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113th Congress  }                                    {    Rept. 113-614
                        HOUSE OF REPRESENTATIVES
 2d Session     }                                    {           Part 1

======================================================================



 
                            ABLE ACT OF 2014

                                _______
                                

 November 12, 2014.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Camp, from the Committee on Ways and Means, submitted the following

                              R E P O R T

                        [To accompany H.R. 647]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 647) to amend the Internal Revenue Code of 1986 to 
provide for the tax treatment of ABLE accounts established 
under State programs for the care of family members with 
disabilities, and for other purposes, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
 I. Summary and Background............................................7
        A. Purpose and Summary...................................     7
        B. Background and Need for Legislation...................     7
        C. Legislative History...................................     7
II. Explanation of the Bill...........................................8
        A. Qualified ABLE Programs (secs. 3 and 4 of the bill and 
            new sec. 529A of the Code)...........................     8
III.Votes of the Committee...........................................16

IV. Budget Effects of the Bill.......................................17
        A. Committee Estimate of Budgetary Effects...............    17
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................    19
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................    19
        D. Macroeconomic Impact Analysis.........................    24
 V. Other Matters To Be Discussed Under the Rules of the House.......24
        A. Committee Oversight Findings and Recommendations......    24
        B. Statement of General Performance Goals and Objectives.    25
        C. Information Relating to Unfunded Mandates.............    25
        D. Applicability of House Rule XXI 5(b)..................    25
        E. Tax Complexity Analysis...............................    25
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................    25
        G. Duplication of Federal Programs.......................    26
        H. Disclosure of Directed Rule Makings...................    26
VI. Changes in Existing Law Made by the Bill, as Reported............26

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Achieving a Better Life Experience Act 
of 2014'' or the ``ABLE Act of 2014''.

SEC. 2. PURPOSES.

  The purposes of this Act are as follows:
          (1) To encourage and assist individuals and families in 
        saving private funds for the purpose of supporting individuals 
        with disabilities to maintain health, independence, and quality 
        of life.
          (2) To provide secure funding for disability-related expenses 
        on behalf of designated beneficiaries with disabilities that 
        will supplement, but not supplant, benefits provided through 
        private insurance, the Medicaid program under title XIX of the 
        Social Security Act, the supplemental security income program 
        under title XVI of such Act, the beneficiary's employment, and 
        other sources.

SEC. 3. QUALIFIED ABLE PROGRAMS.

  (a) In General.--Subchapter F of chapter 1 of the Internal Revenue 
Code of 1986 is amended by inserting after section 529 the following 
new section:

``SEC. 529A. QUALIFIED ABLE PROGRAMS.

  ``(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).
  ``(b) Qualified ABLE Program.--For purposes of this section--
          ``(1) In general.--The term `qualified ABLE program' means a 
        program established and maintained by a State, or agency or 
        instrumentality thereof--
                  ``(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,
                  ``(B) which limits a designated beneficiary to 1 ABLE 
                account for purposes of this section,
                  ``(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
                  ``(D) which meets the other requirements of this 
                section.
          ``(2) Cash contributions.--A program shall not be treated as 
        a qualified ABLE program unless it provides that no 
        contribution will be accepted--
                  ``(A) unless it is in cash, or
                  ``(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.
        For purposes of this paragraph, rules similar to the rules of 
        section 408(d)(4) (determined without regard to subparagraph 
        (B) thereof) shall apply.
          ``(3) Separate accounting.--A program shall not be treated as 
        a qualified ABLE program unless it provides separate accounting 
        for each designated beneficiary.
          ``(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).
          ``(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.
          ``(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.
  ``(c) Tax Treatment.--
          ``(1) Distributions.--
                  ``(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.
                  ``(B) Distributions for qualified disability 
                expenses.--For purposes of this paragraph, if 
                distributions from a qualified ABLE program--
                          ``(i) do not exceed the qualified disability 
                        expenses of the designated beneficiary, no 
                        amount shall be includible in gross income, and
                          ``(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.
                  ``(C) Change in beneficiaries or programs.--
                          ``(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.
                          ``(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.
                          ``(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.
                  ``(D) Operating rules.--For purposes of applying 
                section 72--
                          ``(i) except to the extent provided by the 
                        Secretary, all distributions during a taxable 
                        year shall be treated as one distribution, and
                          ``(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.
          ``(2) Gift tax rules.--For purposes of chapters 12 and 13--
                  ``(A) Contributions.--Any contribution to a qualified 
                ABLE program on behalf of any designated beneficiary--
                          ``(i) shall be treated as a completed gift to 
                        such beneficiary which is not a future interest 
                        in property, and
                          ``(ii) shall not be treated as a qualified 
                        transfer under section 2503(e).
                  ``(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.
                  ``(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.
          ``(3) Additional tax for distributions not used for 
        disability expenses.--
                  ``(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.
                  ``(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.
                  ``(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--
                          ``(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
                          ``(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 gross income for the taxable year in which 
                such excess contribution was made.
          ``(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.
  ``(d) Reports.--
          ``(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.
          ``(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.
          ``(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.
          ``(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.
          ``(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.
  ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
          ``(1) Eligible individual.--
                  ``(A) In general.--An individual is an eligible 
                individual for a taxable year if during such taxable 
                year--
                          ``(i) a disability certification with respect 
                        to such individual is filed with the Secretary 
                        for such taxable year, or
                          ``(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.
                  ``(B) Criteria.--An individual meets the criteria of 
                this subparagraph for a taxable year if--
                          ``(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
                          ``(ii) the individual--
                                  ``(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
                                  ``(II) such blindness or disability 
                                occurred before the date on which the 
                                individual attained age 26.
          ``(2) Disability certification.--
                  ``(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--
                          ``(i) the individual meets the criteria 
                        described in paragraph (1)(B), and
                          ``(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.
                  ``(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.
          ``(3) Designated beneficiary.--The term `designated 
        beneficiary' in connection with an ABLE account established 
        under a qualified ABLE program means--
                  ``(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
                  ``(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.
          ``(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.
          ``(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.
          ``(6) ABLE account.--The term `ABLE account' means an account 
        established and maintained under a qualified ABLE program.
          ``(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.
  ``(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.
  ``(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--
          ``(1) to enforce the 1 ABLE account per eligible individual 
        limit,
          ``(2) providing for the information required to be presented 
        to open an ABLE account,
          ``(3) to generally define qualified disability expenses,
          ``(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),
          ``(5) to prevent fraud and abuse with respect to amounts 
        claimed as qualified disability expenses,
          ``(6) under chapters 11, 12, and 13 of this title, and
          ``(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.''.
  (b) Tax on Excess Contributions.--
          (1) In general.--Subsection (a) of section 4973 of the 
        Internal Revenue Code of 1986 (relating to tax on excess 
        contributions to certain tax-favored accounts and annuities) is 
        amended by striking ``or'' at the end of paragraph (4), by 
        inserting ``or'' at the end of paragraph (5), and by inserting 
        after paragraph (5) the following new paragraph:
          ``(6) an ABLE account (within the meaning of section 
        529A),''.
          (2) Excess contribution.--Section 4973 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new subsection:
  ``(h) Excess Contributions to ABLE Account.--For purposes of this 
section--
          ``(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).
          ``(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.''.
  (c) Penalty for Failure to File Reports.--Section 6693(a)(2) of the 
Internal Revenue Code of 1986 is amended by striking ``and'' at the end 
of subparagraph (D), by redesignating subparagraph (E) as subparagraph 
(F), and by inserting after subparagraph (D) the following:
                  ``(E) section 529A(d) (relating to qualified ABLE 
                programs), and''.
  (d) Conforming Amendments.--
          (1) Section 26(b)(2) of the Internal Revenue Code of 1986 is 
        amended by striking ``and'' at the end of subparagraph (W), by 
        striking the period at the end of subparagraph (X) and 
        inserting ``, and'', and by inserting after subparagraph (X) 
        the following:
                  ``(Y) section 529A(c)(3)(A) (relating to additional 
                tax on ABLE account distributions not used for 
                qualified disability expenses).''.
          (2) The heading for part VIII of subchapter F of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by striking 
        ``higher education'' and inserting ``certain''.
          (3) The item in the table of parts for subchapter F of 
        chapter 1 of the Internal Revenue Code of 1986 relating to part 
        VIII is amended to read as follows:

               ``Part VIII. Certain Savings Entities.''.

