H.R. 647 — what changed

changed This Act may be cited as the “Achieving a Better Life Experience Act of 2013” 2014” or the “ABLE Act of 2013”.2014”.

added “529A. Qualified ABLE programs

added “(a) General rule—A qualified ABLE 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).

added “(b) Qualified ABLE program—For purposes of this section—

added “(1) In general—The term qualified ABLE program means a program established and maintained by a State, or agency or instrumentality thereof—

added “(A) under which a person may make contributions for a taxable year, for the benefit of an individual who is an eligible individual for such taxable year, to an ABLE account which is established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account,

added “(B) which limits a designated beneficiary to 1 ABLE account for purposes of this section,

added “(C) which allows for the establishment of an ABLE account only for a beneficiary who is a resident of such State or a resident of a contracting State, and

added “(D) which meets the other requirements of this section.

added “(2) Cash contributions—A program shall not be treated as a qualified ABLE program unless it provides that no contribution will be accepted—

added “(A) unless it is in cash, or

added “(B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the amount in effect under section 2503(b) for the calendar year in which the taxable year begins.

added “(3) Separate accounting—A program shall not be treated as a qualified ABLE program unless it provides separate accounting for each designated beneficiary.

added “(4) No investment direction—A program shall not be treated as a qualified ABLE program unless it provides that any contributor to, or designated beneficiary under, such program may not directly or indirectly direct the investment of any contributions to the program (or any earnings thereon).

added “(5) No pledging of interest as security—A program shall not be treated as a qualified ABLE program if it allows any interest in the program or any portion thereof to be used as security for a loan.

added “(6) Prohibition on excess contributions—A program shall not be treated as a qualified ABLE program unless it provides adequate safeguards to prevent aggregate contributions on behalf of a designated beneficiary in excess of the limit established by the State under section 529(b)(6). For purposes of the preceding sentence, aggregate contributions include contributions under any prior qualified ABLE program of any State or agency or instrumentality thereof.

added “(c) Tax treatment

added “(1) Distributions

added “(A) In general—Any distribution under a qualified ABLE 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.

added “(B) Distributions for qualified disability expenses—For purposes of this paragraph, if distributions from a qualified ABLE program—

added “(i) do not exceed the qualified disability expenses of the designated beneficiary, no amount shall be includible in gross income, and

added “(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.

added “(C) Change in beneficiaries or programs

added “(i) Rollovers from ABLE accounts—Subparagraph (A) shall not apply to any amount paid or distributed from an ABLE account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another ABLE account for the benefit of the same beneficiary or an eligible individual who is a family member of the beneficiary.

added “(ii) Change in designated beneficiaries—Any change in the designated beneficiary of an interest in a qualified ABLE program during a taxable year shall not be treated as a distribution for purposes of subparagraph (A) if the new beneficiary is an eligible individual for such taxable year and a member of the family of the former beneficiary.

added “(iii) 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 ABLE program for the benefit of the designated beneficiary.

added “(D) Operating rules—For purposes of applying section 72—

added “(i) except to the extent provided by the Secretary, all distributions during a taxable year shall be treated as one distribution, and

added “(ii) except to the extent provided by the Secretary, the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins.

added “(2) Gift tax rules—For purposes of chapters 12 and 13—

added “(A) Contributions—Any contribution to a qualified ABLE program on behalf of any designated beneficiary—

added “(i) shall be treated as a completed gift to such beneficiary which is not a future interest in property, and

added “(ii) shall not be treated as a qualified transfer under section 2503(e).

added “(B) Treatment of distributions—Except as provided in subparagraph (C), in no event shall a distribution from a qualified ABLE program be treated as a taxable gift.

added “(C) Treatment of designation of new beneficiary—The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a contribution under paragraph (1)(C) to the ABLE account of a new beneficiary) during any taxable year unless, as of the beginning of such taxable year, the new beneficiary is both an eligible individual for such taxable year and a member of the family of the former beneficiary.

added “(3) Additional tax for distributions not used for disability expenses

added “(A) In general—The tax imposed by this chapter for any taxable year on any taxpayer who receives a distribution from a qualified ABLE program which is includible in gross income shall be increased by 10 percent of the amount which is so includible.

