American Dream Down Payment Act of 2020
This bill establishes qualified down payment savings programs that allow taxpayers to establish tax-free accounts to save for down payments, including closing costs, on a principal residence. The Department of the Treasury, in coordination with the Securities and Exchange Commission, must report on matters relating to such accounts, including the number of states that have established down payment savings programs and information about beneficiaries of such programs.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4414 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
2d Session
S. 4414
To amend the Internal Revenue Code of 1986 to establish qualified down
payment savings programs.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
August 4, 2020
Mr. Jones (for himself, Mr. Gardner, and Mr. Brown) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish qualified down
payment savings programs.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``American Dream Down Payment Act of
2020''.
SEC. 2. QUALIFIED DOWN PAYMENT SAVINGS PROGRAMS.
(a) In General.--Part VIII of subchapter F of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
529A the following new section:
``SEC. 529B. QUALIFIED DOWN PAYMENT SAVINGS PROGRAMS.
``(a) In General.--A qualified down payment savings 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 Down Payment Savings Program.--For purposes of this
section--
``(1) In general.--The term `qualified down payment savings
program' means a program established and maintained by a State
or agency or instrumentality thereof--
``(A) under which a person may make contributions
to a qualified down payment savings account which is
established for the purpose of meeting qualified down
payment expenses of the designated beneficiary of the
account, and
``(B) which meets the other requirements of this
subsection.
``(2) Cash contributions.--
``(A) In general.--A program shall not be treated
as a qualified down payment savings program unless it
provides that no contribution will be accepted--
``(i) unless it is in cash, and
``(ii) except in the case of contributions
under subsection (c)(3)(C), if such
contribution to a qualified down payment
savings account would result in the balance of
such account exceeding $102,080.
``(B) Inflation adjustment.--
``(i) In general.--In the case of any
calendar year beginning after 2020, the
$102,080 amount in subparagraph (A)(ii) shall
be increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under clause
(ii).
``(ii) Cost-of-living adjustment.--For
purposes of clause (i), the cost-of-living
adjustment for any calendar year is the
percentage (if any) by which--
``(I) the CPI for the preceding
calendar year, exceeds
``(II) the CPI for calendar year
2019.
For purposes of this clause, the CPI for any
calendar year shall be determined in the same
manner as it is determined under section
1(f)(4).
``(iii) Rounding.--If any increase
determined under clause (i) is not a multiple
of $10, such increase shall be rounded to the
nearest multiple of $10.
``(3) Separate accounting.--A program shall not be treated
as a qualified down payment savings program unless it provides
separate accounting for each designated beneficiary.
``(4) Investment direction.--A program shall not be treated
as a qualified down payment savings program unless it provides
that--
``(A) except as provided in subparagraph (B), any
contributor to, or designated beneficiary under, such
program may, directly or indirectly, direct the
investment of any contributions to the program (or any
earnings thereon) no more than 2 times in any calendar
year and subject to the regulations established
pursuant to this section, and
``(B) in the event that an account's holdings meet
the value established under paragraph (2)(B), the
account funds will be transferred to investments in
United States Treasury securities.
``(5) No pledging of interest as a security.--A program
shall not be treated as a qualified down payment savings
program if it allows any interest in the program or any portion
thereof to be used as security for a loan.
``(6) Compliance with regulations.--A program shall not be
treated as a qualified down payment savings program unless it
complies with all regulations issued pursuant to subsection
(f).
``(c) Tax Treatment of Designated Beneficiaries and Contributors.--
``(1) In general.--Except as otherwise provided in this
subsection, no amount shall be includible in gross income of--
``(A) a designated beneficiary under a qualified
down payment savings program, or
``(B) a contributor to such program on behalf of a
designated beneficiary,
with respect to any distribution or earnings under such
program.
``(2) Gift tax treatment of contributions.--For purposes of
chapters 12 and 13--
``(A) In general.--Any contribution to a qualified
down payment savings program on behalf of any
designated beneficiary shall be treated as a completed
gift to such beneficiary which is not a future interest
in property.