          (4) The table of sections for part VIII of subchapter F of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        inserting after the item relating to section 529 the following 
        new item:

``Sec. 529A. Qualified ABLE programs.''.

  (e) Effective Date.--
          (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2014.
          (2) Regulations.--The Secretary of the Treasury (or the 
        Secretary's designee) shall promulgate the regulations or other 
        guidance required under section 529A(g) of the Internal Revenue 
        Code of 1986, as added by subsection (a), not later than 6 
        months after the date of the enactment of this Act.

SEC. 4. TREATMENT OF ABLE ACCOUNTS UNDER CERTAIN FEDERAL PROGRAMS.

  (a) Account Funds Disregarded for Purposes of Certain Other Means-
Tested Federal Programs.--Notwithstanding any other provision of 
Federal law that requires consideration of 1 or more financial 
circumstances of an individual, for the purpose of determining 
eligibility to receive, or the amount of, any assistance or benefit 
authorized by such provision to be provided to or for the benefit of 
such individual, any amount (including earnings thereon) in the ABLE 
account (within the meaning of section 529A of the Internal Revenue 
Code of 1986) of such individual, and any distribution for qualified 
disability expenses (as defined in subsection (e)(5) of such section) 
shall be disregarded for such purpose with respect to any period during 
which such individual maintains, makes contributions to, or receives 
distributions from such ABLE account, except that, in the case of the 
supplemental security income program under title XVI of the Social 
Security Act, a distribution for housing expenses (within the meaning 
of such subsection) shall not be so disregarded, and in the case of 
such program, only the 1st $100,000 of the amount (including such 
earnings) in such ABLE account shall be so disregarded.
  (b) Suspension of SSI Benefits During Periods of Excessive Account 
Funds.--
          (1) In general.--The benefits of an individual under the 
        supplemental security income program under title XVI of the 
        Social Security Act shall not be terminated, but shall be 
        suspended, by reason of excess resources of the individual 
        attributable to an amount in the ABLE account (within the 
        meaning of section 529A of the Internal Revenue Code of 1986) 
        of the individual not disregarded under subsection (a) of this 
        section.
          (2) No impact on medicaid eligibility.--An individual who 
        would be receiving payment of such supplemental security income 
        benefits but for the application of the previous sentence shall 
        be treated for purposes of title XIX of the Social Security Act 
        as if the individual continued to be receiving payment of such 
        benefits.
  (c) Effective Date.--This section shall take effect on the date of 
the enactment of this Act.

                       I. Summary and Background


                         A. PURPOSE AND SUMMARY

    H.R. 647, as reported by the Committee on Ways and Means, 
provides States with the option to establish an ABLE program. 
Such a program would allow individuals with disabilities to 
establish an ABLE account, modeled after Code section 529 
savings accounts, permitting them to save to offset the cost of 
certain qualified expenses for services and programs necessary 
to manage their disability while maintaining access to Medicaid 
and Supplemental Security Income (``SSI'').

                 B. BACKGROUND AND NEED FOR LEGISLATION

    Individuals with disabilities can face significant barriers 
to finding and holding employment and living independently 
because their access to certain safety-net programs can be lost 
once they establish a minimum level of savings and income, thus 
creating a disincentive to find and obtain employment. The ABLE 
Act would facilitate the ability of individuals with 
disabilities to work and live independently without losing 
access to Medicaid and SSI.

                         C. LEGISLATIVE HISTORY

Background

    H.R. 647 was introduced on February 13, 2013, and was 
referred to the Committee on Ways and Means and in addition to 
the Committee on Energy and Commerce.

Committee action

    The Committee on Ways and Means marked up H.R. 647, the 
``Achieving A Better Life Experience Act of 2013 (`ABLE Act of 
2013'),'' on July 31, 2014, and ordered the bill, as amended, 
favorably reported (with a quorum being present).

Committee hearings

    On June 19, 2013, the Social Security Subcommittee held a 
hearing on encouraging work through the Social Security 
Disability Insurance (``SSDI'') program. Testimony was received 
from (i) Mark G. Duggan, Ph.D., Professor, The Wharton School, 
University of Pennsylvania; (ii) Mary C. Daly, Ph.D., Group 
Vice President and Associate Director of Research, Federal 
Reserve Bank of San Francisco; (iii) Kevin Ufier, National 
Director Managed Disability, GENEX Services; (iv) Lisa D. 
Ekman, Director of Federal Policy, Health & Disability 
Advocates, on behalf of the Consortium for Citizens with 
Disabilities Social Security Task Force; (v) James Smith, 
Budget and Policy Manager, Division of Vocational 
Rehabilitation, Vermont Agency of Human Services; and (vi) 
David Weaver, Ph.D., Associate Commissioner, Office of Program 
Development and Research, accompanied by Robert Williams, 
Associate Commissioner, Office of Employment Support Programs, 
Social Security Administration (``SSA''). Witnesses discussed 
the impact of the SSDI program on the economy, efforts by the 
SSA to return individuals to work, international efforts to 
return individuals to work, and other options to encourage 
work. They highlighted the role of employment supports in 
helping individuals with disabilities remain in and return to 
the workforce. Witnesses argued for the need to reexamine the 
SSA's return to work programs to enable more individuals to 
leave the rolls and seek gainful employment. Reforms discussed 
included those to offer vocational and health benefits in lieu 
of cash benefits; create incentives for firms to keep workers 
employed; alter the treatment of earnings to an approach 
similar to the SSI program; simplify earnings rules for 
beneficiaries; and allow States more authority to target 
certain revenue streams to reduce SSDI applications.

                      II. Explanation of the Bill


A. QUALIFIED ABLE PROGRAMS (SECS. 3 AND 4 OF THE BILL AND NEW SEC. 529A 
                              OF THE CODE)

                              PRESENT LAW

    Although present law does not contain tax-advantaged 
savings vehicles specifically targeted to persons with 
disabilities, present law does contain other tax-advantaged 
savings vehicles, as well as rules for certain trusts intended 
for those with disabilities. Below is a description of one such 
savings vehicle and the rules applicable to special needs 
trusts.

