26 U.S.C. § 529A: Qualified ABLE programs

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). 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, which limits a designated beneficiary to 1 ABLE account for purposes of this section, and which meets the other requirements of this section. unless it is in cash, or the amount in effect under section 2503(b) (determined by substituting “1996” for “1997” in paragraph (2)(B) thereof) for the calendar year in which the taxable year begins, plus compensation (as defined by section 219(f)(1)) includible in the designated beneficiary’s gross income for the taxable year, or an amount equal to the poverty line for a one-person household, as determined for the calendar year preceding the calendar year in which the taxable year begins. A program shall not be treated as a qualified ABLE program unless it provides separate accounting for each designated beneficiary. A program shall not be treated as a qualified ABLE program unless it provides that any 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. 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. 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 but do not include any contributions received in a qualified ABLE rollover contribution described in section 530A(d)(4)(B). no contribution is made for the taxable year to a defined contribution plan (within the meaning of section 414(i)) with respect to which the requirements of section 401(a) or 403(a) are met, no contribution is made for the taxable year to an annuity contract described in section 403(b), and no contribution is made for the taxable year to an eligible deferred compensation plan described in section 457(b). The term “poverty line” has the meaning given such term by section 673 of the Community Services Block Grant Act ( 42 U.S.C. 9902 ). 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. do not exceed the qualified disability expenses of the designated beneficiary, no amount shall be includible in gross income, and 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. 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 designated beneficiary or an eligible individual who is a member of the family of the designated beneficiary. 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. 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. shall be treated as a completed gift to such designated beneficiary which is not a future interest in property, and shall not be treated as a qualified transfer under section 2503(e). In no event shall a distribution from an ABLE account to such account’s designated beneficiary be treated as a taxable gift. The taxes imposed by chapters 12 and 13 shall not apply to a transfer by reason of a change in the designated beneficiary under subsection (c)(1)(C). 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. 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. 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 such distribution is accompanied by the amount of net income attributable to such excess contribution. If an ABLE account is established for a designated beneficiary, no account subsequently established for such beneficiary shall be treated as an ABLE account. The preceding sentence shall not apply in the case of an account established for purposes of a rollover described in paragraph (1)(C)(i) of this section if the transferor account is closed as of the end of the 60th day referred to in paragraph (1)(C)(i). 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. 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. A qualified ABLE program shall submit a notice to the Secretary upon the establishment of an ABLE account. Such notice shall contain the name of the designated beneficiary and such other information as the Secretary may require. For purposes of section 103 of the Stephen Beck, Jr., ABLE 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. 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. the individual is entitled to benefits based on blindness or disability under title II or XVI of the Social Security Act, and such blindness or disability occurred before the date on which the individual attained age 46, or a disability certification with respect to such individual is filed with the Secretary for such taxable year. the individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, or is blind (within the meaning of section 1614(a)(2) of the Social Security Act), and such blindness or disability occurred before the date on which the individual attained age 46, and 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. 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. The term “designated beneficiary” in connection with an ABLE account established under a qualified ABLE program means the eligible individual who established an ABLE account and is the owner of such account. 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 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. 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. The term “ABLE account” means an account established by an eligible individual, owned by such eligible individual, and maintained under a qualified ABLE program. Subject to any outstanding payments due for qualified disability expenses, upon the death of the designated beneficiary, 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. to enforce the 1 ABLE account per eligible individual limit, providing for the information required to be presented to open an ABLE account, to generally define qualified disability expenses, 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), to prevent fraud and abuse with respect to amounts claimed as qualified disability expenses, under chapters 11, 12, and 13 of this title, and to allow for transfers from one ABLE account to another ABLE account. Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to contributions made after December 31, 2025 . The amendment made by subsection (a)(1) [amending this section] shall apply to taxable years beginning after December 31, 2025 .” 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. 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 [ 42 U.S.C. 1396 et seq.], the supplemental security income program under title XVI of such Act [ 42 U.S.C. 1381 et seq.], the beneficiary’s employment, and other sources.” a distribution for housing expenses (within the meaning of such subsection) shall not be so disregarded, and in the case of such program, any amount (including such earnings) in such ABLE account shall be considered a resource of the designated beneficiary to the extent that such amount exceeds $100,000. 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. An individual who would be receiving payment of such supplemental security income benefits but for the application of paragraph (1) shall be treated for purposes of title XIX of the Social Security Act [ 42 U.S.C. 1396 et seq.] as if the individual continued to be receiving payment of such benefits. This section shall take effect on the date of the enactment of this Act [ Dec. 19, 2014 ].”