,,ii #aacth ,,congress #b;d ,session ,s4 #bhjf ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #ae1 #bjad ,mr4 ,vitter introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for dependent care savings accounts4 #a4 ,short title ,this ,act may be cited as the ,dependent ,care ,savings ,account ,act of #bjad4 #b4 ,dependent care savings accounts 7a7 ,in general ,part ,,vii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by redesignating section #bbd as section #bbe and inserting after section #bbc the following new section3 #bbd4 ,dependent care savings accounts 7a7 ,deduction allowed ,in the case of an individual1 there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of the individual to a dependent care savings account of such individual4 7b7 ,limitation 7#a7 ,in general ,the amount allowable as a deduction under subsection 7a7 to an individual for the taxable year shall not exceed the lesser of-- 7,a7 #e1jjj1 or 7,b7 the individual's earned income 7within the meaning of section #ba7 for such taxable year4 7#b7 ,coordination with dependent care assistance benefits ,the limitation which would 7but for this paragraph7 apply under paragraph 7#a7 to an individual for any taxable year shall be reduced 7but not below zero7 by the aggregate amount excludable from the individual's gross income for such taxable year under section #abi4 7c7 ,dependent care savings account ,for purposes of this section-- 7#a7 ,in general ,the term dependent care savings account means a trust created or organized in the ,united ,states as a dependent care savings account exclusively for the purpose of paying the qualified dependent care expenses of the account beneficiary1 but only if the written governing instrument creating the trust meets the following requirements3 7,a7 ,except in the case of a rollover contribution described in subsection 7e77#e71 no contribution will be accepted unless it is in cash1 and contributions will not be accepted for the taxable year on behalf of any account beneficiary in excess of #aj1jjj4 7,b7 ,the trustee is a bank 7as defined in section #djh7n77 or such other person who demonstrates to the satisfaction of the ,secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section4 7,c7 ,no part of the trust assets will be invested in life insurance contracts4 7,d7 ,the assets of the trust will not be commingled with other property except in a common trust fund or common investment fund4 7,e7 ,the interest of an individual in the balance in his account is nonforfeitable4 7#b7 ,qualified dependent care expenses ,the term qualified dependent care expenses means the employment-related expenses 7as defined in section #ba7;b77#b77 of the account beneficiary with respect to any qualifying individual 7as defined in section #ba7;b77#a77 of the account beneficiary4 ,such term includes qualified long-term care services 7as defined in section #ggjb;,b7c771 and amounts paid for qualified long-term care insurance contracts 7as defined in section #ggjb;,b7b771 with respect to such qualifying individuals of the account beneficiary4 7#c7 ,account beneficiary ,the term account beneficiary means the individual on whose behalf the dependent care savings account was established4 7#d7 ,certain rules to apply ,rules similar to the following rules shall apply for purposes of this section3 7,a7 ,section #bai7;d77#b7 7relating to no deduction for rollovers74 7,b7 ,except as provided in section #abi1 section #bai7;f77#c7 7relating to time when contributions deemed made74 7,c7 ,section #bai7;f77#e7 7relating to employer payments74 7,d7 ,section #bbc7;b77#f7 7relating to denial of deduction to dependents74 7,e7 ,section #djh7;g7 7relating to community property laws74 7,f7 ,section #djh7;h7 7relating to custodial accounts74 7d7 ,tax treatment of accounts 7#a7 ,in general ,a dependent care savings account is exempt from taxation under this subtitle unless such account has ceased to be a dependent care savings account4 ,notwithstanding the preceding sentence1 any such account is subject to the taxes imposed by section #eaa4 7#b7 ,account terminations ,rules similar to the rules of paragraphs 7#b7 and 7#d7 of section #djh7;e7 shall apply to dependent care savings accounts1 and any amount treated as distributed under such rules shall be treated as not used to pay qualified dependent care expenses4 7e7 ,tax treatment of distributions 7#a7 ,amounts used for qualified dependent care expenses ,any amount paid or distributed out of a dependent care savings account which is used exclusively to pay qualified dependent care expenses of any account beneficiary shall not be includible in gross income4 7#b7 ,inclusion of amounts not used for qualified dependent care expenses ,any amount paid or distributed out of a dependent care savings account which is not used exclusively to pay the qualified dependent care expenses of the account beneficiary shall be included in the gross income of such beneficiary4 7#c7 ,excess contributions returned before due date of return 7,a7 ,in general ,if any excess contribution is contributed for a taxable year to any dependent care savings account of an individual1 paragraph 7#b7 shall not apply to distributions from the dependent care savings accounts of such individual 7to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year7 if-- 7i7 such distribution is received by the individual on or before the last day prescribed by law 7including extensions of time7 for filing such individual's return for such taxable year1 and 7ii7 such distribution is accompanied by the amount of net income attributable to such excess contribution4 ,any net income described in clause 7ii7 shall be included in the gross income of the individual for the taxable year in which it is received4 7,b7 ,excess contribution ,for purposes of subparagraph 7,a71 the term excess contribution means any contribution 7other than a rollover contribution described in paragraph 7#e77 which is neither excludable from gross income under section #abi nor deductible under this section4 7#d7 ,additional tax on distributions not used for qualified dependent care expenses 7,a7 ,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 a dependent care savings account of such beneficiary which is includible