American Dream Down Payment Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 1360 To amend the Internal Revenue Code of 1986 to establish qualified down payment savings programs. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 25, 2021 Mr. MEEKS (for himself, Mrs. BEATTY, and Mr. GREEN of Texas) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to establish qualified down payment savings programs. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘American Dream 4 Down Payment Act of 2021’’. 5 SEC. 2. QUALIFIED DOWN PAYMENT SAVINGS PROGRAMS. 6 (a) IN GENERAL.—Part VIII of subchapter F of 7 chapter 1 of the Internal Revenue Code of 1986 is amend- 8 ed by inserting after section 529A the following new sec- 9 tion: 10 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 1360 IH ‘‘SEC. 529B. QUALIFIED DOWN PAYMENT SAVINGS PRO- 1 GRAMS. 2 ‘‘(a) IN GENERAL.—A qualified down payment sav- 3 ings program shall be exempt from taxation under this 4 subtitle. Notwithstanding the preceding sentence, such 5 program shall be subject to the taxes imposed by section 6 511 (relating to imposition of tax on unrelated business 7 income of charitable organizations). 8 ‘‘(b) QUALIFIED DOWN PAYMENT SAVINGS PRO- 9 GRAM.—For purposes of this section— 10 ‘‘(1) IN GENERAL.—The term ‘qualified down 11 payment savings program’ means a program estab- 12 lished and maintained by a State or agency or in- 13 strumentality thereof— 14 ‘‘(A) under which a person may make con- 15 tributions to a qualified down payment savings 16 account which is established for the purpose of 17 meeting qualified down payment expenses of the 18 designated beneficiary of the account, and 19 ‘‘(B) which meets the other requirements 20 of this subsection. 21 ‘‘(2) CASH CONTRIBUTIONS.— 22 ‘‘(A) IN GENERAL.—A program shall not 23 be treated as a qualified down payment savings 24 program unless it provides that no contribution 25 will be accepted— 26 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 1360 IH ‘‘(i) unless it is in cash, and 1 ‘‘(ii) except in the case of contribu- 2 tions under subsection (c)(3)(C), if such 3 contribution to a qualified down payment 4 savings account would result in the balance 5 of such account exceeding $102,080. 6 ‘‘(B) INFLATION ADJUSTMENT.— 7 ‘‘(i) IN GENERAL.—In the case of any 8 calendar year beginning after 2021, the 9 $102,080 amount in subparagraph (A)(ii) 10 shall be increased by an amount equal to— 11 ‘‘(I) such dollar amount, multi- 12 plied by 13 ‘‘(II) the cost-of-living adjust- 14 ment determined under clause (ii). 15 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.— 16 For purposes of clause (i), the cost-of-liv- 17 ing adjustment for any calendar year is the 18 percentage (if any) by which— 19 ‘‘(I) the CPI for the preceding 20 calendar year, exceeds 21 ‘‘(II) the CPI for calendar year 22 2020. 23 For purposes of this clause, the CPI for 24 any calendar year shall be determined in 25 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 1360 IH the same manner as it is determined under 1 section 1(f)(4). 2 ‘‘(iii) ROUNDING.—If any increase de- 3 termined under clause (i) is not a multiple 4 of $10, such increase shall be rounded to 5 the nearest multiple of $10. 6 ‘‘(3) SEPARATE ACCOUNTING.—A program shall 7 not be treated as a qualified down payment savings 8 program unless it provides separate accounting for 9 each designated beneficiary. 10 ‘‘(4) INVESTMENT DIRECTION.—A program 11 shall not be treated as a qualified down payment 12 savings program unless it provides that— 13 ‘‘(A) except as provided in subparagraph 14 (B), any contributor to, or designated bene- 15 ficiary under, such program may, directly or in- 16 directly, direct the investment of any contribu- 17 tions to the program (or any earnings thereon) 18 no more than 2 times in any calendar year and 19 subject to the regulations established pursuant 20 to this section, and 21 ‘‘(B) in the event that an account’s hold- 22 ings meet the value established under para- 23 graph (2)(B), the account funds will be trans- 24 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 1360 IH ferred to investments in United States Treasury 1 securities. 2 ‘‘(5) NO PLEDGING OF INTEREST AS A SECU- 3 RITY.—A program shall not be treated as a qualified 4 down payment savings program if it allows any in- 5 terest in the program or any portion thereof to be 6 used as security for a loan. 7 ‘‘(6) COMPLIANCE WITH REGULATIONS.