Sec. 131201. Matching payments for elective deferral and IRA contributions by certain individuals
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Subchapter B of chapter 65 is amended by adding at the end the following new section: Any eligible individual who makes qualified retirement savings contributions for the taxable year shall be allowed a credit for such taxable year in an amount equal to the applicable percentage of so much of the qualified retirement savings contributions made by such eligible individual for the taxable year as does not exceed $1,000. The credit under this section shall be— treated as allowed by subpart C of part IV of subchapter A of chapter 1, and paid by the Secretary as a contribution (as soon as practicable after the eligible individual has filed a tax return making a claim for such credit for the taxable year) to the applicable retirement savings vehicle of an eligible individual.
For purposes of this section— Except as provided in paragraph (2), the applicable percentage is 50 percent. The percentage under paragraph
(1)shall be reduced (but not below zero) by the number of percentage points which bears the same ratio to 50 percentage points as— the excess of— the taxpayer’s modified adjusted gross income for such taxable year, over the applicable dollar amount, bears to the phaseout range. If any reduction determined under this paragraph is not a whole percentage point, such reduction shall be rounded to the next lowest whole percentage point. Except as provided in subparagraph (B)— the applicable dollar amount is $50,000, and the phaseout range is $20,000. In the case of— a head of a household (as defined in section 2(b)), the applicable dollar amount and the phaseout range shall be 3/4 of the amounts applicable under subparagraph
(A)(as adjusted under subsection (h)), and any taxpayer who is not filing a joint return and who is not a head of a household (as so defined), the applicable dollar amount and the phaseout range shall be ½ of the amounts applicable under subparagraph
(A)(as so adjusted). In the case of an eligible individual with respect to whom (without regard to this paragraph) the credit determined under subsection (a)(1) is greater than zero but less than $100, the credit allowed under this section shall be $100. For purposes of this section— The term eligible individual means any individual if such individual has attained the age of 18 as of the close of the taxable year. The term eligible individual shall not include— any individual with respect to whom a deduction under section 151 is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins, and any individual who is a student (as defined in section 152(f)(2)). For purposes of this section— The term qualified retirement savings contributions means, with respect to any taxable year, the sum of— the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual, the amount of— any elective deferrals (as defined in section 402(g)(3)) of such individual, and any elective deferral of compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A), the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)), and the amount of contributions made by such individual to the ABLE account (within the meaning of section 529A) of which such individual is the designated beneficiary. Such term shall not include any amount attributable to a payment under subsection (a)(2). The qualified retirement savings contributions determined under paragraph
(1)for a taxable year shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph
(1)may be made. For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes— such taxable year, the 2 preceding taxable years, and the period after such taxable year and before the due date (including extensions) for filing the return of tax for such taxable year. There shall not be taken into account under subparagraph (A)— any distribution referred to in section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), any distribution to which section 408(d)(3) or 408A(d)(3) applies, any portion of a distribution if such portion is transferred or paid in a rollover contribution (as defined in section 402(c), 403(a)(4), 403(b)(8), 408A(e), or 457(e)(16)) to an account or plan to which qualified retirement contributions can be made, and the amount of distributions under a qualified ABLE program (within the meaning of section 529A) that is equal to amounts not included in gross income with respect to such distributions under section 529A(c)(1)(B) (relating to distributions for qualified disability expenses). For purposes of determining distributions received by an individual under subparagraph
(A)for any taxable year, any distribution received by the spouse of such individual shall be treated as received by such individual if such individual and spouse file a joint return for such taxable year and for the taxable year during which the spouse receives the distribution. The term applicable retirement savings vehicle means an account or plan elected by the eligible individual under paragraph (2). Any such election to have contributed the amount determined under subsection
