Refund to Rainy Day Savings Act
Bill: S.2600 | Sponsor: Sen. Booker, Cory A. (D-NJ)
Policy area: Taxation

Summary:
Refund to Rainy Day Savings Act
This bill directs the Internal Revenue Service (IRS) to establish and implement the Refund to Rainy Day Savings program (i.e., a program to provide for unexpected expenses) to allow taxpayers to deposit 20% of their income tax refunds into the savings program. The bill sets forth rules for investments in and disbursement from the savings program.
The bill also reauthorizes the Assets for Independence Act for FY2021-FY2025. The IRS may make grants to qualified entities to conduct AFI innovation projects.
The bill directs the Department of Health and Human Services to establish a three-year matched savings account pilot program to encourage savings by participants in the savings program.

To establish the Refund to Rainy Day Savings Program.

    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 ``Refund to Rainy Day Savings Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Approximately 15,000,000 households file tax returns 
        each year with the Internal Revenue Service.
            (2) For millions of Americans with low or moderate levels 
        of income, their tax refund is the single largest source of 
        income for the entire year.
            (3) Financial insecurity extends far up the income 
        spectrum, as too few Americans have sufficient financial 
        savings, and 1 in every 3 Americans has no financial savings at 
        all.
            (4) Forty percent of American families do not have enough 
        liquidity to pay for a $400 ``rainy day'' expense, and 40 
        percent of Americans are liquid asset poor, with emergency 
        savings that are too small to cover basic needs in the event of 
        a surprise expense or reduction in income.

SEC. 3. REFUND TO RAINY DAY SAVINGS PROGRAM.