—A 8 program shall not be treated as a qualified down 9 payment savings program unless it complies with all 10 regulations issued pursuant to subsection (f). 11 ‘‘(c) TAX TREATMENT OF DESIGNATED BENE- 12 FICIARIES AND CONTRIBUTORS.— 13 ‘‘(1) IN GENERAL.—Except as otherwise pro- 14 vided in this subsection, no amount shall be includ- 15 ible in gross income of— 16 ‘‘(A) a designated beneficiary under a 17 qualified down payment savings program, or 18 ‘‘(B) a contributor to such program on be- 19 half of a designated beneficiary, 20 with respect to any distribution or earnings under 21 such program. 22 ‘‘(2) GIFT TAX TREATMENT OF CONTRIBU- 23 TIONS.—For purposes of chapters 12 and 13— 24 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 1360 IH ‘‘(A) IN GENERAL.—Any contribution to a 1 qualified down payment savings program on be- 2 half of any designated beneficiary shall be 3 treated as a completed gift to such beneficiary 4 which is not a future interest in property. 5 ‘‘(B) TREATMENT OF EXCESS CONTRIBU- 6 TIONS.—If the aggregate amount of contribu- 7 tions described in subparagraph (A) during the 8 calendar year by a donor exceeds the limitation 9 for such year under section 2503(b), such ag- 10 gregate amount shall, at the election of the 11 donor, be taken into account for purposes of 12 such section ratably over the 5-year period be- 13 ginning with such calendar year. 14 ‘‘(3) DISTRIBUTIONS.— 15 ‘‘(A) IN GENERAL.—Any distribution 16 under a qualified down payment savings pro- 17 gram shall be includible in the gross income of 18 the distributee in the manner as provided under 19 section 72 to the extent not excluded from gross 20 income under any other provision of this chap- 21 ter. 22 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED 23 DOWN PAYMENT EXPENSES.—For purposes of 24 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 1360 IH this paragraph, if distributions from a qualified 1 down payment savings program— 2 ‘‘(i) do not exceed the qualified down 3 payment expenses, no amount shall be in- 4 cludible in gross income, and 5 ‘‘(ii) in any other case, the amount 6 otherwise includible in gross income shall 7 be reduced by an amount which bears the 8 same ratio to such amount as such ex- 9 penses bear to such distributions. 10 ‘‘(C) ROLLOVERS.— 11 ‘‘(i) IN GENERAL.—Subparagraph (A) 12 shall not apply to that portion of any dis- 13 tribution which, within 60 days of such 14 distribution, is transferred to another 15 qualified down payment savings account 16 for the benefit of the designated bene- 17 ficiary. 18 ‘‘(ii) LIMITATION ON CERTAIN ROLL- 19 OVERS.—Clause (i) shall not apply to any 20 transfer if such transfer occurs within 12 21 months from the date of a previous trans- 22 fer to any qualified down payment savings 23 account for the benefit of the designated 24 beneficiary. 25 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 1360 IH ‘‘(4) ESTATE TAX TREATMENT.— 1 ‘‘(A) IN GENERAL.—No amount shall be 2 includible in the gross estate of any individual 3 for purposes of chapter 11 by reason of an in- 4 terest in a qualified down payment savings pro- 5 gram. 6 ‘‘(B) AMOUNTS INCLUDIBLE IN ESTATE OF 7 DESIGNATED BENEFICIARY IN CERTAIN 8 CASES.—Subparagraph (A) shall not apply to 9 amounts distributed on account of the death of 10 a beneficiary. 11 ‘‘(C) AMOUNTS INCLUDIBLE IN ESTATE OF 12 DONOR MAKING EXCESS CONTRIBUTIONS.—In 13 the case of a donor who makes the election de- 14 scribed in paragraph (2)(B) and who dies be- 15 fore the close of the 5-year period referred to 16 in such paragraph, notwithstanding subpara- 17 graph (A), the gross estate of the donor shall 18 include the portion of such contributions prop- 19 erly allocable to periods after the date of death 20 of the donor. 21 ‘‘(5) OTHER GIFT TAX RULES.—For purposes 22 of chapters 12 and 13, in no event shall a distribu- 23 tion from a qualified down payment savings account 24 be treated as a taxable gift. 25 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 1360 IH ‘‘(6) ADDITIONAL TAX.— 1 ‘‘(A) IN GENERAL.—The tax imposed by 2 this chapter for any taxable year on any tax- 3 payer who receives a distribution from a quali- 4 fied down payment savings program which is 5 includible in gross income shall be increased by 6 10 percent of the amount which is so includible. 7 ‘‘(B) EXCEPTIONS.—Subparagraph (A) 8 shall not apply if the payment or distribution 9 is— 10 ‘‘(i) made to a beneficiary (or to the 11 estate of the designated beneficiary) on or 12 after the death of the designated bene- 13 ficiary, or 14 ‘‘(ii) attributable to the designated 15 beneficiary’s being disabled (within the 16 meaning of section 72(m)(7)). 