added “(B) Exception—Subparagraph (A) shall not apply if the payment or distribution is made to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary.

added “(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—

added “(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

added “(ii) such distribution is accompanied by the amount of net income attributable to such excess contribution.

added “(4) Loss of ABLE account treatment—If, during any taxable year of an eligible individual for whose benefit any ABLE account is established, more than 1 ABLE account for the benefit of the eligible individual exists at the same time, each such ABLE account other than the earliest established ABLE account shall not be treated as an ABLE account as of the first day of such taxable year.

added “(d) Reports

added “(1) In general—Each officer or employee having control of the qualified ABLE program or their designee shall make such reports regarding such program to the Secretary and to designated beneficiaries with respect to contributions, distributions, the return of excess contributions, and such other matters as the Secretary may require.

added “(2) Certain aggregated information—For research purposes, the Secretary shall make available to the public reports containing aggregate information, by diagnosis and other relevant characteristics, on contributions and distributions from the qualified ABLE program. In carrying out the preceding sentence an item may not be made available to the public if such item can be associated with, or otherwise identify, directly or indirectly, a particular individual.

added “(3) Notice of establishment of ABLE account—The trustee of an ABLE account shall submit a notice to the Secretary upon the establishment of the ABLE account. Such notice shall contain the name and State of residence of the beneficiary and such other information as the Secretary may require.

added “(4) Electronic distribution statements—For purposes of section 4 of the Achieving a Better Life Experience Act of 2014, States shall submit electronically on a monthly basis to the Commissioner of Social Security, in the manner specified by the Commissioner, statements on relevant distributions and account balances from all ABLE accounts.

added “(5) Requirements—The reports and notices required by paragraphs (1), (2), and (3) 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.

added “(e) Other definitions and special rules—For purposes of this section—

added “(1) Eligible individual

added “(A) In general—An individual is an eligible individual for a taxable year if during such taxable year—

added “(i) a disability certification with respect to such individual is filed with the Secretary for such taxable year, or

added “(ii) the individual has been determined for purposes of section 223 or 1614 of the Social Security Act (42 U.S.C. 421, 1382c) to meet the criteria of subparagraph (B) for such taxable year.

added “(B) Criteria—An individual meets the criteria of this subparagraph for a taxable year if—

added “(i) in the case of an individual who has not attained age 19 as of the close of the taxable year, the individual is either blind (within the meaning of section 1614(a)(2) of the Social Security Act (42 U.S.C. 1382c(a)(2))) or disabled within the meaning of section 1614(a)(3)(C) of such Act (42 U.S.C. 1382c(a)(3)(C)), or

added “(ii) the individual—

added “(I) is either blind (within the meaning of section 1614(a)(2) of such Act (42 U.S.C. 1382c(a)(2))) or disabled within the meaning of section 1614(a)(3)(A) of such Act, and

added “(II) such blindness or disability occurred before the date on which the individual attained age 26.

added “(2) Disability certification

added “(A) In general—The term disability certification means, with respect to an eligible individual, a certification to the satisfaction of the Secretary by the eligible individual or the parent or guardian of the eligible individual that—

added “(i) the individual meets the criteria described in paragraph (1)(B), and

added “(ii) includes a copy of the individual’s diagnosis relating to the individual’s relevant impairment or impairments, signed by a physician meeting the criteria of section 1861(r)(1) of the Social Security Act.

added “(B) Restriction on use of certification—No inference may be drawn from a disability certification for purposes of establishing eligibility for benefits under title II, XVI, or XIX of the Social Security Act.

added “(3) Designated beneficiary—The term “designated beneficiary” in connection with an ABLE account established under a qualified ABLE program means—

added “(A) the eligible individual designated at the commencement of participation in the qualified ABLE program as the beneficiary of amounts paid (or to be paid) to the program, and

added “(B) in the case of a change in beneficiaries described in subparagraph (C)(ii) of subsection (c)(1), the individual who is the new beneficiary.

added “(4) Member of family—The term “member of the family” means, with respect to any designated beneficiary, an individual who bears a relationship to such beneficiary which is described in subparagraph section 152(d)(2)(B). For purposes of the preceding sentence, a rule similar to the rule of section 152(f)(1)(B) shall apply.