    (a) In General.--Not later than December 31, 2021, the Secretary of 
the Treasury or the Secretary's delegate (referred to in this section 
as the ``Secretary'') shall establish and implement a program (referred 
to in this section as the ``Refund to Rainy Day Savings Program'') to 
allow participating taxpayers, pursuant to the requirements established 
under this section, to defer payment on 20 percent of the amount which 
would otherwise be refunded to such taxpayer as an overpayment (as 
described in section 6401 of the Internal Revenue Code of 1986).
    (b) Period of Deferral.--Except as provided under subsection 
(c)(5), a participating taxpayer may elect to defer payment of the 
amount described in subsection (a) and have such amount deposited in 
the Rainy Day Fund (as described in subsection (c)).
    (c) Rainy Day Fund.--
            (1) In general.--The Secretary shall establish a fund, in 
        such manner as the Secretary determines to be appropriate, to 
        be known as the ``Rainy Day Fund'', consisting of any amounts 
        described in subsection (a) on which payment has been deferred 
        by participating taxpayers.
            (2) Investment.--Any amounts deposited in the Rainy Day 
        Fund shall be invested by the Secretary, in coordination with 
        the Bureau of the Fiscal Service of the Department of the 
        Treasury, in United States Treasury bills issued under chapter 
        31 of title 31, United States Code, with maturities suitable 
        for the needs of the Fund and selected so as to provide the 
        highest return on investment for participating taxpayers.
            (3) Disbursements from fund.--
                    (A) In general.--On the date that is 180 days after 
                receipt of the individual income tax return of a 
                participating taxpayer, the amounts in the Rainy Day 
                Fund shall be made available to the Secretary to 
                distribute to such taxpayer in an amount equal to the 
                amount deferred by such taxpayer under subsection (a) 
                and any interest accrued on such amount (as determined 
                under paragraph (4)).
                    (B) Distributed to bank account.--The amounts 
                described in subparagraph (A) shall be distributed to 
                the bank account identified by the participating 
                taxpayer under subsection (d)(3).
            (4) Interest accrued.--The amount of interest accrued on 
        the amount deferred by a participating taxpayer under 
        subsection (a) shall be determined by the Secretary, in 
        coordination with the Bureau of the Fiscal Service of the 
        Department of the Treasury, based upon the return on the 
        investment of such amounts under paragraph (2).
            (5) Early withdrawal.--
                    (A) In general.--On any date during the period 
                between the date which is 30 days after receipt by the 
                Secretary of the individual income tax return of the 
                participating taxpayer and October 15 of the applicable 
                year, such taxpayer may elect to terminate the deferral 
                of the amount described under subsection (a) and 
                receive a distribution from the Rainy Day Fund equal to 
                such amount and any interest which has accrued on such 
                amount up to that date.
                    (B) Complete withdrawal.--A participating taxpayer 
                making an election under subparagraph (A) must 
                terminate deferral of the full amount described under 
                subsection (a), and such amount shall be distributed to 
                the bank account identified by the participating 
                taxpayer under subsection (d)(3).
    (d) Participating Taxpayer.--For purposes of this section, the term 
``participating taxpayer'' means a taxpayer who--
            (1) has not requested or received an extension of the time 
        for payment of taxes for such taxable year under section 6161 
        of the Internal Revenue Code of 1986,
            (2) prior to the due date for filing the return of tax for 
        such taxable year, elects to participate in the Refund to Rainy 