Section 529 qualified tuition programs

    A qualified tuition program is a program established and 
maintained by a State or agency or instrumentality thereof, or 
by one or more eligible educational institutions, which 
satisfies certain requirements and under which a person may 
purchase tuition credits or certificates on behalf of a 
designated beneficiary that entitle the beneficiary to the 
waiver or payment of qualified higher education expenses of the 
beneficiary (a ``prepaid tuition program''). Section 529\1\ 
provides specified income tax and transfer tax rules for the 
treatment of accounts and contracts established under qualified 
tuition programs.\2\ In the case of a program established and 
maintained by a State or agency or instrumentality thereof, a 
qualified tuition program also includes a program under which a 
person may make contributions to an account that is established 
for the purpose of satisfying the qualified higher education 
expenses of the designated beneficiary of the account, provided 
it satisfies certain specified requirements (a ``savings 
account program''). Under both types of qualified tuition 
programs, a contributor establishes an account for the benefit 
of a particular designated beneficiary to provide for that 
beneficiary's higher education expenses.
---------------------------------------------------------------------------
    \1\Except where otherwise specified, all section references are to 
the Internal Revenue Code of 1986, as amended (the ``Code'').
    \2\For purposes of this description, the term ``account'' is used 
interchangeably to refer to a prepaid tuition benefit contract or a 
tuition savings account established pursuant to a qualified tuition 
program.
---------------------------------------------------------------------------
    For this purpose, qualified higher education expenses means 
tuition, fees, books, supplies, and equipment required for the 
enrollment or attendance of a designated beneficiary at an 
eligible educational institution, and expenses for special 
needs services in the case of a special needs beneficiary that 
are incurred in connection with such enrollment or attendance. 
Qualified higher education expenses generally also include room 
and board for students who are enrolled at least half-time.
    Contributions to a qualified tuition program must be made 
in cash. Section 529 does not impose a specific dollar limit on 
the amount of contributions, account balances, or prepaid 
tuition benefits relating to a qualified tuition account; 
however, the program is required to have adequate safeguards to 
prevent contributions in excess of amounts necessary to provide 
for the beneficiary's qualified higher education expenses. 
Contributions generally are treated as a completed gift 
eligible for the gift tax annual exclusion. Contributions are 
not tax deductible for Federal income tax purposes, although 
they may be deductible for State income tax purposes. Amounts 
in the account accumulate on a tax-deferred basis (i.e., income 
on accounts in the plan is not subject to current income tax).
    A qualified tuition program may not permit any contributor 
to, or designated beneficiary under, the program to direct 
(directly or indirectly) the investment of any contributions 
(or earnings thereon), and must provide separate accounting for 
each designated beneficiary. A qualified tuition program may 
not allow any interest in an account or contract (or any 
portion thereof) to be used as security for a loan.
    Distributions from a qualified tuition program are 
excludable from the distributee's gross income to the extent 
that the total distribution does not exceed the qualified 
higher education expenses incurred for the beneficiary. If a 
distribution from a qualified tuition program exceeds the 
qualified higher education expenses incurred for the 
beneficiary, the portion of the excess that is treated as 
earnings generally is subject to income tax and an additional 
10-percent tax. Amounts in a qualified tuition program may be 
rolled over without income tax liability to another qualified 
tuition program for the same beneficiary or for a member of the 
family of that beneficiary.
    In general, prepaid tuition contracts and tuition savings 
accounts established under a qualified tuition program involve 
prepayments or contributions made by one or more individuals 
for the benefit of a designated beneficiary. Decisions with 
respect to the contract or account are made by an individual 
who is not the designated beneficiary. Qualified tuition 
accounts or contracts generally require the designation of a 
person (generally referred to as an ``account owner'')\3\ whom 
the program administrator (oftentimes a third party 
administrator retained by the State or by the educational 
institution that established the program) may look to for 
decisions, recordkeeping, and reporting with respect to the 
account established for a designated beneficiary. The person or 
persons who make the contributions to the account need not be 
the same person who is regarded as the account owner for 
purposes of administering the account. Under many qualified 
tuition programs, the account owner generally has control over 
the account or contract, including the ability to change 
designated beneficiaries and to withdraw funds at any time and 
for any purpose. Thus, in practice, qualified tuition accounts 
or contracts generally involve a contributor, a designated 
beneficiary, an account owner (who oftentimes is not the 
contributor or the designated beneficiary), and an 
administrator of the account or contract.
---------------------------------------------------------------------------
    \3\Section 529 refers to contributors and designated beneficiaries, 
but does not define or otherwise refer to the term ``account owner,'' 
which is a commonly used term among qualified tuition programs.
---------------------------------------------------------------------------

Treatment of savings accounts under Federal means-tested programs

    Means-tested programs typically include income and 
resources limits designed to properly target benefits to 
individuals with limited income and other financial resources 
on which to depend for support. Income is the money an 
individual receives in a month from wages and other sources 
while resources are savings and other items of significant 
value that individuals may own, such as a home or vehicle. 
Income and resources limits vary from program to program and 
sometimes from State to State for State-administered programs 
such as Medicaid. The SSI program is federally-administered and 
has a $2,000 resource limit for individuals. In most States, 
SSI receipt confers Medicaid eligibility. When SSI recipients 
have income and resources over the limit, their SSI benefits 
are suspended but they remain eligible for Medicaid.

Use of a trust to provide for the needs of a disabled person

            In general
    A specially designed trust, sometimes referred to as 
special needs trusts or supplemental needs trust, may be used 
to provide financial assistance to a disabled person (the trust 
beneficiary) without disqualifying the beneficiary for certain 
government benefits, such as Medicaid or SSI. The trust may be 
established using the disabled person's own funds (a self-
settled trust) or the funds of a third party who does not have 
a legal obligation to support the trust beneficiary (a third-
party trust).
    The assets of a properly drafted third-party trust 
generally are not counted when determining the beneficiary's 
eligibility for Medicaid. Assets held in a self-settled trust, 
however, generally are counted when determining Medicaid 
eligibility, unless for example the trust is described in 
section 1917(d)(4)(A) of the Social Security Act. That section 
describes a trust: (1) containing the assets of an individual 
who is disabled (within the meaning of section 1614(a)(3) of 
the Social Security Act); (2) which is established for the 
benefit of the individual by a parent, grandparent, legal 
guardian, or a court; and (3) pursuant to the terms of which 
the State will be reimbursed upon the individual's death for 
the total amount of medical assistance paid on behalf of the 
individual under the State's Medicaid plan, up to the amount of 
the assets remaining in the trust upon the death of the 
individual. For SSI, trusts that are irrevocable, meaning the 
value cannot be turned into a liquid resource, are not counted 
toward the asset test, but any amounts that are removed are 
counted as income in the month received, which may reduce the 
individual's monthly benefit amount.
            Income tax provisions related to qualified disability 
                    trusts
    Under present law, a qualified disability trust is allowed 
a deduction for a personal exemption equal to that of an 
unmarried individual (for 2014, $3,950 subject to phaseout if 
adjusted gross income exceeds $254,200).\4\
---------------------------------------------------------------------------
    \4\Sec. 642(b)(2)(C). The exemption amount of a trust generally is 
either $100 or $300 (if required to distribute all its income 
currently).
---------------------------------------------------------------------------
    In addition, amounts distributed to a child who is a 
beneficiary of a qualified disability trust are treated as 
earned income for purposes of the ``kiddie'' tax and thus are 
not taxed at parents' tax rates.\5\
---------------------------------------------------------------------------
    \5\Sec. 1(g)(4)(C).
---------------------------------------------------------------------------
    For these purposes a qualified disability trust means a 
disability trust described in section 1917(c)(2)(B)(iv) of the 
Social Security Act\6\ all the beneficiaries of which are 
determined to be disabled (within the meaning of section 
1614(a)(3) of that Act).
---------------------------------------------------------------------------
    \6\Section 1917(c)(2)(B)(iv) of the Social Security Act describes 
trusts, including disability trusts described in section 1917(d)(4) of 
that Act, established solely for the benefit of an individual under 65 
years of age who is disabled (within the meaning of section 1614(a)(3) 
of that Act).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee recognizes the special financial burdens 
borne by families raising children with disabilities and the 
fact that increased financial needs generally continue 
throughout the child's lifetime. Present law provides for 
various types of tax-advantaged savings arrangements; however, 
none of these arrangements adequately serves the goal of 
promoting saving for these financial needs. The creation of 
qualified ABLE programs with tax-favored treatment of ABLE 
accounts for eligible beneficiaries will assist families and 
disabled individuals in meeting their financial needs.

