Working Parents Flexibility Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 1859 To amend the Internal Revenue Code of 1986 to provide for parent savings accounts, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 25, 2019 Mr. KATKO (for himself and Mr. BRINDISI) 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 provide for parent savings accounts, and for other purposes. 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 ‘‘Working Parents 4 Flexibility Act of 2019’’. 5 SEC. 2. PARENTAL LEAVE SAVINGS ACCOUNTS. 6 (a) IN GENERAL.—Part VII of subchapter B of chap- 7 ter 1 of the Internal Revenue Code of 1986 is amended 8 by redesignating section 224 as section 225 and by insert- 9 ing after section 223 the following new section: 10 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 2 •HR 1859 IH ‘‘SEC. 224. PARENTAL LEAVE SAVINGS ACCOUNTS. 1 ‘‘(a) ALLOWANCE OF DEDUCTION.— 2 ‘‘(1) IN GENERAL.—In the case of an individual 3 who is an eligible individual for any month during 4 the taxable year, there shall be allowed as a deduc- 5 tion for the taxable year an amount equal to the ag- 6 gregate amount paid in cash during such taxable 7 year by such individual to a parental leave savings 8 account of such individual. 9 ‘‘(b) LIMITATIONS.— 10 ‘‘(1) ANNUAL LIMITATION FOR ANY YEAR.— 11 The amount allowable as a deduction under sub- 12 section (a) to an eligible individual for the taxable 13 year shall not exceed $6,750. 14 ‘‘(2) OVERALL LIMITATION.—The aggregate 15 amounts contributed to a parental leave savings ac- 16 count for all taxable years shall not exceed $24,000. 17 ‘‘(3) ADJUSTED GROSS INCOME LIMITATION.— 18 In the case of a taxpayer whose adjusted gross in- 19 come exceeds $250,000 for the taxable year, the dol- 20 lar limitation under paragraph (1) for such taxable 21 year shall be zero. 22 ‘‘(4) DENIAL OF DEDUCTION TO DEPEND- 23 ENTS.—No deduction shall be allowed under this 24 section to any individual with respect to whom a de- 25 duction under section 151 is allowable to another 26 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 3 •HR 1859 IH taxpayer for a taxable year beginning in the cal- 1 endar year in which such individual’s taxable year 2 begins. 3 ‘‘(5) COORDINATION WITH EMPLOYER CON- 4 TRIBUTIONS.—The limitation which would (but for 5 this paragraph) apply under this subsection to an in- 6 dividual for any taxable year shall be reduced (but 7 not below zero) by the aggregate amount contributed 8 to a parental leave savings account of such indi- 9 vidual which is excludable from the taxpayer’s ad- 10 justed gross income for such taxable year under sec- 11 tion 139G (and such amount shall not be allowed as 12 a deduction under subsection (a)). 13 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this 14 section, the term ‘eligible individual’ means, with respect 15 to any month, any individual who has earned income from 16 employment during the 12 months preceding the month 17 in which the parental leave savings account is established. 18 ‘‘(d) PARENTAL LEAVE SAVINGS ACCOUNT.—For 19 purposes of this section: 20 ‘‘(1) IN GENERAL.—The term ‘parental leave 21 savings account’ means a trust created or organized 22 in the United States exclusively for the purpose of 23 making distributions for the care of a child of the 24 account owner, but only if the written governing in- 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 4 •HR 1859 IH strument creating the trust meets the following re- 1 quirements: 2 ‘‘(A) Except in the case of a rollover con- 3 tribution described in subsection (e)(3), no con- 4 tribution will be accepted— 5 ‘‘(i) unless it is in cash, or 6 ‘‘(ii) to the extent such contribution— 7 ‘‘(I) when added to previous con- 8 tributions to the trust for the calendar 9 year, exceeds the dollar amount in ef- 10 fect under subsection (b)(1), or 11 ‘‘(II) when added to all previous 12 contributions to the trust, exceeds the 13 limit under subsection (b)(2). 14 ‘‘(B) The trustee is a bank (as defined in 15 section 408(n)), or another person who dem- 16 onstrates to the satisfaction of the Secretary 17 that the manner in which such person will ad- 18 minister the trust will be consistent with the re- 19 quirements of this section. 20 ‘‘(C) No part of the trust assets will be in- 21 vested in life insurance contracts. 22 ‘‘(D) The assets of the trust will not be 23 commingled with other property except in a 24 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 5 •HR 1859 IH common trust fund or common investment 1 fund. 2 ‘‘(E) The interest of an individual in the 3 balance in his account is nonforfeitable. 