        Day Savings Program, and
            (3) provides the Secretary with a bank account number and 
        any other financial information deemed necessary by the 
        Secretary for purposes of paragraphs (3)(B) and (5)(B) of 
        subsection (c).
    (e) Forms.--The Secretary shall ensure that the election to defer 
payment of the amount described in subsection (a) may be claimed on 
Forms 1040, 1040A, and 1040EZ.
    (f) Implementation.--
            (1) Educational materials and outreach.--The Secretary 
        shall--
                    (A) design educational materials for taxpayers 
                regarding financial savings and the Refund to Rainy Day 
                Savings Program,
                    (B) publicly disseminate and distribute such 
                materials during the first calendar quarter of each 
                calendar year and following disbursement of amounts 
                described in subsection (c)(3), and
                    (C) engage in outreach regarding the Refund to 
                Rainy Day Savings Program to the Volunteer Income Tax 
                Assistance program and paid tax preparers.
            (2) Information for participating taxpayers.--The Secretary 
        shall ensure that a participating taxpayer is able to 
        electronically verify the status of the amount deferred by such 
        taxpayer under subsection (a), including any interest accrued 
        on such amount and the status of any distribution.
            (3) Federally funded benefits.--Any amounts described in 
        subsection (a) which are distributed to a participating 
        taxpayer, including any interest accrued on such amount, shall 
        be treated in the same manner as any refund made to such 
        taxpayer under section 32 of the Internal Revenue Code of 1986 
        for purposes of determining the eligibility of such taxpayer 
        for benefits or assistance, or the amount or extent of benefits 
        or assistance, under any Federal program or under any State or 
        local program financed in whole or in part with Federal funds.

SEC. 4. ASSETS FOR INDEPENDENCE INNOVATION DEMONSTRATION PROJECTS.

    (a) Reauthorization.--The Assets for Independence Act (42 U.S.C. 
604 note) is amended--
            (1) in section 416, by inserting ``, and, subject to 
        section 417, $25,000,000 for each of fiscal years 2021, 2022, 
        2023, 2024, and 2025 to remain available until expended.''; and
            (2) by adding at the end the following new section:

``SEC. 417. RESERVATION OF FUNDS.

    ``(a) In General.--Subject to subsections (b) and (c), from the 
funds appropriated for each of fiscal years 2021, 2022, 2023, 2024, and 
2025 under section 416, the Secretary shall reserve--
            ``(1) $3,000,000 for general research and evaluation; and
            ``(2) any amounts remaining after application of paragraph 
        (1) to fund AFI innovation demonstration projects under section 
        418.
    ``(b) Pilot Program Funding.--From the amounts reserved under 
subsection (a) for each of fiscal years 2021, 2022, and 2023, the 
Secretary shall make available for operating the pilot program 
established under section 5 of the Refund to Rainy Day Savings Act--
            ``(1) 50 percent of the amount reserved for the relevant 
        fiscal year under paragraph (1) of subsection (a) (after any 
        adjustment under subsection (c)); and
            ``(2) 25 percent of the amount reserved for the relevant 
        fiscal year under paragraph (2) of subsection (a) (after any 
        adjustment under subsection (c)).
    ``(c) Proportional Adjustment.--In any of fiscal years 2021, 2022, 
2023, 2024, and 2025, if the amount appropriated for such fiscal year 
is greater or less than the amount authorized for such fiscal year 
under section 416, the amounts reserved under subsection (a) shall be 
increased or decreased for such fiscal year so that each such amount 
bears the same proportion to the amount appropriated as each of the 
amounts reserved under such subsection bears to the amount 
authorized.''.
    (b) Establishment of Innovation Program.--The Assets for 
Independence Act (42 U.S.C. 604 note), as amended by subsection (a), is 
further amended by adding at the end the following new section:

