``(A) Except in the case of a rollover contribution 
                described in subsection (f)(5), no contribution will be 
                accepted--
                            ``(i) unless it is in cash, or
                            ``(ii) to the extent such contribution, 
                        when added to previous contributions to the 
                        trust for the calendar year, exceeds the dollar 
                        limitation in effect under subsection (b).
                    ``(B) The trustee is a bank (as defined in section 
                408(n)), an insurance company (as defined in section 
                816), or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(E) The interest of an individual in the balance 
                in his account is nonforfeitable.
            ``(2) Qualified disaster and public health emergency 
        expenses.--The term `qualified disaster and public health 
        emergency expenses' means--
                    ``(A) disaster mitigation expenses,
                    ``(B) disaster recovery expenses,
                    ``(C) public health emergency expenses, and
                    ``(D) unemployment related expenses.
            ``(3) Disaster mitigation expenses.--The term `disaster 
        mitigation expenses' means expenses for any of the following 
        with respect to the residence referred to in subsection (c):
                    ``(A) Tornado safe rooms manufactured or 
                constructed in accordance with FEMA 320 or FEMA 361 
                guidance or tornado shelters manufactured or 
                constructed in accordance with the National Storm 
                Shelter/International Code Council 500 standard.
                    ``(B) Opening protection, including impact and wind 
                resistant windows, exterior doors, and garage doors.
                    ``(C) Reinforcement of roof-to-wall and floor-to-
                wall connections for wind or seismic activity.
                    ``(D) Roof covering for impact, fire, or high wind 
                resistance.
                    ``(E) Cripple and shear walls to resist seismic 
                activity.
                    ``(F) Flood resistant building materials.
                    ``(G) Elevating structures and utilities above base 
                flood elevation.
                    ``(H) Fire resistant exterior wall assemblies/
                systems.
                    ``(I) Lightning protection systems.
                    ``(J) Whole home standby generators.
                    ``(K) Any activity specified by the Secretary as 
                appropriate to mitigate the risks of future hazards 
                (including earthquake, flood, hail, hurricane, 
                sinkhole, lightning, power outage, tornado, and 
                wildfire) and other natural disasters.
            ``(4) Disaster recovery expenses.--The term `disaster 
        recovery expenses' means with respect to the residence referred 
        to in subsection (c) any expense incurred to replace or repair 
        disaster-related uninsured personal casualty personal losses 
        totaling $1,000 or greater.
            ``(5) Disaster-related uninsured personal casualty loss.--
        The term `disaster-related uninsured personal casualty loss' 
        means a personal casualty loss (as defined in section 
        165(h)(3)(B), determined without regard to the second sentence 
        thereof) attributable to a State or federally declared disaster 
        for which a deduction is allowable under section 165 (without 
        regard to subsection (h)(1)).
            ``(6) Federally declared disaster.--The term `federally 
        declared disaster' has the meaning given such term by section 
        165(i)(5).
            ``(7) Public health emergency expenses.--The term `public 
        health emergency expenses' means expenses for any of the 
        following with respect to an individual referred to in 
        subsection (c) if paid or incurred while a public health 
        emergency declaration is in effect and while such individual is 
        unemployed or has their employment status reduced from full-
        time status:
                    ``(A) Child care expenses.
                    ``(B) Out-of-pocket health care costs, including 
                insurance premiums.
                    ``(C) Housing expenses including mortgage, rent, or 
                property taxes.
                    ``(D) Utilities.
            ``(8) Public health emergency declaration.--The term 
        `public health emergency declaration' means any declaration of 
        a public health emergency by the Secretary of Health and Human 
        Services under section 319 of the Public Health Service Act (42 
        U.S.C. 247d).
            ``(9) Unemployment related expenses.--The term 
        `unemployment related expenses' means, in the case of an 
        account beneficiary with any period of unemployment during the 
        taxable year, any expenses during such taxable year which, in 
        the aggregate, do not exceed $500.
            ``(10) Account beneficiary.--The term `account beneficiary' 
        means the individual on whose behalf the emergency savings 
        account was established.
    ``(e) Treatment of Account.--
            ``(1) In general.--An emergency savings account is exempt 
        from taxation under this subtitle unless such account has 
        ceased to be an emergency savings 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 
        emergency savings accounts, and any amount treated as 
        distributed under such rules shall be treated as not used to 
        pay qualified disaster and public health emergency expenses.
    ``(f) Tax Treatment of Distributions.--
            ``(1) Amounts used for qualified disaster and public health 
        emergency expenses.--Any amount paid or distributed out of an 
        emergency savings account which is used exclusively to pay 
        qualified disaster and public health emergency expenses of any 
        account beneficiary shall not be includible in gross income.
            ``(2) Inclusion of amounts not used for qualified disaster 
        and public health emergency expenses.--Any amount paid or 
        distributed out of an emergency savings account which is not 
        used exclusively to pay the qualified disaster and public 
        health emergency expenses of the account beneficiary shall be 
        included in the gross income of such beneficiary.