                        EXPLANATION OF PROVISION

In general

    The provision provides rules for a new type of tax-
advantaged savings program, a qualified ABLE program. A 
qualified ABLE program is a program established and maintained 
by a State or agency or instrumentality thereof. A qualified 
ABLE program must meet the following conditions: (1) under the 
provisions of the program, contributions may be made to an 
account (an ``ABLE account''), established for the purpose of 
meeting the qualified disability expenses of the designated 
beneficiary of the account; (2) the program must limit a 
designated beneficiary to one ABLE account; (3) the program 
must allow for the establishment of ABLE accounts only for 
designated beneficiaries who are either residents of the State 
maintaining such ABLE program (a ``program State'') or 
residents of a State that has not established an ABLE program 
(a ``contracting State'') which has entered into a contract 
with a program State to provide the contracting State's 
residents with access to the program State's ABLE program; and 
(4) the program must meet certain other requirements discussed 
below. A qualified ABLE program is generally exempt from income 
tax, but is otherwise subject to the taxes imposed on the 
unrelated business income of tax-exempt organizations.
    A designated beneficiary of an ABLE account must be an 
eligible individual (defined below) who is designated at the 
commencement of participation in the qualified ABLE program as 
the beneficiary of amounts paid (or to be paid) into the 
program. Additionally, a designated beneficiary may be a 
brother, sister, stepbrother or stepsister of the former 
designated beneficiary of the ABLE account, provided such new 
designated beneficiary is also an eligible individual.
    Contributions to an ABLE account must be made in cash and 
are not deductible for Federal income tax purposes. Under the 
provision, except in the case of a rollover contribution from 
another account, an ABLE account must provide that it may not 
receive aggregate contributions during a taxable year in excess 
of the annual gift tax exclusion amount ($14,000 for 2014).\7\ 
Additionally, a qualified ABLE program must provide adequate 
safeguards to ensure that ABLE account contributions do not 
exceed the limit imposed on accounts under the qualified 
tuition program of the State maintaining the qualified ABLE 
program, taking into account contributions under any prior 
qualified ABLE program. Amounts in the account accumulate on a 
tax-deferred basis (i.e., income on accounts in the plan is not 
subject to current income tax).
---------------------------------------------------------------------------
    \7\Sec. 2503(b). This amount is indexed for inflation. In the case 
that contributions to an ABLE account exceed the annual limit, an 
excise tax in the amount of six percent of the excess contribution to 
such account is imposed on the designated beneficiary. Such tax does 
not apply in the event that the trustee of such account makes a 
corrective distribution of such excess amounts within the taxable year.
---------------------------------------------------------------------------
    A qualified ABLE program may not permit any contributor to, 
or designated beneficiary under, the program to direct 
(directly or indirectly) the investment of any contributions 
(or earnings thereon), which shall be implemented in the same 
manner as section 529 qualified tuition programs. A qualified 
ABLE program must also provide separate accounting for each 
designated beneficiary and may not allow any interest in the 
program (or any portion thereof) to be used as security for a 
loan.
    Amounts distributed from a qualified ABLE account are 
includible in the gross income of the distributee as provided 
in section 72 (relating to annuities) to the extent not 
otherwise excluded from gross income. If the distributions from 
a qualified ABLE account do not exceed the qualified 
distribution expenses of the designated beneficiary, no amount 
is includible in gross income. If the distributions exceed the 
qualified distribution expenses, the amount otherwise 
includible in gross income is reduced by an amount which bears 
the same ratio to the distributed amount as the qualified 
disability expenses bear to that amount. The portion of any 
distribution that is includible in gross income is subject to 
an additional 10-percent tax unless made after the death of the 
beneficiary.
    For example, assume a qualified ABLE account with a balance 
of $100,000 (of which $50,000 consists of contributions) 
distributes $10,000 to a beneficiary who has incurred $6,000 of 
qualified disability expenses. Under section 72, one-half of 
the distribution ($5,000) is includible in gross income. Under 
the bill, the $5,000 amount otherwise includible in gross 
income is reduced by $3,000 ($6,000/$10,000 multiplied by 
$5,000) to $2,000. An additional tax of $200 (ten percent of 
$2,000) is imposed on the distribution.
    Amounts in an ABLE account may be rolled over without 
income tax liability to another ABLE account for the same 
beneficiary\8\ or another ABLE account for the designated 
beneficiary's brother, sister, stepbrother or stepsister who is 
also an eligible individual.
---------------------------------------------------------------------------
    \8\Such circumstances could arise, for instance, if an eligible 
individual were to relocate to a different State.
---------------------------------------------------------------------------
    Under the provision, if, during any taxable year of an 
eligible individual, more than one ABLE account exists for such 
individual, each such ABLE account other than the earliest 
established ABLE account shall cease to be an ABLE account as 
of the first day of such taxable year. In this case, the 
designated beneficiary of the nonqualifying ABLE account shall 
be treated as having received a distribution of the fair market 
value of all the non-qualifying ABLE account's assets on the 
first day of such taxable year. The provision provides the 
Secretary of the Treasury (``Secretary'') with the authority to 
prescribe regulations to enforce the one ABLE account 
limitation. Within those regulations, Treasury should establish 
a method for allowing individuals to verify the existence of 
accounts in order to prevent individuals from unknowingly 
having nonqualifying ABLE accounts.
    Under the provision, a contribution to an ABLE account is 
treated as a completed gift of a present interest to the 
beneficiary of the account. Thus, the contribution qualifies 
for the per-donee annual gift tax exclusion ($14,000 for 2014) 
and, to the extent of the exclusion, is exempt from the 
generation skipping transfer (``GST'') tax. A distribution from 
an ABLE account generally is not subject to gift tax or GST 
tax. These taxes may apply, however, to a change of designated 
beneficiary during any taxable year unless, as of the beginning 
of the year, the new beneficiary is both an eligible individual 
for the taxable year and a brother, sister, stepbrother or 
stepsister of the former beneficiary.

Eligible individuals

    As described above, a qualified ABLE program may provide 
for the establishment of ABLE accounts only if those accounts 
have as their designated beneficiary an eligible individual. 
For these purposes, an eligible individual is an individual 
either (1) for whom a disability certification has been filed 
with the Secretary for the taxable year, or (2) who has been 
determined, for purposes of Social Security Disability 
Insurance benefits or SSI benefits\9\ to meet the requirements 
relating to disability or blindness described below. For the 
purposes of determining eligibility for SSI, the eligible 
individual is the owner of the account. All rules for the 
counting and deeming of income and resources should apply. A 
disability certification means a certification to the 
satisfaction of the Secretary, made by the eligible individual 
or the parent or guardian of the eligible individual, that the 
individual meets the requirements relating to disability or 
blindness described below and that includes a copy of the 
individual's diagnosis relating to the individual's relevant 
impairment or impairments, signed by a licensed physician.\10\
---------------------------------------------------------------------------
    \9\These are benefits, respectively, under Title II or Title XVI of 
the Social Security Act.
    \10\No inference may be drawn from a disability certification for 
purposes of eligibility for Social Security, SSI or Medicaid benefits.
---------------------------------------------------------------------------
    Treasury is responsible for maintaining the list of 
eligible individuals, including those who have a Social 
Security disability determination, so that States and the IRS 
need to contact only one entity to confirm an individual's 
eligibility status. The SSA is responsible for providing 
confirmation of disability determination in the manner 
specified by Treasury. This process does not violate the Health 
Insurance Portability and Accountability Act of 1996 
(``HIPAA'') because no diagnosis information should be 
exchanged, only binary information on the result of a 
disability determination or certification for a given tax year.
    For purposes of the requirements relating to disability or 
blindness, the definitions of blind and disabled under the SSI 
program apply (``SSI definitions'').\11\ In general, an 
individual must be either blind or disabled, and the blindness 
or disability must have occurred before the date on which the 
individual attained age 26. This does not require SSA to make 
additional disability determinations beyond what is needed to 
administer its programs, but means that if a positive 
disability determination was made prior to the individual's 
turning 26, it can be used. An individual who has not reached 
age 19 during the taxable year may be blind or disabled under 
the SSI definition applicable to an individual under the age of 
18. This is meant to allow for additional processing time on a 
pending age-18 redetermination.
---------------------------------------------------------------------------
    \11\Section 1614(a)(2) and (a)(3) of the Social Security Act. Under 
the applicable definition, an individual is generally disabled if 
unable to engage in any substantial gainful activity by reason of any 
medically determinable physical or mental impairment that can be 
expected to result in death or that has lasted or can be expected to 
last for a continuous period of at least 12 months. An individual under 
the age of 18 is disabled if having a medically determinable physical 
or mental impairment that results in marked and severe functional 
limitations and that can be expected to result in death or that has 
lasted or can be expected to last for a continuous period of at least 
12 months.
---------------------------------------------------------------------------
    As discussed further below, the provision provides that, 
not later than six months after the date of enactment, the 
Secretary shall develop regulations or other guidance on 
certain aspects of the provision. Among these aspects are 
regulations or guidance, to be developed in consultation with 
the Commissioner of Social Security, relating to disability 
certifications and determinations of disability including those 
conditions which are deemed to have occurred prior to age 26. 
It is intended that individuals with those conditions shall be 
required to present only limited (or no) evidence demonstrating 
that the condition occurred prior to age 26. This list of 
conditions should operate in a manner similar to the SSA's 
Compassionate Allowances, which targets the most obviously 
disabled individuals for allowances based on objective medical 
information that can be obtained quickly. Compassionate 
Allowances are selected using information received at public 
outreach hearings, comments received from the Social Security 
and Disability Determination Services communities, the counsel 
of medical and scientific experts, and research conducted by 
the National Institutes of Health.