(a)shall be to an account or plan which— is a Roth IRA or a designated Roth account (within the meaning of section 402A) of an applicable retirement plan (as defined in section 402A(e)(1)), is for the benefit of the eligible individual, accepts contributions made under this section, and is designated by such individual (in such form and manner as the Secretary may provide). For purposes of this section, the term modified adjusted gross income means adjusted gross income— determined without regard to sections 911, 931, and 933, and determined without regard to any exclusion or deduction allowed for any qualified retirement savings contribution made during the taxable year. In the case of any contribution under subsection (a)(2)— except as otherwise provided in this section or by the Secretary under regulations, such contribution shall be treated as— an elective deferral made by the individual which is a designated Roth contribution, if contributed to an applicable retirement plan, or as a Roth IRA contribution made by such individual, if contributed to a Roth IRA, and such contribution shall not be taken into account with respect to any applicable limitation under sections 402(g)(1), 403(b), 408(a)(1), 408(b)(2)(B), 408A(c)(2), 414(v)(2), 415(c), or 457(b)(2), and shall be disregarded for purposes of sections 401(a)(4), 401(k)(3), 401(k)(11)(B)(i)(III), and 416. A plan or arrangement to which a contribution is made under this section shall not be treated as violating any requirement under section 401, 403, 408A, or 457 solely by reason of accepting such contribution. If any contribution is erroneously paid under subsection (a)(2), including a payment that is not made to an applicable retirement savings vehicle, the amount of such erroneous payment shall be treated as an underpayment of tax (other than for purposes of part II of subchapter A of chapter 68) for the taxable year in which the Secretary determines the payment is erroneous. In the case of a contribution to which subparagraph
(A)applies— section 72 shall not apply to the distribution of such contribution (and any income attributable thereto) if such distribution is received not later than the day prescribed by law (including extensions of time) for filing the individual’s return for such taxable year, and any plan or arrangement from which such a distribution is made under this subparagraph shall not be treated as violating any requirement under section 401, 403, 408A, or 457 solely by reason of making such distribution. In the case of an amount elected by an eligible individual to be contributed to an account or plan under subsection (e)(2), the Secretary shall provide guidance to the custodian of the account or the plan sponsor, as the case may be, detailing the treatment of such contribution under subsection (f)(2) and the reporting requirements with respect to such contribution under section 131201(c)(2) of the Act to provide for reconciliation pursuant to title II of S. Con. Res. 14. In the case of any taxable year beginning in a calendar year after 2020, each of the dollar amounts in subsections (a)(1) and (b)(3)(A)(i) shall be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2019 for calendar year 2016 in subparagraph (A)(ii) thereof. Any increase determined under paragraph
(1)shall be rounded to the nearest multiple of— $100 in the case of an adjustment of the amount in subsection (a)(1), and $1,000 in the case of an adjustment of the amount in subsection (b)(3)(A)(i). . The Secretary of the Treasury shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the amendments made by this section. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession. The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the amendments made by this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to its residents. No credit shall be allowed against United States income taxes under section 6433 of the Internal Revenue Code of 1986 (as added by this section) to any person— to whom a credit is allowed against taxes imposed by the possession by reason of the amendments made by this section, or who is eligible for a payment under a plan described in paragraph (2). For purposes of this subsection, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States. For purposes of section 1324 of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section. Section 6211(b)(4) is amended by striking and 7527A and inserting 7527A, and 6433 . The Secretary of the Treasury shall— amend Form 5500 to require separate reporting of the aggregate amount of contributions received by the plan during the year under section 6433 of the Internal Revenue Code of 1986 (as added by this section), and amend Form 5498 to require similar reporting with respect to individual retirement accounts (as defined in section 408 of such Code) and individual retirement annuities (as defined in section 408(b) of such Code). Section 1324(b)(2) of title 31, United States Code, is amended by striking or 7527A and inserting 7527A, or 6433 . Section 25B is amended by striking subsections
(a)through
(f)and inserting the following: For payment of credit related to qualified retirement savings contributions, see section 6433. . The table of sections for subchapter B of chapter 65 is amended by adding at the end the following new item: Sec. 6433. Matching payments for elective deferral and IRA contributions by certain individuals. . The amendments made by this section shall apply to taxable years beginning after December 31, 2024.