4 ‘‘(2) CERTAIN RULES TO APPLY.—Rules similar 5 to the following rules shall apply for purposes of this 6 section: 7 ‘‘(A) Section 219(d)(2) (relating to no de- 8 duction for rollovers). 9 ‘‘(B) Section 219(f)(3) (relating to time 10 when contributions deemed made). 11 ‘‘(C) Except as provided in section 106(d), 12 section 219(f)(5) (relating to employer pay- 13 ments). 14 ‘‘(D) Section 408(g) (relating to commu- 15 nity property laws). 16 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.— 17 ‘‘(1) IN GENERAL.—Except as provided in para- 18 graph (2), any distribution from a parental leave 19 savings account shall be included in the gross in- 20 come of the account owner. 21 ‘‘(2) EARLY PARENTHOOD PAYMENTS OR IMME- 22 DIATE RETURN OF CONTRIBUTIONS.— 23 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 6 •HR 1859 IH ‘‘(A) IN GENERAL.—Any amount paid or 1 distributed out of a parental leave savings ac- 2 count which— 3 ‘‘(i) is made pursuant to a request by 4 the account owner and not later than 1 5 year after the birth or adoption of a child 6 of the account owner, or 7 ‘‘(ii) is not more than the amount of 8 contributions made to the account during 9 the 30-day period ending on the date of 10 such distribution, 11 shall not be included in gross income. Clause 12 (ii) shall not apply if a deduction is allowed 13 with respect to such contribution. 14 ‘‘(B) RETURN OF CONTRIBUTION NOT 15 TAKEN INTO ACCOUNT IN DETERMINING DE- 16 DUCTION.—The amount allowed as a deduction 17 under subsection (a) for the taxable year (deter- 18 mined without regard to this subparagraph) 19 shall be reduced by the amount of distributions 20 made during the taxable year under subpara- 21 graph (A)(ii). 22 ‘‘(C) COORDINATION WITH DEPENDENT 23 CARE TAX CREDIT.—The employment-related 24 expenses (as defined in section 21(b)(2)) taken 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 7 •HR 1859 IH into account with respect to any child of the 1 taxpayer in determining the credit under sec- 2 tion 21 for the taxable year (determined with- 3 out regard to this subparagraph) shall be re- 4 duced by any amounts excluded from gross in- 5 come for the taxable year under subparagraph 6 (A)(i) with respect to such child. 7 ‘‘(3) ROLLOVER CONTRIBUTIONS.—An amount 8 is described in this paragraph as a rollover contribu- 9 tion if it meets the requirements of subparagraphs 10 (A) and (B). 11 ‘‘(A) IN GENERAL.—Paragraph (1) shall 12 not apply to any amount paid or distributed 13 from a parental leave savings account to the ac- 14 count owner if— 15 ‘‘(i) the entire amount received is paid 16 into an individual retirement account or in- 17 dividual retirement annuity (other than an 18 endowment contract) for the benefit of 19 such individual not later than the 60th day 20 after the day on which he receives the pay- 21 ment or distribution, or 22 ‘‘(ii) the entire amount received is 23 paid into an eligible retirement plan for 24 the benefit of such individual not later 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 8 •HR 1859 IH than the 60th day after the date on which 1 the payment or distribution is received, ex- 2 cept the maximum amount which may be 3 paid into such plan may not exceed the 4 portion of the amount received which is in- 5 cludible in gross income (determined with- 6 out regard to this paragraph). 7 For purposes of clause (ii), the term ‘eligible re- 8 tirement plan’ means an eligible retirement plan 9 described in clause (iii), (iv), (v), or (vi) of sec- 10 tion 402(c)(8)(B). 11 ‘‘(B) LIMITATION.—This paragraph does 12 not apply to any amount described in subpara- 13 graph (A)(i) received by an individual from a 14 parental leave savings account if at any time 15 during the 1-year period ending on the day of 16 such receipt such individual received any other 17 amount described in that subparagraph from a 18 parental leave savings account which was not 19 includible in his gross income because of the ap- 20 plication of this paragraph. 21 ‘‘(C) SPECIAL RULE FOR 529 AND 529A 22 FUNDING DISTRIBUTIONS.— 23 ‘‘(i) IN GENERAL.—A plan shall not 24 fail to be treated as a parental leave sav- 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 9 •HR 1859 IH ings account under this section solely be- 1 cause the account provides for distribu- 2 tions from a parental leave savings account 3 to a qualified tuition program (as defined 4 in section 529(b)) or a qualified ABLE 5 program (as defined in section 529A(b)) of 6 the taxpayer or a child of the taxpayer (as 7 defined in section 529(e)). 