``SEC. 418. AFI INNOVATION PROJECTS.

    ``(a) In General.--The Secretary is authorized to make grants to 
qualified entities to conduct AFI innovation projects under this 
section.
    ``(b) Definitions.--For purposes of this section:
            ``(1) AFI innovation project.--The term `AFI innovation 
        project' means a demonstration project carried out by a 
        qualified entity under this section.
            ``(2) Innovation development account.--The term `innovation 
        development account' means an account that is established in a 
        federally insured financial institution or a State insured 
        financial institution and meets such other requirements as are 
        established by the Secretary.
    ``(c) Application.--
            ``(1) Criteria and preferences.--
                    ``(A) In general.--Subject to subparagraph (B), in 
                considering an application to conduct an AFI innovation 
                project, the Secretary shall apply subsections (c) and 
                (d) of section 405 to the application in the same 
                manner that such subsections apply to an application to 
                conduct a demonstration project under section 405.
                    ``(B) Modification.--For purposes of this 
                paragraph, paragraph (1) of section 405(c) shall be 
                applied without regard to the phrase `through 
                activities requiring one or more qualified expenses'.
            ``(2) Approval of afi innovation projects.--Not later than 
        12 months after the date of the enactment of this section, the 
        Secretary shall, on a competitive basis, approve such 
        applications to conduct AFI innovation projects as the 
        Secretary considers to be appropriate, taking into account the 
        considerations required by paragraph (1). The Secretary shall 
        ensure, to the maximum extent practicable, that the 
        applications that are approved involve a range of communities 
        (both rural and urban) and diverse populations.
    ``(d) Project Duration and Grant Amount.--
            ``(1) Duration.--The Secretary shall award grants under 
        this section for a period not to exceed 5 project years.
            ``(2) Grant amount.--For each project year of an AFI 
        innovation project approved under this section, the Secretary 
        may make a grant to the qualified entity authorized to conduct 
        the project. In making such a grant, the Secretary shall make 
        the grant on the first day of the project year in an amount not 
        to exceed the lesser of--
                    ``(A) the aggregate amount of funds committed as 
                matching contributions from non-Federal public or 
                private sector sources; or
                    ``(B) $1,000,000.
    ``(e) Eligibility and Selection of Individuals To Participate in an 
AFI Innovation Project.--
            ``(1) Eligibility criteria.--Subject to the approval of the 
        Secretary, each qualified entity conducting an AFI innovation 
        project shall establish eligibility requirements for 
        participants in the project. Such requirements shall--
                    ``(A) be more expansive than the requirements 
                established under section 408; and
                    ``(B) ensure that eligibility is limited to low-
                income individuals.
            ``(2) Selection of individuals to participate.--Each 
        qualified entity conducting an AFI innovation project shall 
        select, from among the individuals that meet the eligibility 
        requirements established by the entity under paragraph (1), the 
        individuals--
                    ``(A) that the qualified entity determines to be 
                best suited to participate; and
                    ``(B) to whom the qualified entity will make 
                disbursements or deposits in accordance with subsection 
                (f).
    ``(f) Disbursements by Qualified Entities.--
            ``(1) In general.--Each qualified entity conducting an AFI 
        innovation project shall, in a manner consistent with the 
        program requirements established by such entity, disburse to a 
        third-party or deposit into the innovation development account 
        of each individual participating in the project from the funds 
        described in subsection (d)(2), a matching contribution of not 
        less than $0.50 and not more than $8 for every $1 deposited in 
        the account by a project participant.
            ``(2) Limitation on disbursements for an individual.--Not 
        more than $5,000 from a grant made under subsection (d)(1) 
        shall be provided to any one individual over the course of the 
        AFI innovation project.
            ``(3) Limitation on disbursements for a household.--Not 
        more than $10,000 from a grant made under subsection (d)(1) 
        shall be provided to any one household over the course of the 
        AFI innovation project.
            ``(4) Adjustment for inflation.--
                    ``(A) In general.--For each calendar year after 
                2021, the dollar amounts in paragraphs (2) and (3) 
                shall be increased by an amount equal to the product 
                of--
                            ``(i) such dollar amount, and
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) of the 
                        Internal Revenue Code of 1986 (as in effect on 
                        December 1, 2017) for the calendar year, 
                        determined by substituting `calendar year 2019' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any increase determined under 
                subparagraph (A) is not a multiple of $50, such 
                increase shall be rounded to the next lowest multiple 
                of $50.''.
    (c) Conforming Amendments.--The Assets for Independence Act (42 
U.S.C. 604 note), as amended by subsections (a) and (b), is further 
amended--
            (1) in section 404(2), by inserting ``or section 418'' 
        before the period;
            (2) in section 406--
                    (A) in subsection (a), by striking ``to conduct a 
                demonstration project under this title'' and inserting 
                ``under section 405''; and
                    (B) in subsection (b), by striking ``conducted 
                under this title'' and inserting ``approved under 
                section 405'';
            (3) in section 407--
                    (A) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) in subparagraph (A), by 
                                inserting ``or, in the case of a 
                                participant in a project conducted 
                                under section 418, other permitted 
                                expenses'' after ``qualified 
                                expenses''; and
                                    (II) in subparagraph (B), by 
                                inserting ``or subsection (f) of 
                                section 418'' after ``section 410''; 
                                and
                            (ii) in paragraph (3), by inserting ``or 
                        section 418(d)(1)''; and
                    (B) in subsection (d)(2)(A), by inserting ``or 
                section 418(d)(1)'' after ``section 406(b)'';
            (4) in section 408, by striking ``conducted under this 
        title'' each place it appears and inserting ``approved under 
        section 405'';
            (5) in section 409, by striking ``conducted under this 
        title'' and inserting ``approved under section 405'';
            (6) in section 410, by striking ``under this title'' and 
        inserting ``conducting a demonstration project approved under 
        section 405'';
            (7) in section 413(a), by inserting ``or section 418(c)'' 
        after ``under section 405''; and
            (8) in section 415, by inserting ``or innovation 
        development account'' after ``individual development account''.