Qualified disability expenses

    As described above, the earnings on distributions from an 
ABLE account are excluded from income only to the extent total 
distributions do not exceed the qualified disability expenses 
of the designated beneficiary. For these purposes, qualified 
disability expenses are any expenses related to the eligible 
individual's blindness or disability which are made for the 
benefit of the designated beneficiary. Such expenses include 
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.

Reporting requirements

    Under the provision, each officer or employee having 
control of the qualified ABLE program (or their designee) is 
required to make reports to the Secretary and to the designated 
beneficiaries of ABLE accounts. Such reports must provide 
information with respect to contributions, distributions, the 
return of excess contributions, and other matters as required 
by the Secretary. In addition, for research purposes, the 
Secretary, with assistance from SSA, shall make available to 
the public reports containing aggregate information, by 
diagnosis and other relevant characteristics, on contributions 
and distributions in order to monitor take-up and identify 
gaps. However, an item of information may not be made 
publically available if it can be associated with, or otherwise 
identify, directly or indirectly, a particular individual. 
Given SSA's research capabilities, SSA will be an important 
partner in developing, creating, and publishing the required 
research tables. In this case, these tables will not violate 
HIPAA because data is de-identified and presented in the 
aggregate.
    The provision also requires that the trustee of an ABLE 
account submit a notice to the Secretary upon the establishment 
of the ABLE account. The notice shall contain the name and 
State of residence of the beneficiary, and other such 
information as the Secretary may require. These reports and 
notices must be filed at such time and in such manner as 
required by the Secretary. A penalty of $50 may apply with 
respect to any failure to provide a required report or notice.
    Additionally, for purposes of the rules relating to 
eligibility for SSI (discussed below), States having control of 
a qualified ABLE program must submit statements on 
distributions and account balances of all ABLE accounts to the 
Commissioner of Social Security. States should work with the 
Commissioner during implementation to identify data elements to 
include in their electronic statements that would allow SSA to 
electronically make accurate and timely SSI determinations on a 
monthly basis. This would include but not be limited to the 
name, date of birth, and SSN of the beneficiary, balance 
information as of the first moment of the month (i.e., 12:00 
a.m. on the first of the month); and, regarding distributions, 
the recipient of the distribution, whether it is a distribution 
for a qualified or non-qualified expense, and if for a 
qualified expense, the type of qualified expense (e.g., 
housing). To comply with the requirements for notice and appeal 
in the Computer Matching and Privacy Protection Act, SSA should 
work with States to address issues so that information can be 
processed as efficiently as possible. In doing so, options such 
as providing immediate notice when an individual indicates a 
withdrawal is for a housing expense or when the account balance 
reaches $100,000 should be considered.

Transfer to State

    Under the provision, in the event that the designated 
beneficiary dies, subject to any outstanding payments due for 
qualified disability expenses incurred by the designated 
beneficiary, all amounts remaining in the deceased 
beneficiary's ABLE account not in excess of the amount equal to 
the total medical assistance paid for such individual after 
establishment of the account 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. Such repaid amounts shall be net of any premiums 
paid from the account or by or on behalf of the beneficiary to 
a Medicaid Buy-In program.

Regulations

    The Secretary is directed to issue regulations or other 
guidance as the Secretary determines is necessary or 
appropriate to carry out the purposes of the qualified ABLE 
program rules, including regulations (1) to enforce the one 
ABLE account per eligible individual limit; (2) providing for 
the information required to be presented to open an ABLE 
account; (3) to generally define disability expenses; (4) 
relating to disability certifications and determinations of 
disability, to be developed in consultation with the 
Commissioner of Social Security, as discussed above; (5) to 
prevent fraud and abuse with respect to amounts claimed as 
qualified disability expenses; (6) under the estate tax, gift 
tax, and generation-skipping transfer tax provisions of the 
Code; and (7) to allow for transfers from one ABLE account to 
another ABLE account in cases in which an eligible individual 
has a change in State of residence. The Secretary is directed 
to issue such regulations or other guidance no later than six 
months after the date of enactment.

Treatment of ABLE accounts under Federal programs

    Under the provision, any amount in an ABLE account, and any 
distribution for qualified disability expenses, shall be 
disregarded for purposes of determining eligibility to receive, 
or the amount of, any assistance or benefit authorized by any 
Federal means-tested program. However, in the case of the SSI 
program, a distribution for housing expenses is not 
disregarded, nor are amounts in an ABLE account in excess of 
$100,000. In the case that an individual's ABLE account balance 
exceeds $100,000, the individual's SSI benefits shall not be 
terminated, but instead shall be suspended until such time as 
the individual's resources fall below $100,000. However, the 
suspension shall not apply for purposes of Medicaid 
eligibility.

                             EFFECTIVE DATE

    The provision relating to the establishment of ABLE 
programs is effective for taxable years beginning after 
December 31, 2014. The directive that the Secretary issue 
regulations within six months and the disregard of ABLE 
accounts and distributions from such accounts in the case of 
certain means-tested Federal programs are effective on the date 
of enactment.

                      III. Votes of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 647 the ``Achieving A Better Life 
Experience Act of 2014 (`ABLE Act of 2014'),'' on July 31, 
2014:

                    MOTION TO REPORT RECOMMENDATIONS

    The bill, H.R. 647, was ordered favorably reported as 
amended by voice vote (with a quorum being present).

                     IV. Budget Effects of the Bill


               A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 647, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal budget receipts for fiscal years 2014-2024:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Fiscal years--[millions of dollars]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                              Item                                 2014    2015    2016    2017    2018      2019       2020       2021       2022       2023       2024     2014-19    2014-24
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues........................................................  ......      -1      -4     -10     -24        -49        -82       -117       -158       -203       -249        -89       -898
Outlays\1\......................................................  ......      -1     -12     -31     -47        -78       -109       -150       -202       -243       -280       -170     -1,153
    Net Total...................................................  ......      -2     -16     -41     -71       -127       -191       -267       -360       -446       -529       -259     -2,051
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details may not add to total due to rounding.
\1\Estimated outlay effects provided by the Congressional Budget Office.

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET 
                               AUTHORITY

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves new or increased budget authority. The Committee 
further states that the revenue-reducing tax provisions involve 
increased tax expenditures. (See amounts in table in Part 
IV.A., above.)