8 ‘‘(ii) TAX TREATMENT.—Paragraph 9 (1) shall not apply to so much of any such 10 distribution as is allocable to earnings on 11 the amounts contributed by the taxpayer to 12 the parental leave savings account. 13 ‘‘(4) ADDITIONAL TAX FOR DISTRIBUTIONS NOT 14 USED FOR EARLY PARENTHOOD PAYMENTS.—The 15 tax imposed by this chapter on the account owner 16 for any taxable year in which there is a payment or 17 distribution from a parental leave savings account of 18 such account owner which is includible in gross in- 19 come under subparagraph (1) shall be increased by 20 20 percent of the amount which is so includible. The 21 preceding sentence shall not apply to the portion of 22 a distribution described in subparagraph (C)(i) that 23 is so includible. 24 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 10 •HR 1859 IH ‘‘(5) EXCESS CONTRIBUTIONS RETURNED BE- 1 FORE DUE DATE OF RETURN.— 2 ‘‘(A) IN GENERAL.—If any excess con- 3 tribution is contributed for a taxable year to 4 any parental leave savings account of an indi- 5 vidual, paragraph (1) shall not apply to dis- 6 tributions from the parental leave savings ac- 7 count of such individual (to the extent such dis- 8 tributions do not exceed the aggregate excess 9 contributions to the account of such individual 10 for such year) if— 11 ‘‘(i) such distribution is received by 12 the individual on or before the last day 13 prescribed by law (including extensions of 14 time) for filing such individual’s return for 15 such taxable year, and 16 ‘‘(ii) such distribution is accompanied 17 by the amount of net income attributable 18 to such excess contribution. 19 Any net income described in clause (ii) shall be 20 included in the gross income of the individual 21 for the taxable year in which it is received. 22 ‘‘(B) EXCESS CONTRIBUTION.—For pur- 23 poses of subparagraph (A), the term ‘excess 24 contribution’ means any contribution (other 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 11 •HR 1859 IH than a rollover contribution described in para- 1 graph (3)) which is neither excludable from 2 gross income under section 139G nor deductible 3 under this section. 4 ‘‘(6) TRANSFER OF ACCOUNT INCIDENT TO DI- 5 VORCE.—The transfer of an individual’s interest in 6 a parental leave savings account to an individual’s 7 spouse or former spouse under a divorce or separa- 8 tion instrument described in subparagraph (A) of 9 section 71(b)(2) shall not be considered a taxable 10 transfer made by such individual notwithstanding 11 any other provision of this subtitle, and such interest 12 shall, after such transfer, be treated as a parental 13 leave savings account with respect to which such 14 spouse is the account owner. 15 ‘‘(7) TREATMENT AFTER DEATH OF ACCOUNT 16 OWNER.— 17 ‘‘(A) TREATMENT IF DESIGNATED BENE- 18 FICIARY IS SPOUSE.— 19 ‘‘(i) IN GENERAL.—If a qualified indi- 20 vidual acquires such owner’s interest in a 21 parental leave savings account by reason of 22 being the designated beneficiary of such 23 account at the death of the account owner, 24 such parental leave savings account shall 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 12 •HR 1859 IH be treated as if the qualified individual 1 were the account owner. 2 ‘‘(ii) QUALIFIED INDIVIDUAL.—For 3 purposes of clause (i), the term ‘qualified 4 individual’ means, with respect to any ac- 5 count owner— 6 ‘‘(I) the account owner’s sur- 7 viving spouse, or 8 ‘‘(II) any other person with cus- 9 tody of any child of the deceased ac- 10 count owner, but only if such death 11 occurred not later than 1 year after 12 the birth or adoption of such child by 13 the deceased account owner. 14 ‘‘(B) OTHER CASES.— 15 ‘‘(i) IN GENERAL.—If, by reason of 16 the death of the account owner, any person 17 acquires the account owner’s interest in a 18 parental leave savings account in a case to 19 which subparagraph (A) does not apply— 20 ‘‘(I) such account shall cease to 21 be a parental leave savings account as 22 of the date of death, and 23 ‘‘(II) an amount equal to the fair 24 market value of the assets in such ac- 25 VerDate Sep 11 2014 17:38 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1859.IH H1859 pbinns on DSK79D2C42PROD with BILLS 13 •HR 1859 IH count on such date shall be includible 1 if such person is not the estate of 2 such owner, in such person’s [Text truncated for display. 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