``(B) Treatment of excess contributions.--If the
aggregate amount of contributions described in
subparagraph (A) during the calendar year by a donor
exceeds the limitation for such year under section
2503(b), such aggregate amount shall, at the election
of the donor, be taken into account for purposes of
such section ratably over the 5-year period beginning
with such calendar year.
``(3) Distributions.--
``(A) In general.--Any distribution under a
qualified down payment savings 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 down payment
expenses.--For purposes of this paragraph, if
distributions from a qualified down payment savings
program--
``(i) do not exceed the qualified down
payment expenses, 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) Rollovers.--
``(i) In general.--Subparagraph (A) shall
not apply to that portion of any distribution
which, within 60 days of such distribution, is
transferred to another qualified down payment
savings account for the benefit of the
designated beneficiary.
``(ii) 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
down payment savings account for the benefit of
the designated beneficiary.
``(4) Estate tax treatment.--
``(A) In general.--No amount shall be includible in
the gross estate of any individual for purposes of
chapter 11 by reason of an interest in a qualified down
payment savings program.
``(B) Amounts includible in estate of designated
beneficiary in certain cases.--Subparagraph (A) shall
not apply to amounts distributed on account of the
death of a beneficiary.
``(C) Amounts includible in estate of donor making
excess contributions.--In the case of a donor who makes
the election described in paragraph (2)(B) and who dies
before the close of the 5-year period referred to in
such paragraph, notwithstanding subparagraph (A), the
gross estate of the donor shall include the portion of
such contributions properly allocable to periods after
the date of death of the donor.
``(5) Other gift tax rules.--For purposes of chapters 12
and 13, in no event shall a distribution from a qualified down
payment savings account be treated as a taxable gift.
``(6) Additional tax.--
``(A) In general.--The tax imposed by this chapter
for any taxable year on any taxpayer who receives a
distribution from a qualified down payment savings
program which is includible in gross income shall be
increased by 10 percent of the amount which is so
includible.
``(B) Exceptions.--Subparagraph (A) shall not apply
if the payment or distribution is--
``(i) made to a beneficiary (or to the
estate of the designated beneficiary) on or
after the death of the designated beneficiary,
or
``(ii) attributable to the designated
beneficiary's being disabled (within the
meaning of section 72(m)(7)).
``(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.
``(d) Reports.--Each officer or employee having control of the
qualified down payment savings program or their designee shall make
such reports regarding such program to the Secretary and to designated
beneficiaries with respect to contributions, distributions, and such
other matters as the Secretary may require. The reports required by
this subsection shall be filed at such time and in such manner and
furnished to such individuals at such time and in such manner as may be
required by the Secretary.
``(e) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Designated beneficiary.--The term `designated
beneficiary' means the individual designated at the
commencement of participation in the qualified down payment
savings program as the beneficiary of amounts paid (or to be
paid) to the program.
``(2) Qualified down payment expenses.--The term `qualified
down payment expenses' means amounts (including closing costs)
paid or incurred to purchase a principal residence (within the
meaning of section 121).
``(3) Qualified down payment savings account.--The term
`qualified down payment savings account' means an account
maintained under a qualified down payment savings program.
``(f) Regulations.--Notwithstanding any other provision of this
section, the Secretary, in consultation with the Chairman of the
Securities and Exchange Commission, shall prescribe such regulations as
may be necessary or appropriate to carry out the purposes of this
section and to prevent abuse of such purposes. Such regulations shall
include--
``(1) impermissible investments for qualified down payment
savings programs;
``(2) permissible fees, including the maximum amount of
overall fees and commissions, that may be charged in
association with a qualified down payment savings program
account; and
``(3) minimum required disclosures to account
beneficiaries, including disclosures related to any possible
losses that could be incurred in a qualified down payment
savings account.''.