      C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 27, 2014.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 647, the Achieving 
a Better Life Experience Act of 2014.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is David 
Rafferty.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 647--Achieving a Better Life Experience Act of 2014

    Summary: H.R. 647 would allow for the creation of a new 
type of tax-favored account--an ABLE account--for the benefit 
of individuals with disabilities. Assets in an ABLE account and 
distributions from the account for qualifying expenses would be 
disregarded when determining the beneficiary's eligibility for 
most federal means-tested benefits.
    CBO estimates that enacting H.R. 647 would increase direct 
spending by $1.2 billion over the 2015-2024 period. 
Additionally, the staff of the Joint Committee on Taxation 
(JCT) estimates that enacting H.R. 647 would decrease revenues 
by $0.9 billion over the 2015-2024 period. In total, CBO and 
JCT estimate that enacting the bill would increase deficits by 
$2.1 billion over the next 10 years. Pay-as-you-go procedures 
apply because enacting the legislation would affect direct 
spending and revenues.
    CBO has determined that the nontax provisions of the bill 
contain no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act (UMRA). Similarly, 
JCT has determined that the tax provisions of the bill contain 
no intergovernmental or private-sector mandates as defined in 
UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 647 is shown in the following table. 
The costs of this legislation fall within budget functions 550 
(health), 570 (Medicare), and 600 (income security).

                                               TABLE 1. SUMMARY OF ESTIMATED BUDGETARY EFFECTS OF H.R. 647
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 By fiscal year, in millions of dollars--
                                                --------------------------------------------------------------------------------------------------------
                                                  2015   2016   2017    2018    2019     2020     2021     2022     2023     2024   2015-2019  2015-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING
 
Estimated Budget Authority.....................      1     12      31      47      78      109      150      202      243      280       170      1,153
Estimated Outlays..............................      1     12      31      47      78      109      150      202      243      280       170      1,153
 
                                                                   CHANGES IN REVENUES
 
Estimated Revenues.............................     -1     -4     -10     -24     -49      -82     -117     -158     -203     -249       -89       -898
 
                                        NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
 
Impact on Deficit..............................      2     16      41      71     127      191      267      360      446      529       259     2,051
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: CBO and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the beginning of fiscal year 2015. 
CBO also assumes that, under the bill, states would establish 
qualifying ABLE programs during the 2015-2017 period.
    The ABLE Act would amend section 529 of the Internal 
Revenue Code to permit individuals to establish ``ABLE 
accounts'' for disabled beneficiaries that resemble the 
qualified tuition programs--often called ``529 accounts''--that 
have been established under that section of the tax code since 
1996. Earnings on an ABLE account would not count as taxable 
income of the contributor to the account or the eligible 
beneficiary; because earnings on assets in other accounts would 
generally be taxed under current law, the legislation would 
reduce tax revenues. Moreover, assets in an ABLE account and 
distributions from the account for qualified disability 
expenses would be disregarded when determining the qualified 
beneficiary's eligibility for most federal means-tested 
benefits. Thus, the legislation would increase the number of 
beneficiaries of federal means-tested programs and federal 
spending from such programs.
    Key characteristics of ABLE accounts: ABLE accounts would 
have the following features--
           Any contributor--such as a family member, a 
        friend, or the disabled person--could establish an ABLE 
        account for an eligible beneficiary. An eligible 
        beneficiary could have only one ABLE account, which 
        must be established in the state in which he resides 
        (or in a state that provides ABLE account services for 
        his home state).
           An ABLE account may not receive annual 
        contributions exceeding the annual gift-tax exemption. 
        Additionally, a state must provide adequate safeguards 
        to ensure aggregate contributions to an ABLE account do 
        not exceed the state-based limits for 529 accounts.
           An eligible beneficiary would be a child who 
        meets the Supplemental Security Income (SSI) program's 
        disability standard for children or an adult who meets 
        the SSI program's disability standard for adults, 
        provided that the adult's disability occurred before he 
        reached age 26.
           Qualified disability expenses would be any 
        expenses made for the benefit of the disabled 
        beneficiary related to 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 any other expenses approved by the Secretary of the 
        Treasury under regulations.
           Earnings on an ABLE account and 
        distributions from the account for qualified disability 
        expenses would not count as taxable income of the 
        contributor or the eligible beneficiary. Contributions 
        to an ABLE account would have to be made in cash from 
        the contributor's after-tax income.
           Assets in an ABLE account and distributions 
        from the account for qualified disability expenses 
        would be disregarded when determining the qualified 
        beneficiary's eligibility for most federal means-tested 
        benefits. For SSI, only the first $100,000 in each ABLE 
        account would be disregarded.
           Assets in an ABLE account could be rolled 
        over without penalty into another ABLE account for 
        either the qualified beneficiary or any of the 
        beneficiary's qualifying family members. Any assets 
        remaining in an ABLE account upon the death of the 
        qualified beneficiary could be used to reimburse a 
        state Medicaid agency for payments it made on behalf of 
        the beneficiary.
    Effects on direct spending: CBO estimates that enacting 
H.R. 647 would increase direct spending by $170 million over 
the 2015-2019 period and by about $1,150 million over the 2015-
2024 period (see Table 2). The SSI and Medicaid programs would 
each account for roughly half of the increase, with the 
Medicare program experiencing a very small increase in outlays.

                                          TABLE 2--ESTIMATED EFFECTS OF H.R. 647 ON DIRECT SPENDING, BY PROGRAM
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   By fiscal year, outlays in millions of dollars--
                                                             -------------------------------------------------------------------------------------------
                                                               2015   2016   2017   2018   2019   2020   2021   2022   2023   2024  2015-2019  2015-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING
 
Supplemental Security Income................................      *      5     15     25     45     60     80    110    125    135        90        600
Medicaid....................................................      1      7     16     22     33     49     69     91    117    144        79        549
Medicare....................................................      0      0      *      *      *      *      1      1      1      1         1          4
                                                             -------------------------------------------------------------------------------------------
    Total Changes...........................................      1     12     31     47     78    109    150    202    243    280       170     1,153
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Notes: Components may not sum to totals because of rounding.
* = less than $500,000.