in gross income under paragraph 7#b7 shall be increased by #bj percent of the amount which is so includible4 7,b7 ,exception for disability or death ,subparagraph 7,a7 shall not apply if the payment or distribution is made after the account beneficiary becomes disabled within the meaning of section #gb7m77#g7 or dies4 7#e7 ,rollover contribution ,an amount is described in this paragraph as a rollover contribution if it meets the requirements of subparagraphs 7,a7 and 7,b74 7,a7 ,in general ,paragraph 7#b7 shall not apply to any amount paid or distributed from a dependent care savings account to the account beneficiary to the extent the amount received is paid into a dependent care savings account for the benefit of such beneficiary not later than the #fjth day after the day on which the beneficiary receives the payment or distribution4 7,b7 ,limitation ,this paragraph shall not apply to any amount described in subparagraph 7,a7 received by an individual from a dependent care savings account if1 at any time during the #a-year period ending on the day of such receipt1 such individual received any other amount described in subparagraph 7,a7 from a dependent care savings account which was not includible in the individual's gross income because of the application of this paragraph4 7#f7 ,coordination with dependent care credit ,for purposes of determining the amount of the credit under section #ba1 any payment or distribution out of a dependent care savings account for qualified dependent care expenses shall not be treated as employment-related expenses4 7#g7 ,transfer of account incident to divorce2 treatment after death ,rules similar to the rules of paragraphs 7#g7 and 7#h7 of section #bbc shall apply with respect to dependent care savings accounts4 7f7 ,reports ,the ,secretary may require the trustee of a dependent care savings account to make such reports regarding such account to the ,secretary and to the account beneficiary with respect to contributions1 distributions1 the return of excess contributions1 and such other matters as the ,secretary determines appropriate4 ,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 ,secretary4 4 7b7 ,deduction allowed in computing adjusted gross income ,subsection 7a7 of section #fb of the ,internal ,revenue ,code of #aihf is amended by inserting before the last sentence the following new paragraph3 7#bb7 ,dependent care savings accounts ,the deduction allowed by section #bbd7;a74 4 7c7 ,exclusion of employer contributions ,section #abi of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7f7 ,contributions to dependent care savings accounts 7#a7 ,in general ,gross income of an employee does not include amounts contributed by an employee's employer to any dependent care savings account 7as defined in section #bbd7 of such employee to the extent such amounts do not exceed the limitation under section #bbd7;b77#a7 which is applicable to such employee for such taxable year4 7#b7 ,cross reference ,for penalty on failure by employer to make comparable contributions to the dependent care savings accounts of comparable employees1 see section #dihj;,h4 4 7d7 ,tax on excess contributions ,section #digc of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in subsection 7a71 by striking or at the end of paragraph 7#d71 by adding or at the end of paragraph 7#e71 and by inserting after paragraph 7#e7 the following new paragraph3 7#f7 a dependent care savings account 7as defined in section #bbd71 1 and 7#b7 by adding at the end the following new subsection3 7h7 ,excess contributions to dependent care savings accounts ,for purposes of this section1 in the case of a dependent care savings account 7as defined in section #bbd71 the term excess contributions means the sum of-- 7#a7 the aggregate amount contributed for the taxable year to the account 7other than a rollover contribution described in section #bbd7;e77#e77 which is neither excludable from gross income under section #abi nor allowable as a deduction under section #bbd for such year1 and 7#b7 the amount determined under this subsection for the preceding taxable year1 reduced by the sum of-- 7,a7 the distributions out of the account which were included in gross income under section #bbd7;e77#b71 and 7,b7 the excess 7if any7 of-- 7i7 the maximum amount allowable as a deduction under section #bbd7;b77#a7 for the taxable year1 over 7ii7 the amount contributed to the account for the taxable year4 4 7e7 ,failure of employer ,to make comparable dependent care savings account contributions ,chapter #dc of the ,internal ,revenue ,code of #aihf1 as amended by the ,patient ,protection and ,affordable ,care ,act1 is amended by adding at the end the following new section3 #dihj;,j4 ,failure of employer to make comparable dependent care savings account contributions 7a7 ,general rule ,in the case of an employer who makes a contribution to the dependent care savings account of any employee during a calendar year1 there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection 7b7 for such calendar year4 7b7 ,rules and requirements ,rules and requirements similar to the rules and requirements of section #dihj;,e shall apply for purposes of this section4 7c7 ,regulations ,the ,secretary shall issue regulations to carry out the purposes of this section4 7d7 ,exception ,for purposes of applying section #dihj;,e to a contribution to a dependent care savings account of an employee who is not a highly compensated employee 7as defined in section #dad7q771 highly compensated employees shall not be treated as comparable participating employees4 4 7f7 ,clerical amendments 7#a7 ,the table of sections for part ,,vii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by redesignating the item relating to section #bbd as an item relating to section #bbe1 and by inserting before such item the following new item3 ,sec4 #bbd4 ,dependent care savings accounts4 4 7#b7 ,the table of sections for chapter #dc of such ,code1 as amended by the ,patient ,protection and ,affordable ,care ,act1 is amended by adding at the end the following new item3 ,sec4 #dihj;,j4 ,failure of employer to make comparable dependent care savings account contributions4 4 7g7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4