added “(5) Qualified disability expenses—The term qualified disability expenses means any expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary, including the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary under regulations and consistent with the purposes of this section.

added “(6) ABLE account—The term “ABLE account” means an account established and maintained under a qualified ABLE program.

added “(7) Contracting State—The term “contracting State” means a State without a qualified ABLE program which has entered into a contract with a State with a qualified ABLE program to provide residents of the contracting State access to a qualified ABLE program.

added “(f) Transfer to State—Subject to any outstanding payments due for qualified disability expenses, in the case that the designated beneficiary dies, all amounts remaining in the qualified ABLE account not in excess of the amount equal to the total medical assistance paid for the designated beneficiary after the establishment of the account, net of any premiums paid from the account or paid by or on behalf of the beneficiary to a Medicaid Buy-In program, under any State Medicaid plan established under title XIX of the Social Security Act shall be distributed to such State upon filing of a claim for payment by such State. For purposes of this paragraph, the State shall be a creditor of an ABLE account and not a beneficiary. Subsection (c)(3) shall not apply to a distribution under the preceding sentence.

added “(g) Regulations—The Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations—

added “(1) to enforce the 1 ABLE account per eligible individual limit,

added “(2) providing for the information required to be presented to open an ABLE account,

added “(3) to generally define qualified disability expenses,

added “(4) developed in consultation with the Commissioner of Social Security, relating to disability certifications and determinations of disability, including those conditions deemed to meet the requirements of subsection (e)(1)(B)(ii),

added “(5) to prevent fraud and abuse with respect to amounts claimed as qualified disability expenses,

added “(6) under chapters 11, 12, and 13 of this title, and

added “(7) to allow for transfers from one ABLE account to another ABLE account in cases in which there is a change in the State of residence of an eligible individual.”

removed “(f) ABLE Accounts

removed “(1) General rules—For purposes of any other provision of law with respect to a qualified ABLE program and an ABLE account, except as otherwise provided in this subsection—

removed “(A) a qualified ABLE program and an ABLE account shall be treated in the same manner as a qualified tuition program and an account described in subsection (b)(1)(A)(ii), respectively, are treated,

removed “(B) qualified disability expenses with respect to a program or account described in subparagraph (A) shall be treated in the same manner as qualified higher education expenses are treated, and

removed “(C) maximum contributions shall be no higher than the limit established by the State for their regular 529 account.

removed “(2) Qualified ABLE program—For purposes of this subsection, the term qualified ABLE program means a program established and maintained by a State or agency or instrumentality thereof—

removed “(A) under which a person may make contributions to an ABLE account which is established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account,

removed “(B) which meets the requirements of the preceding subsections of this section (as modified by this subsection), determined by substituting—

removed “(i) “qualified ABLE program” for “qualified tuition program”, and

removed “(ii) “ABLE account” for “account”, and

removed “(C) which meets the other requirements of this subsection.

removed “(3) Qualified disability expenses—For purposes of this subsection—

removed “(A) In general—The term qualified disability expenses means any expenses which are made for the benefit of an individual with a disability who is a designated beneficiary.

removed “(B) Expenses included—The following expenses shall be qualified disability expenses if such expenses are made for the benefit of an individual with a disability who is a designated beneficiary and are related to such disability:

removed “(i) Education—Expenses for education, including tuition for preschool thru post-secondary education, which shall include higher education expenses (as defined by subsection (e)(3)) and expenses for books, supplies, and educational materials related to preschool and secondary education, tutors, and special education services.

removed “(ii) Housing—Expenses for a primary residence, including rent, purchase of a primary residence or an interest in a primary residence, mortgage payments, real property taxes, and utility charges.

removed “(iii) Transportation—Expenses for transportation, including the use of mass transit, the purchase or modification of vehicles, and moving expenses.

removed “(iv) Employment support—Expenses related to obtaining and maintaining employment, including job-related training, assistive technology, and personal assistance supports.

removed “(v) Health, prevention, and wellness—Expenses for health and wellness, including premiums for health insurance, mental health, medical, vision, and dental expenses, habilitation and rehabilitation services, durable medical equipment, therapy, respite care, long term services and supports, nutritional management, communication services and devices, adaptive equipment, assistive technology, and personal assistance.

