26 USC 529 - Qualified ABLE programs

View all text of Part VIII [§ 529 - § 530]

§ 529A. Qualified ABLE programs

(a) General rule

(b) Qualified ABLE programFor purposes of this section—

(1) In generalThe term “qualified ABLE program” means a program established and maintained by a State, or agency or instrumentality thereof—

(A) 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,

(B) which limits a designated beneficiary to 1 ABLE account for purposes of this section, and

(2) Cash contributionsA program shall not be treated as a qualified ABLE program unless it provides that no contribution will be accepted—

(A) unless it is in cash, or

(B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the sum of—

(i) the amount in effect under section 2503(b) for the calendar year in which the taxable year begins, plus

(ii) in the case of any contribution by a designated beneficiary described in paragraph (7) before January 1, 2026, the lesser of—(I) compensation (as defined by section 219(f)(1)) includible in the designated beneficiary’s gross income for the taxable year, or(II) 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.

For purposes of this paragraph, rules similar to the rules of section 408(d)(4) (determined without regard to subparagraph (B) thereof) shall apply. A designated beneficiary (or a person acting on behalf of such beneficiary) shall maintain adequate records for purposes of ensuring, and shall be responsible for ensuring, that the requirements of subparagraph (B)(ii) are met.

(3) Separate accounting

(4) Limited investment direction

(5) No pledging of interest as security

(6) Prohibition on excess contributions

(7) Special rules related to contribution limitFor purposes of paragraph (2)(B)(ii)—

(A) Designated beneficiaryA designated beneficiary described in this paragraph is an employee (including an employee within the meaning of section 401(c)) with respect to whom—

(i) 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,

(ii) no contribution is made for the taxable year to an annuity contract described in section 403(b), and

(iii) no contribution is made for the taxable year to an eligible deferred compensation plan described in section 457(b).

(B) Poverty line

(1) Distributions

(A) In general

(B) Distributions for qualified disability expensesFor purposes of this paragraph, if distributions from a qualified ABLE program—

(i) do not exceed the qualified disability expenses of the designated beneficiary, no amount shall be includible in gross income, and

(ii) 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.

(i) Rollovers from ABLE accounts

(ii) Change in designated beneficiaries

(iii) Limitation on certain rollovers

(2) Gift tax rulesFor purposes of chapters 12 and 13—

(A) ContributionsAny contribution to a qualified ABLE program on behalf of any designated beneficiary—

(i) shall be treated as a completed gift to such designated beneficiary which is not a future interest in property, and

(ii) shall not be treated as a qualified transfer under section 2503(e).

(B) Treatment of distributions

(3) Additional tax for distributions not used for disability expenses

(A) In general

(B) Exception

(C) Contributions returned before certain dateSubparagraph (A) shall not apply to the distribution of any contribution made during a taxable year on behalf of the designated beneficiary if—

(i) 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

(ii) such distribution is accompanied by the amount of net income attributable to such excess contribution.

Any net income described in clause (ii) shall be included in gross income for the taxable year in which such excess contribution was made.

(4) Loss of ABLE account treatment

(d) Reports

(1) In general

(2) Certain aggregated information

(3) Notice of establishment of ABLE account

(4) Electronic distribution statements

(5) Requirements

(e) Other definitions and special rulesFor purposes of this section—

(1) Eligible individualAn individual is an eligible individual for a taxable year if during such taxable year—

(A) 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 26, or

(B) a disability certification with respect to such individual is filed with the Secretary for such taxable year.

(2) Disability certification

(A) In generalThe term “disability certification” means, with respect to an individual, a certification to the satisfaction of the Secretary by the individual or the parent or guardian of the individual that—

(i) certifies that—(I) 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(II) such blindness or disability occurred before the date on which the individual attained age 26, and

(ii) 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.

(B) Restriction on use of certification

(3) Designated beneficiary

(4) Member of family

(5) Qualified disability expenses

(6) ABLE account

(f) Transfer to State

(g) RegulationsThe Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations—

(1) to enforce the 1 ABLE account per eligible individual limit,

(2) providing for the information required to be presented to open an ABLE account,

(3) to generally define qualified disability expenses,

(4) 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),

(5) to prevent fraud and abuse with respect to amounts claimed as qualified disability expenses,

(6) under chapters 11, 12, and 13 of this title, and

(7) to allow for transfers from one ABLE account to another ABLE account.

(Added Pub. L. 113–295, div. B, title I, § 102(a), Dec. 19, 2014, 128 Stat. 4056; amended Pub. L. 114–113, div. Q, title III, § 303(a)–(c), Dec. 18, 2015, 129 Stat. 3087; Pub. L. 115–97, title I, § 11024(a), Dec. 22, 2017, 131 Stat. 2075; Pub. L. 115–141, div. U, title I, § 101(o), title IV, § 401(a)(129), (130), Mar. 23, 2018, 132 Stat. 1166, 1190; Pub. L. 117–328, div. T, title I, § 124(a), Dec. 29, 2022, 136 Stat. 5314.)