    Supplemental Security Income: CBO expects that the ABLE Act 
would increase SSI caseloads for two distinct groups of 
people--
           Individuals whose eligibility for SSI 
        benefits was denied or interrupted because of excess 
        resources (defined as assets exceeding $2,000 for an 
        individual or $3,000 for a couple, excluding the value 
        of a home, a vehicle, and several other categories of 
        assets). Under current law, those individuals must 
        spend down their excess resources before gaining or 
        reestablishing eligibility for SSI. Under H.R. 647, 
        many such individuals could establish an ABLE account 
        more quickly than they could spend down excess 
        resources--accelerating their participation in SSI by 
        several months to several years. CBO anticipates that, 
        by the 10th year after enactment, about one-third of 
        the individuals who could accelerate their SSI 
        eligibility by establishing an ABLE account would do 
        so.
           Individuals who do not apply for SSI under 
        current law because of excess resources, but who would 
        meet SSI's age or disability requirement and income 
        requirement. CBO anticipates that, by the 10th year 
        after enactment, about 10 percent of the individuals in 
        this group would establish an ABLE account.
    Based on data from the Social Security Administration and 
the Current Population Survey, CBO estimates that SSI outlays 
would increase by roughly $600 million (or one-tenth of one 
percent of benefit payments in that program) over the 2015-2024 
period. CBO estimates that the average monthly SSI caseload 
would increase by around 25,000 (or about one-quarter of one 
percent) in 2024.
    Medicaid: As discussed above, assets in an ABLE account 
would be disregarded when determining a qualified beneficiary's 
eligibility for most federal means-tested benefits. There are 
several pathways to Medicaid eligibility for disabled adults 
under the age of 65 that require individuals to meet both 
income and asset tests. CBO expects that enacting H.R. 647 
would increase the number of disabled adults under the age of 
65 who enroll in Medicaid because they could hold cash assets 
in an ABLE account that would not count against Medicaid 
eligibility. Because a beneficiary of an ABLE account must have 
a disability that occurred before he reached age 26, CBO does 
not expect an increase in the number of elderly individuals who 
enroll in Medicaid. Additionally, CBO does not expect that 
establishment of ABLE accounts would increase the number of 
children and nondisabled adults enrolled in Medicaid because 
those individuals are not required to meet an asset test under 
current law.
    CBO estimates that enacting H.R. 647 would increase federal 
spending for Medicaid by about $550 million over the 2015-2024 
period. Many disabled adults who might have benefitted from the 
current legislation in the absence of the Affordable Care Act 
(ACA) are, or will soon become, eligible for Medicaid under 
current law. Under the ACA, states are permitted to expand 
their Medicaid programs to cover adults earning less than 138 
percent of the federal poverty level. That pathway to Medicaid 
eligibility has a higher income limit than most of the income 
limits used to determine Medicaid eligibility for disabled 
adults, and it does not require individuals to meet an asset 
test. Therefore, CBO expects that enacting H.R. 647 would lead 
to an increase in enrollment of disabled adults to only a small 
degree in states that expand Medicaid eligibility under the ACA 
and to a larger degree in states that do not. Altogether, CBO 
estimates that enacting the bill would increase the number of 
disabled adults under age 65 who are covered by Medicaid by 
about 10,000 in 2024, or less than one-tenth of one percent of 
the number of nonelderly disabled Medicaid beneficiaries in 
that year.
    Low-Income Subsidy under Medicare Part D: The Low-Income 
Subsidy (LIS) under Medicare's prescription drug benefit 
program (known as Part D) provides premium and cost-sharing 
assistance to individuals whose income is up to 150 percent of 
the federal poverty level and whose assets do not exceed 
$13,440 per individual or $26,860 per couple in 2014. CBO 
estimates that LIS spending would increase by less than $5 
million over the 2015-2024 period. CBO expects that very few 
Medicare beneficiaries would be permitted to establish ABLE 
accounts because a beneficiary of an ABLE account must have a 
disability that was diagnosed before he or she reached age 26.
    Effects on revenues: H.R. 647 would allow for the creation 
of a new type of tax-favored account--an ABLE account--for the 
benefit of individuals with disabilities. Qualified 
distributions from such accounts would include payments for 
education, medical and dental care, housing, community-based 
support services, moving, and funeral and burial services. For 
purposes of this estimate, JCT assumes that the provision 
allowing for the creation of ABLE accounts would be effective 
for taxable years beginning after December 31, 2014. JCT 
estimates that the resulting reduction in federal tax 
collections would total $898 million over the 2015-2024 period.
    JCT's estimate primarily reflects the revenue loss 
attributable to savings by households with qualified disabled 
dependents and incomes higher than $40,000. Under H.R. 647, 
earnings on the assets deposited in ABLE accounts would be 
untaxed; in contrast, earnings on assets in other accounts 
would generally be taxed under current law. There would be an 
additional, but much smaller, revenue loss stemming from 
transfers from qualified disability trusts.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

            CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 647 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JULY 31, 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By Fiscal Year, in Millions of Dollars--
                                          --------------------------------------------------------------------------------------------------------------
                                            2014   2015   2016   2017    2018    2019    2020     2021     2022     2023     2024   2014-2019  2014-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 Statutory Pay-As-You-Go Impact...........      0      2     16      41      71     127     191      267      360      446      529       259      2,051
Memorandum:
    Changes in Outlays...................      0      1     12      31      47      78     109      150      202      243      280       170      1,153
    Changes in Revenues..................      0     -1     -4     -10     -24     -49     -82     -117     -158     -203     -249       -89       -898
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: CBO has 
determined that the nontax provisions of the bill contain no 
intergovernmental or private-sector mandates as defined in 
UMRA. CBO estimates that the provisions in the bill that would 
increase federal spending for Medicaid would similarly result 
in $415 million of additional Medicaid spending by states over 
the 2014-2024 period. Those provisions, however, would not be 
intergovernmental mandates as defined by UMRA because Medicaid 
provides states with significant flexibility to make 
programmatic adjustments to accommodate the changes.
    JCT has determined that the tax provisions of the bill 
contain no intergovernmental or private-sector mandates as 
defined in UMRA.
    Previous CBO estimate: On May 9, 2014, CBO transmitted a 
cost estimate for S. 313, the Achieving a Better Life 
Experience Act of 2013, as introduced on February 13, 2013. The 
text of S. 313 is identical to the text of H.R. 647 that also 
was introduced on February 13, 2013. CBO and JCT estimated that 
the introduced version of S. 313 would increase direct spending 
by $17.5 billion and reduce revenues by $1.7 billion over the 
2015-2024 period. S. 313 and H.R. 647 (as introduced) would 
increase the deficit by significantly more than the version of 
H.R. 647 that was ordered reported by the Ways and Means 
Committee primarily for three reasons:
           S. 313 would allow a beneficiary to have 
        multiple ABLE accounts. In contrast, the committee-
        approved version of H.R. 647 would limit each 
        beneficiary to a single account.
           S. 313 would allow effectively unlimited 
        contributions into a beneficiary's accounts. The 
        committee-approved version of H.R. 647 would limit 
        annual and aggregate contributions into a beneficiary's 
        account.
           S. 313 would permit adults of any age to be 
        a beneficiary--even if they were retired or were 
        earning substantial income from work--provided they had 
        a marked and severe functional limitation (the SSI 
        program's disability standard for children). The 
        committee-approved version of H.R. 647 would limit 
        adult eligibility to those who are incapable of 
        engaging in substantial gainful (work) activity (the 
        SSI program's disability standard for adults) and whose 
        disability occurred before the age of 26.
    Relative to the earlier cost estimate for S. 313 as 
introduced, CBO and JCT estimate that those differences would 
significantly reduce the number of individuals who would be 
eligible to become beneficiaries of ABLE accounts, the amount 
of assets that would receive tax-preferred treatment, and the 
additional months of means-tested benefits received by those 
whose assets were placed in an ABLE account.
    Estimate prepared by: Federal Costs: Tom Bradley, Andrea 
Noda, and David Rafferty; Federal Revenues: Staff of the Joint 
Committee on Taxation; Impact on State, Local, and Tribal 
Governments: J'nell L. Blanco; Impact on the Private Sector: 
Sam Trachtman.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

                    D. MACROECONOMIC IMPACT ANALYSIS

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the bill amending the Internal Revenue Code of 
1986: the effects of the bill on economic activity are so small 
as to be incalculable within the context of a model of the 
aggregate economy.

     V. Other Matters To Be Discussed Under the Rules of the House


          A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 647 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. INFORMATION RELATING TO UNFUNDED MANDATES

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. APPLICABILITY OF HOUSE RULE XXI 5(B)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. TAX COMPLEXITY ANALYSIS

    The following statement is made pursuant to clause 3(h)(1) 
of rule XIII of the Rules of the House of Representatives. 
Section 4022(b) of the Internal Revenue Service Restructuring 
and Reform Act of 1998 requires the staff of the Joint 
Committee on Taxation (in consultation with the Internal 
Revenue Service and the Treasury Department) to provide a tax 
complexity analysis. The complexity analysis is required for 
all legislation reported by the Senate Committee on Finance, 
the House Committee on Ways and Means, or any committee of 
conference if the legislation includes a provision that 
directly or indirectly amends the Internal Revenue Code and has 
widespread applicability to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Code and that 
have ``widespread applicability'' to individuals or small 
businesses, within the meaning of the rule.

  F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF 
                                BENEFITS

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. DUPLICATION OF FEDERAL PROGRAMS

    In compliance with Sec. 3(j)(2) of H. Res. 5 (113th 
Congress), the Committee states that the Government 
Accountability Office has included programs related to benefits 
for disabled Americans in a report to Congress pursuant to 
section 21 of Public Law 111-139. The Committee also states 
that the most recent Catalog of Federal Domestic Assistance, 
published pursuant to the Federal Program Information Act 
(Public Law 95-220, as amended by Public Law 98-169), 
identified programs related to benefits for disabled Americans.