removed “(vi) Miscellaneous expenses—Financial management and administrative services; legal fees; expenses for oversight; monitoring; home improvements, and modifications, maintenance and repairs, at primary residence; or funeral and burial expenses.

removed “(vii) Assistive technology and personal support services—Expenses for assistive technology and personal support with respect to any item described in clauses (i) through (vi).

removed “(viii) Other approved expenses—Any other expenses which are approved by the Secretary under regulations and consistent with the purposes of this section.

removed “(C) Individual with a disability

removed “(i) In general—Except as provided in clause (ii), an individual is an individual with a disability for a year if the individual (regardless of age)—

removed “(I) has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 month, or

removed “(II) is blind.

removed “(ii) Disability certification required—An individual shall not be treated as an individual with a disability for a year unless the individual—

removed “(I) is receiving (or, for purposes of title XIX of the Social Security Act, is deemed to be, or treated as, receiving by the State Medicaid Agency) benefits under the supplemental security income program under title XVI of such Act, or whose benefits under such program are suspended other than by reason of misconduct,

removed “(II) is receiving disability benefits under title II of such Act, or

removed “(III) files a disability certification with the Secretary for such year.

removed “(iii) Disability certification defined—The term disability certification means, with respect to an individual, a certification to the satisfaction of the Secretary by the designated beneficiary or the parent or guardian of the designated beneficiary that—

removed “(I) the individual meets the criteria described in clause (i), and

removed “(II) includes a copy of the designated beneficiary’s diagnosis, signed by a physician meeting the criteria of section 1861(r)(1) of the Social Security Act.

removed “(iv) Restriction on use of certification—No inference may be drawn from a disability certification for purposes of establishing eligibility for benefits under title II, XVI, or XIX of the Social Security Act.

removed “(4) Rollovers from ABLE accounts—Subsection (c)(3)(A) shall not apply to any amount paid or distributed from an ABLE account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into—

removed “(A) another ABLE account for the benefit of—

removed “(i) the same beneficiary, or

removed “(ii) an individual with a disability who is a family member of the beneficiary,

removed “(B) any trust which is described in subparagraph (A) or (C) of section 1917(d)(4) of the Social Security Act and which is for the benefit of an individual described in clause (i) or (ii) of subparagraph (A), or

removed “(C) a qualified tuition program—

removed “(i) for the benefit of the designated beneficiary, or

removed “(ii) to the credit of another designated beneficiary under a qualified tuition program who is a member of the family of the designated beneficiary with respect to which the distribution was made.

removed “(5) Transfer to State—Subject to any outstanding payments due for qualified disability expenses, in the case that the designated beneficiary dies or ceases to be an individual with a disability, all amounts remaining in the qualified ABLE account not in excess of the amount equal to the total medical assistance paid for the designated beneficiary after the establishment of the account, net of any premiums paid from the account or paid by or on behalf of the beneficiary to a Medicaid Buy-In program, under any State Medicaid plan established under title XIX of the Social Security Act shall be distributed to such State upon filing of a claim for payment by such State. For purposes of this paragraph, the State shall be a creditor of an ABLE account and not a beneficiary. Subsection (c)(3) shall not apply to a distribution under the preceding sentence.

removed “(6) Regulations—Not later than 6 months after the date of the enactment of this section, the Secretary may prescribe such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations to prevent fraud and abuse with respect to amounts claimed as qualified disability expenses.”

removed “(F) section 529(d) by reason of 529(f) (relating to ABLE accounts).”

added “(6) an ABLE account (within the meaning of section 529A),”

added “(h) Excess contributions to ABLE account—For purposes of this section—

added “(1) In general—In the case of an ABLE account (within the meaning of section 529A), the term excess contributions means the amount by which the amount contributed for the taxable year to such account (other than contributions under section 529A(c)(1)(C)) exceeds the contribution limit under section 529A(b)(2)(B).

added “(2) Special rule—For purposes of this subsection, any contribution which is distributed out of the ABLE account in a distribution to which the last sentence of section 529A(b)(2) applies shall be treated as an amount not contributed.”

added “(E) section 529A(d) (relating to qualified ABLE programs), and”

added “(Y) section 529A(c)(3)(A) (relating to additional tax on ABLE account distributions not used for qualified disability expenses).”