17 ‘‘(C) CONTRIBUTIONS RETURNED BEFORE 18 CERTAIN DATE.—Subparagraph (A) shall not 19 apply to the distribution of any contribution 20 made during a taxable year on behalf of the 21 designated beneficiary if— 22 ‘‘(i) such distribution is received on or 23 before the day prescribed by law (including 24 extensions of time) for filing such des- 25 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 1360 IH ignated beneficiary’s return for such tax- 1 able year, and 2 ‘‘(ii) such distribution is accompanied 3 by the amount of net income attributable 4 to such excess contribution. 5 ‘‘(d) REPORTS.—Each officer or employee having 6 control of the qualified down payment savings program or 7 their designee shall make such reports regarding such pro- 8 gram to the Secretary and to designated beneficiaries with 9 respect to contributions, distributions, and such other 10 matters as the Secretary may require. The reports re- 11 quired by this subsection shall be filed at such time and 12 in such manner and furnished to such individuals at such 13 time and in such manner as may be required by the Sec- 14 retary. 15 ‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.— 16 For purposes of this section— 17 ‘‘(1) DESIGNATED BENEFICIARY.—The term 18 ‘designated beneficiary’ means the individual des- 19 ignated at the commencement of participation in the 20 qualified down payment savings program as the ben- 21 eficiary of amounts paid (or to be paid) to the pro- 22 gram. 23 ‘‘(2) QUALIFIED DOWN PAYMENT EXPENSES.— 24 The term ‘qualified down payment expenses’ means 25 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 1360 IH amounts (including closing costs) paid or incurred to 1 purchase a principal residence (within the meaning 2 of section 121). 3 ‘‘(3) QUALIFIED DOWN PAYMENT SAVINGS AC- 4 COUNT.—The term ‘qualified down payment savings 5 account’ means an account maintained under a 6 qualified down payment savings program. 7 ‘‘(f) REGULATIONS.—Notwithstanding any other pro- 8 vision of this section, the Secretary, in consultation with 9 the Chairman of the Securities and Exchange Commis- 10 sion, shall prescribe such regulations as may be necessary 11 or appropriate to carry out the purposes of this section 12 and to prevent abuse of such purposes. Such regulations 13 shall include— 14 ‘‘(1) impermissible investments for qualified 15 down payment savings programs; 16 ‘‘(2) permissible fees, including the maximum 17 amount of overall fees and commissions, that may be 18 charged in association with a qualified down pay- 19 ment savings program account; and 20 ‘‘(3) minimum required disclosures to account 21 beneficiaries, including disclosures related to any 22 possible losses that could be incurred in a qualified 23 down payment savings account.’’. 24 (b) TAX ON EXCESS CONTRIBUTIONS.— 25 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 1360 IH (1) IN GENERAL.—Subsection (a) of section 1 4973 of the Internal Revenue Code of 1986 is 2 amended by striking ‘‘or’’ at the end of paragraph 3 (5), by inserting ‘‘or’’ at the end of paragraph (6), 4 and by inserting after paragraph (6) the following 5 new paragraph: 6 ‘‘(7) a qualified down payment savings account 7 (within the meaning of section 529B),’’. 8 (2) EXCESS CONTRIBUTION.—Section 4973 of 9 such Code is amended by adding at the end the fol- 10 lowing new subsection: 11 ‘‘(i) EXCESS CONTRIBUTIONS TO QUALIFIED DOWN 12 PAYMENT SAVINGS ACCOUNTS.—For purposes of this sec- 13 tion— 14 ‘‘(1) IN GENERAL.—In the case of a qualified 15 down payment savings account (within the meaning 16 of section 529B), the term ‘excess contributions’ 17 means the amount by which the amount contributed 18 for the taxable year to such account (other than con- 19 tributions under section 529B(c)(3)(C)) exceeds the 20 contribution limit under section 529B(b)(2)(B). 21 ‘‘(2) SPECIAL RULE.—For purposes of this sub- 22 section, any contribution which is distributed out of 23 the qualified down payment savings account in a dis- 24 VerDate Sep 11 2014 02:00 Mar 22, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1360.IH H1360 pbinns on DSKJLVW7X2PROD with BILLS 13 •HR 1360 IH tribution to which section 529B(c)(6)(C) applies 1 shall be treated as an amount not contributed.’’. 2 (c) PENALTY FOR FAILURE TO FILE REPORTS.— 3 Section 6693(a)(2) is amended by striking ‘‘and’’ [Text truncated for display. 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