                 H. DISCLOSURE OF DIRECTED RULE MAKINGS

    In compliance with Sec. 3(k) of H. Res. 5 (113th Congress), 
the following statement is made concerning directed rule 
making: The Committee estimates that the bill requires at most 
one directed rule making within the meaning of such section 
(related to the requirement that the Secretary prescribe 
certain regulations to carry out the purposes of the proposal).

       VI. Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *


Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *


Subpart A--Nonrefundable Personal Credits

           *       *       *       *       *       *       *


SEC. 26. LIMITATION BASED ON TAX LIABILITY; DEFINITION OF TAX 
                    LIABILITY.

  (a) * * *
  (b) Regular Tax Liability.--For purposes of this part--
          (1) * * *
          (2) Exception for certain taxes.--For purposes of 
        paragraph (1), any tax imposed by any of the following 
        provisions shall not be treated as tax imposed by this 
        chapter:
                  (A) * * *

           *       *       *       *       *       *       *

                  (W) section 36(f) (relating to recapture of 
                homebuyer credit), [and]
                  (X) section 457A(c)(1)(B) (relating to 
                determinability of amounts of compensation)[.], 
                and
                  (Y) section 529A(c)(3)(A) (relating to 
                additional tax on ABLE account distributions 
                not used for qualified disability expenses).

           *       *       *       *       *       *       *


                   Subchapter F--Exempt Organizations

     * * * * * * *

             [Part VIII. Higher Education Savings Entities.]

Part VIII. Certain Savings Entities.

           *       *       *       *       *       *       *


         PART VIII--[HIGHER EDUCATION] CERTAIN SAVINGS ENTITIES

Sec. 529. Qualified tuition programs.
Sec. 529A. Qualified ABLE programs.

           *       *       *       *       *       *       *


SEC. 529A. QUALIFIED ABLE PROGRAMS.

  (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).
  (b) Qualified ABLE Program.--For purposes of this section--
          (1) In general.--The term ``qualified ABLE program'' 
        means a program established and maintained by a State, 
        or agency or instrumentality thereof--
                  (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,
                  (B) which limits a designated beneficiary to 
                1 ABLE account for purposes of this section,
                  (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
                  (D) which meets the other requirements of 
                this section.
          (2) Cash contributions.--A program shall not be 
        treated as a qualified ABLE program unless it provides 
        that no contribution will be accepted--
                  (A) unless it is in cash, or
                  (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.
        For purposes of this paragraph, rules similar to the 
        rules of section 408(d)(4) (determined without regard 
        to subparagraph (B) thereof) shall apply.
          (3) Separate accounting.--A program shall not be 
        treated as a qualified ABLE program unless it provides 
        separate accounting for each designated beneficiary.
          (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).
          (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.
          (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.
  (c) Tax Treatment.--
          (1) Distributions.--
                  (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.
                  (B) Distributions for qualified disability 
                expenses.--For purposes of this paragraph, if 
                distributions from a qualified ABLE program--
                          (i) do not exceed the qualified 
                        disability expenses of the designated 
                        beneficiary, no amount shall be 
                        includible in gross income, and
                          (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.
                  (C) Change in beneficiaries or programs.--
                          (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.
                          (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.
                          (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.
                  (D) Operating rules.--For purposes of 
                applying section 72--
                          (i) except to the extent provided by 
                        the Secretary, all distributions during 
                        a taxable year shall be treated as one 
                        distribution, and
                          (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.
          (2) Gift tax rules.--For purposes of chapters 12 and 
        13--
                  (A) Contributions.--Any contribution to a 
                qualified ABLE program on behalf of any 
                designated beneficiary--
                          (i) shall be treated as a completed 
                        gift to such beneficiary which is not a 
                        future interest in property, and
                          (ii) shall not be treated as a 
                        qualified transfer under section 
                        2503(e).
                  (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.
                  (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.
          (3) Additional tax for distributions not used for 
        disability expenses.--
                  (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.
                  (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.
                  (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--
                          (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
                          (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 gross income for the taxable 
                year in which such excess contribution was 
                made.
          (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.
  (d) Reports.--
          (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.
          (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.
          (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.
          (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.
          (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.
  (e) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) Eligible individual.--
                  (A) In general.--An individual is an eligible 
                individual for a taxable year if during such 
                taxable year--
                          (i) a disability certification with 
                        respect to such individual is filed 
                        with the Secretary for such taxable 
                        year, or
                          (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.
                  (B) Criteria.--An individual meets the 
                criteria of this subparagraph for a taxable 
                year if--
                          (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
                          (ii) the individual--
                                  (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
                                  (II) such blindness or 
                                disability occurred before the 
                                date on which the individual 
                                attained age 26.
          (2) Disability certification.--
                  (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--
                          (i) the individual meets the criteria 
                        described in paragraph (1)(B), and
                          (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.
                  (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.
          (3) Designated beneficiary.--The term ``designated 
        beneficiary'' in connection with an ABLE account 
        established under a qualified ABLE program means--
                  (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
                  (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.
          (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.
          (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.
          (6) ABLE account.--The term ``ABLE account'' means an 
        account established and maintained under a qualified 
        ABLE program.
          (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.
  (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.
  (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--
          (1) to enforce the 1 ABLE account per eligible 
        individual limit,
          (2) providing for the information required to be 
        presented to open an ABLE account,
          (3) to generally define qualified disability 
        expenses,
          (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),
          (5) to prevent fraud and abuse with respect to 
        amounts claimed as qualified disability expenses,
          (6) under chapters 11, 12, and 13 of this title, and
          (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.

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Subtitle D--Miscellaneous Excise Taxes

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CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

           *       *       *       *       *       *       *


SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO CERTAIN TAX-FAVORED ACCOUNTS 
                    AND ANNUITIES.

  (a) Tax Imposed.--In the case of--
          (1) * * *

           *       *       *       *       *       *       *

          (4) a Coverdell education savings account (as defined 
        in section 530), [or]
          (5) a health savings account (within the meaning of 
        section 223(d)), or
          (6) an ABLE account (within the meaning of section 
        529A),
there is imposed for each taxable year a tax in an amount equal 
to 6 percent of the amount of the excess contributions to such 
individual's accounts or annuities (determined as of the close 
of the taxable year). The amount of such tax for any taxable 
year shall not exceed 6 percent of the value of the account or 
annuity (determined as of the close of the taxable year). In 
the case of an endowment contract described in section 408(b), 
the tax imposed by this section does not apply to any amount 
allocable to life, health, accident, or other insurance under 
such contract. The tax imposed by this subsection shall be paid 
by such individual.

           *       *       *       *       *       *       *

  (h) Excess Contributions to ABLE Account.--For purposes of 
this section--
          (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).
          (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.

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Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
PENALTIES

           *       *       *       *       *       *       *


Subchapter B--Assessable Penalties

           *       *       *       *       *       *       *


PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


SEC. 6693. FAILURE TO PROVIDE REPORTS ON CERTAIN TAX-FAVORED ACCOUNTS 
                    OR ANNUITIES; PENALTIES RELATING TO DESIGNATED 
                    NONDEDUCTIBLE CONTRIBUTIONS.

  (a) Reports.--
          (1) * * *
          (2) Provisions.--The provisions referred to in this 
        paragraph are--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) section 529(d) (relating to qualified 
                tuition programs), [and]
                  (E) section 529A(d) (relating to qualified 
                ABLE programs), and
                  [(E)] (F) section 530(h) (relating to 
                Coverdell education savings accounts).
This subsection shall not apply to any report which is an 
information return described in section 6724(d)(1)(C)(i) or a 
payee statement described in section 6724(d)(2)(X).

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