SEC. 5. MATCHED REFUND TO RAINY DAY SAVINGS PILOT PROGRAM.

    (a) In General.--Not later than 6 months after the date of the 
enactment of this Act and using the funds made available pursuant to 
section 417(b) of the Assets for Independence Act, the Secretary of 
Health and Human Services, acting through the Director of Community 
Services (in this section referred to as ``the Secretary''), shall 
establish under this section a matched savings account pilot program to 
encourage saving by eligible individuals. Under the pilot program, a 
qualified entity may apply to the Secretary for a grant to conduct a 
pilot project described in subsection (b) (in this section referred to 
as a ``pilot project''). The pilot program shall operate for a period 
of 3 years.
    (b) Pilot Project Described.--
            (1) In general.--A pilot project is a project in which a 
        qualified entity establishes a matched savings program that 
        meets the requirements of paragraph (2) for eligible 
        individuals who are selected by the entity to participate in 
        the program.
            (2) Requirements.--
                    (A) Deposits into direct deposit accounts.--
                            (i) In general.--A matched savings program 
                        established as part of a pilot project shall 
                        match amounts saved by each eligible individual 
                        participating in the pilot project, with such 
                        match amount to be equal to or less than the 
                        amount of any payment deferred by such 
                        individual under the Refund to Rainy Day 
                        Savings Program established in section 3(a).
                            (ii) Timing.--Any amount described in 
                        clause (i) shall not be distributed to an 
                        eligible individual until the amounts described 
                        in paragraphs (3)(B) or (5)(B) of section 3(c) 
                        have been distributed to the bank account 
                        identified by such individual.
                    (B) Evaluation of program by independent research 
                organization.--
                            (i) In general.--From amounts made 
                        available under section 417(b)(2) of the Assets 
                        for Independence Act, as added by section 
                        4(a)(2) of this Act, the Secretary shall enter 
                        into a contract with an independent research 
                        organization for purposes of evaluating pilot 
                        projects conducted under this section.
                            (ii) Coordination.--Each qualified entity 
                        that establishes a matched savings program as 
                        part of a pilot project shall collaborate with 
                        the independent research organization described 
                        in clause (i) to evaluate the outcomes and 
                        impact of the project.
                            (iii) Impact on different groups.--The 
                        evaluation described in clause (i) shall 
                        include an examination of the demographic 
                        characteristics of the individuals 
                        participating in the pilot project, such as 
                        gender, race, age, geographic location, and 
                        family makeup, and how the impacts of the 
                        project vary among different demographic 
                        groups.
                            (iv) Program features.--The program 
                        features to be evaluated through the pilot 
                        projects conducted under this section may 
                        include--
                                    (I) different levels of matching 
                                contributions by qualified entities;
                                    (II) lock-out periods during which 
                                an eligible individual may not make 
                                withdrawals from their account; and
                                    (III) educational materials 
                                intended to promote savings.
            (3) Duration.--A pilot project shall be for a duration of 
        not more than 3 years.
            (4) Federally funded benefits.--Any amounts described in 
        paragraph (2)(A) which are distributed to an eligible 
        individual shall be treated in the same manner as any refund 
        made to such taxpayer under section 32 of the Internal Revenue 
        Code of 1986 for purposes of determining the eligibility of 
        such taxpayer for benefits or assistance, or the amount or 
        extent of benefits or assistance, under any Federal program or 
        under any State or local program financed in whole or in part 
        with Federal funds.
    (c) Strategic Communications Plan.--The Secretary shall devise a 
strategic communications plan to ensure a strong pilot program.
    (d) Annual Report to Congress.--The Secretary shall submit an 
annual report to Congress on the progress and outcomes of the pilot 
program established under this section.
    (e) Definitions.--In this section:
            (1) Eligible individual.--The term ``eligible individual'' 
        means an individual who--
                    (A) has deferred payment of the amount described in 
                section 3(a) under the Refund to Rainy Day Savings 
                Program established in such section, and
                    (B) meets the eligibility requirements under 
                section 408 of the Assets for Independence Act, except 
                that subsection (a)(2) of such section shall not apply.
            (2) Qualified entity.--
                    (A) In general.--The term ``qualified entity'' 
                means--
                            (i) one or more not-for-profit 
                        organizations described in section 501(c)(3) of 
                        the Internal Revenue Code of 1986 and exempt 
                        from taxation under section 501(a) of such 
                        Code;
                            (ii) a State or local government agency, or 
                        a tribal government, submitting an application 
                        to conduct a pilot project jointly with an 
                        organization described in clause (i);
                            (iii) a site that offers free tax help to 
                        individuals who qualify through the Internal 
                        Revenue Service's Voluntary Income Tax 
                        Assistance or Tax Counseling for the Elderly 
                        programs; or
                            (iv) an entity that--
                                    (I) is--
                                            (aa) a credit union 
                                        designated as a low-income 
                                        credit union by the National 
                                        Credit Union Administration; or
                                            (bb) an organization 
                                        designated as a community 
                                        development financial 
                                        institution by the Secretary of 
                                        the Treasury (or the Community 
                                        Development Financial 
                                        Institutions Fund); and
                                    (II) can demonstrate a 
                                collaborative relationship with a local 
                                community-based organization whose 
                                activities are designed to address 
                                poverty in the community and the needs 
                                of community members for economic 
                                independence and stability.
                            (v) Rule of construction.--Nothing in this 
                        paragraph shall be construed as preventing an 
                        organization described in subparagraph (A)(i) 
                        from collaborating with a financial institution 
                        or for-profit community development corporation 
                        to carry out the purposes of this section.
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