(b) Tax on Excess Contributions.--
(1) In general.--Subsection (a) of section 4973 of the
Internal Revenue Code of 1986 is amended by striking ``or'' at
the end of paragraph (5), by inserting ``or'' at the end of
paragraph (6), and by inserting after paragraph (6) the
following new paragraph:
``(7) a qualified down payment savings account (within the
meaning of section 529B),''.
(2) Excess contribution.--Section 4973 of such Code is
amended by adding at the end the following new subsection:
``(i) Excess Contributions to Qualified Down Payment Savings
Accounts.--For purposes of this section--
``(1) In general.--In the case of a qualified down payment
savings account (within the meaning of section 529B), the term
`excess contributions' means the amount by which the amount
contributed for the taxable year to such account (other than
contributions under section 529B(c)(3)(C)) exceeds the
contribution limit under section 529B(b)(2)(B).
``(2) Special rule.--For purposes of this subsection, any
contribution which is distributed out of the qualified down
payment savings account in a distribution to which section
529B(c)(6)(C) applies shall be treated as an amount not
contributed.''.
(c) Penalty for Failure To File Reports.--Section 6693(a)(2) is
amended by striking ``and'' at the end of subparagraph (E), by
redesignating subparagraph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following:
``(F) section 529B(d) (relating to qualified down
payment savings programs), and''.
(d) Other Conforming Amendments.--
(1) Section 26(b)(2) of the Internal Revenue Code of 1986
is amended by striking ``and'' at the end of subparagraph (X),
by striking the period at the end of subparagraph (Y) and
inserting ``, and'', and by inserting after subparagraph (Y)
the following:
``(Z) section 529B(c)(6) (relating to additional
tax on qualified down payment savings program
distributions not used for qualified down payment
expenses).''.
(2) Section 877A of such Code is amended--
(A) in subsection (e)(2) by inserting ``a qualified
down payment savings program (as defined in section
529B),'' after ``a qualified ABLE program (as defined
in section 529A),'', and
(B) in subsection (g)(6) by inserting
``529B(c)(6),'' after ``529A(c)(3),''.
(3) Section 4965(c) of such Code is amended by striking
``or'' at the end of paragraph (7), by striking the period at
the end of paragraph (8) and inserting ``, or'', and by
inserting after paragraph (8) the following new paragraph:
``(9) a program described in section 529B.''.
(4) The table of sections for part VIII of subchapter F of
chapter 1 of such Code is amended by inserting after the item
relating to section 529A the following new item:
``Sec. 529B. Qualified down payment savings programs.''.
(e) Reports on Down Payment Savings Programs.--Beginning on that
date that is 12 months after the regulations established pursuant to
section 529B(f) are finalized, and every two years thereafter, the
Secretary of the Treasury (or the Secretary's delegate), in
coordination with the Chairman of the Securities and Exchange
Commission and the States offering qualified down payment savings
programs, shall issue a public report detailing the following:
(1) The number of States that have established qualified
down payment savings programs.
(2) The number of down payment savings program accounts in
existence during the time specified in the report and the
number of such accounts that have been established over the
life of the program.
(3) The age distribution of down payment savings account
beneficiaries.
(4) The percentage of qualified down payment savings
account beneficiaries that would be first-time homebuyers.
(5) A summary of the account balances held in qualified
down payment savings program accounts.
(6) The race and gender distribution of qualified down
payment savings program account designated beneficiaries.
(7) The income distribution of the designated beneficiaries
of qualified down payment savings program accounts.
(8) The number of down payment savings program
distributions that have been made since the previous report.
(9) Such other information as the Secretary (or the
Secretary's designee) shall determine is required to assess
whether qualified down payment savings accounts have
contributed to facilitating access to affordable homeownership,
including first-time homeownership, particularly among young
people, low- and moderate-income people, and people from
communities with historically low rates of homeownership.
(f) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2019.
(2) Regulations.--The Secretary of the Treasury (or the
Secretary's designee) shall promulgate the regulations or other
guidance required under section 529B(f) 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.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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