I 117th CONGRESS 1st Session H. R. 1449 IN THE HOUSE OF REPRESENTATIVES March 1, 2021 Mr. Cloud (for himself, Mrs. Hinson , Mr. LaMalfa , and Mr. Owens ) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide emergency savings accounts for individuals.

1. Short title This Act may be cited as the Emergency Savings Accounts Act of 2021 . 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: 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.