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

(a) General rule. A qualified ABLE program is exempt from this subtitle’s tax, but is subject to section 511 tax on unrelated business income of charitable organizations. (b) Qualified ABLE program. (1) It is a State-established and State-maintained program under which a person may contribute for a taxable year to an ABLE account for an eligible individual, to pay that beneficiary’s qualified disability expenses. It must limit each beneficiary to one account and meet this section’s other requirements. (2) Contributions must be cash. Except for subsection (c)(1)(C) contributions and qualified ABLE rollovers under section 530A(d)(4)(B), a program may not accept a contribution that would make all contributions for the year exceed the section 2503(b) amount, using “1996” instead of “1997” in paragraph (2)(B), plus, for a paragraph (7) beneficiary, the lesser of the beneficiary’s gross-income-included compensation or the poverty line for one person for the preceding calendar year. Section 408(d)(4) rules, without subparagraph (B), apply. The beneficiary or representative must keep adequate records and is responsible for meeting the paragraph (B)(ii) limit. (3) The program must separately account for each beneficiary. (4) The beneficiary may directly or indirectly direct investment of contributions or earnings no more than twice each calendar year. (5) An interest may not secure a loan. (6) The program must prevent contributions above the State’s section 529(b)(6) limit. Aggregate contributions include prior State programs but exclude qualified ABLE rollovers. (7)(A) For the extra contribution amount, the beneficiary is an employee, including a section 401(c) employee, for whom no taxable-year contribution is made to a qualifying defined-contribution plan under section 401(a) or 403(a), section 403(b) annuity, or section 457(b) eligible deferred-compensation plan. (B) “Poverty line” has the meaning in Community Services Block Grant Act section 673. (c) Tax treatment. (1)(A) A distribution is included in the recipient’s gross income under section 72 unless another chapter provision excludes it. (B) If distributions do not exceed the beneficiary’s qualified disability expenses, none is included. Otherwise, the includible amount is reduced in the same ratio that those expenses bear to the distributions. (C)(i) A distribution transferred within 60 days to another ABLE account for the same beneficiary or a family-member eligible individual is not taxable. (ii) Changing beneficiaries is not a distribution if the new beneficiary is eligible for that year and is a family member. (iii) The rollover rule does not apply to a transfer within 12 months after a previous transfer for that beneficiary. (2) For gift-tax chapters, a contribution is a completed gift to the beneficiary, not a future interest, and is not a section 2503(e) qualified transfer. A distribution to the beneficiary is never a taxable gift. Chapters 12 and 13 do not apply to a beneficiary change under paragraph (1)(C). (3) The tax for a year is increased by 10 percent of a gross-income-includible distribution. This does not apply to a payment after the beneficiary’s death to a beneficiary or the beneficiary’s estate, or to a contribution returned by the filing deadline (including extensions) with its attributable net income. That net income is included in the contribution year. (4) Once an ABLE account is established for a beneficiary, a later account for that beneficiary is not an ABLE account. This does not apply to a rollover account if the transferor account is closed by the end of the 60-day period. (d) Reports. Program officers or designees must report to the Secretary and beneficiaries about contributions, distributions, returned excess contributions, and other matters the Secretary requires. For research, the Secretary must make public aggregate contribution and distribution information by diagnosis and other relevant characteristics, but not information that could directly or indirectly identify a person. The program must notify the Secretary when an account is established, giving the beneficiary’s name and other required information. States must send the Social Security Commissioner monthly electronic statements, in the specified manner, about relevant distributions and balances from all ABLE accounts for section 103 of the Stephen Beck, Jr., ABLE Act of 2014. Reports and notices must be filed and furnished at the times and in the manner the Secretary requires. (e) Other definitions and special rules. (1) An individual is eligible for a taxable year if, during it, the individual is entitled to title II or XVI Social Security benefits based on blindness or disability that occurred before age 46, or a disability certification is filed for that year. (2)(A) A “disability certification” is a certification satisfactory to the Secretary by the individual, parent, or guardian stating that (i)(I) the individual has a medically determinable physical or mental impairment causing marked and severe functional limitations that can be expected to cause death or last at least 12 continuous months, or is blind under Social Security Act section 1614(a)(2), and (II) the blindness or disability began before age 46, and (ii) includes a physician-signed diagnosis relating to the relevant impairment, from a physician meeting section 1861(r)(1) criteria. (B) No eligibility inference for title II, XVI, or XIX Social Security Act benefits may be drawn from the certification. (3) The “designated beneficiary” is the eligible individual who established and owns the ABLE account. (4) A “member of the family” is a person related as section 152(d)(2)(B) describes; a similar section 152(f)(1)(B) rule applies. (5) “Qualified disability expenses” are expenses related to the beneficiary’s blindness or disability and made for the beneficiary, including education, housing, transportation, employment training and support, assistive technology and personal-support services, health, prevention and wellness, financial management and administrative services, legal fees, oversight and monitoring, funeral and burial expenses, and other expenses approved by the Secretary’s regulations and consistent with this section. (6) An “ABLE account” is an account established and owned by an eligible individual and maintained under a qualified ABLE program. (f) Transfer to State. After the beneficiary dies, and subject to unpaid qualified-disability expenses, the remaining account amount up to the total medical assistance paid for the beneficiary after account establishment—less premiums paid from the account or by or for the beneficiary to a State Medicaid-plan Medicaid Buy-In program—must be distributed to the State when it files a claim. The State is a creditor, not a beneficiary. The 10-percent additional tax in subsection (c)(3) does not apply to that distribution. (g) Regulations. The Secretary must issue regulations or other guidance needed or appropriate for this section, including rules to enforce the one-account limit; specify information needed to open an account; generally define qualified disability expenses; develop, with the Social Security Commissioner, disability-certification and disability-determination rules, including conditions treated as meeting subsection (e)(1)(B); prevent fraud and abuse in claimed expenses; apply chapters 11, 12, and 13; and allow transfers between ABLE accounts.