            ``(3) Excess contributions returned before due date of 
        return.--
                    ``(A) In general.--If any excess contribution is 
                contributed for a taxable year to any emergency savings 
                account of an individual, paragraph (2) shall not apply 
                to distributions from the emergency savings 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 
                described in paragraph (5)) which is not deductible 
                under this section.
            ``(4) Additional tax on distributions not used for 
        qualified disaster and public health emergency expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                on the account beneficiary for any taxable year in 
                which there is a payment or distribution from an 
                emergency savings account of such beneficiary which is 
                includible in gross income under paragraph (2) shall be 
                increased by 20 percent of the amount which is so 
                includible.
                    ``(B) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment or 
                distribution is made after the account beneficiary 
                becomes disabled within the meaning of section 72(m)(7) 
                or dies.
            ``(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 (2) shall not apply to 
                any amount paid or distributed from an emergency 
                savings account to the account beneficiary to the 
                extent the amount received is paid into an emergency 
                savings 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 an emergency savings 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 an emergency savings 
                account which was not includible in the individual's 
                gross income because of the application of this 
                paragraph.
    ``(g) Cost-of-Living Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2021, each $5,000 amount in 
        subsection (b) and the $3,000 amount in subsection (d)(4) shall 
        be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                such taxable year begins determined by substituting 
                `calendar year 2020' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.
            ``(2) Rounding.--If any increase under paragraph (1) is not 
        a multiple of $50, such increase shall be rounded to the 
        nearest multiple of $50.
    ``(h) Special Rules.--
            ``(1) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual with 
        respect to whom a deduction under section 151 is allowable to 
        another taxpayer for a taxable year beginning in the calendar 
        year in which such individual's taxable year begins.
            ``(2) Taxable year must be full taxable year.--Except in 
        the case of a taxable year closed by reason of the death of the 
        taxpayer, no deduction shall be allowed under this section in 
        the case of a taxable year covering a period of less than 12 
        months.
            ``(3) 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 219(f)(5) (relating to employer 
                payments).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
                    ``(F) Section 223(f)(7) (relating to transfer of 
                account incident to divorce).
                    ``(G) Section 223(f)(8) (relating to treatment 
                after death of account beneficiary).
            ``(4) Coordination with casualty loss deduction.--No 
        deduction shall be allowed under section 165 for a loss for 
        which a disaster recovery expense payment is made from an 
        emergency savings account.
    ``(i) Reports.--The Secretary may require the trustee of an 
emergency savings account to make such reports regarding such account 
to the Secretary and to the account beneficiary with respect to 
contributions, distributions, the return of excess contributions, and 
such other matters as the Secretary determines appropriate.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Section 62(a) of such Code is amended by inserting after 
paragraph (21) the following new paragraph:
            ``(22) Emergency savings accounts.--The deduction allowed 
        by section 224.''.
    (c) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to certain tax-favored 
accounts and annuities) is amended--
            (1) by striking ``or'' at the end of subsection (a)(5), by 
        inserting ``or'' at the end of subsection (a)(6), and by 
        inserting after subsection (a)(6) the following new paragraph:
            ``(7) an emergency savings account (within the meaning of 
        section 224(d)),''; and
            (2) by adding at the end the following new subsection:
    ``(i) Excess Contributions to Emergency Savings Accounts.--For 
purposes of this section, in the case of emergency savings accounts 
(within the meaning of section 224(d)), the term `excess contributions' 
means the sum of--
            ``(1) the aggregate amount contributed for the taxable year 
        to the accounts (other than a rollover contribution described 
        in section 224(f)(5)) which is not allowable as a deduction 
        under section 224 for such year, and
            ``(2) the amount determined under this subsection for the 
        preceding taxable year, reduced by the sum of--
                    ``(A) the distributions out of the accounts which 
                were included in gross income under section 224(f)(2), 
                and
                    ``(B) the excess (if any) of--
                            ``(i) the maximum amount allowable as a 
                        deduction under section 224(b) for the taxable 
                        year, over
                            ``(ii) the amount contributed to the 
                        accounts for the taxable year.
                For purposes of this subsection, any contribution which 
                is distributed out of the emergency savings account in 
                a distribution to which section 224(f)(3) applies shall 
                be treated as an amount not contributed.''.
    (d) Failure To Provide Reports on Emergency Savings Accounts.--
Section 6693(a)(2) of such Code is amended by redesignating 
subparagraphs (D), (E), and (F) as subparagraphs (E), (F), and (G), 
respectively, and by inserting after subparagraph (C) the following new 
subparagraph:
                    ``(D) section 224(i) (relating to emergency savings 
                accounts),''.
    (e) 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:

``Sec. 224. Emergency savings accounts.
``Sec. 225. Cross reference.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2020.
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