article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Seniors Real Property Tax Relief Act of 1998''. SEC. 2. ALLOWANCE OF DEDUCTION FOR STATE AND LOCAL REAL PROPERTY TAXES TO CERTAIN SENIORS WHO DO NOT ITEMIZE THEIR DEDUCTIONS. (a) In General.--Subsection (a) of section 62 of the Internal Revenue Code of 1986 (relating to definition of adjusted gross income) is amended by adding at the end the following new paragraph: ``(18) Real property taxes of eligible senior taxpayers.-- ``(A) In general.--In the case of an eligible senior taxpayer, the deduction for State and local real property taxes (within the meaning of section 164). ``(B) Limitation.--Subparagraph (A) shall apply only to the portion of State and local real property taxes which exceeds the aggregate amount distributed for the taxable year from the senior citizen real property tax account (as defined by section 222). The preceding sentence shall not apply to a distribution described in paragraph (3), (4), or (5) of section 222(e). ``(C) Eligible senior taxpayer defined.--For purposes of subparagraph (A), the term `eligible senior taxpayer' means a taxpayer-- ``(i) who is not married or is married filing a separate return and-- ``(I) who has attained age 65 before the close of his taxable year, and ``(II) whose modified adjusted gross income for such taxable year does not exceed $30,000, or ``(ii) who is filing a joint return or is a surviving spouse (as defined in section 2(a)) and-- ``(I) with respect to whom 1 of the spouses has attained age 65 before the close of the taxpayer's taxable year, and ``(II) whose modified adjusted gross income for such taxable year does not exceed $60,000. ``(D) Modified adjusted gross income.--For purposes of subparagraph (C), the term `modified adjusted gross income' means the adjusted gross income of the taxpayer for the taxable year determined-- ``(i) without regard to sections 911, 931, and 933, and ``(ii) after the application of sections 86, 469, 219, 220, and 222. ``(E) Inflation adjustment.-- ``(i) In general.--In the case of a taxable year beginning after December 31, 1999, each of the dollar amounts in subparagraphs (C)(i)(II) and (C)(ii)(II) shall be increased by an amount equal to-- ``(I) such dollar amount, multiplied by ``(II) 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 1998' for `calendar year 1992' in subparagraph (B) thereof. ``(ii) Rounding.--If any amount as adjusted under clause (i) is not a multiple of $100 such amount shall be rounded to the next lowest multiple of $100.''. (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 3. SENIOR CITIZEN REAL PROPERTY TAX ACCOUNTS. (a) In General.--Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section: ``SEC. 222. SENIOR CITIZEN REAL PROPERTY TAX ACCOUNTS. ``(a) Deduction Allowed.--In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the cash contributions made for such taxable year to a senior citizen real property tax account maintained for the benefit of such individual. ``(b) Maximum Amount of Deduction.--The amount allowable as a deduction under subsection (a) to any individual for any taxable year shall not exceed $2,000. ``(c) Definitions.--For purposes of this section-- ``(1) Senior citizen real property tax account.--The term `senior citizen real property tax account' means a trust created or organized in the United States exclusively for the purpose of paying the qualified property tax expenses of the account beneficiary of the trust, but only if the trust is designated as a senior citizen real property tax account at the time created or organized and the written governing instrument creating the trust meets the following requirements: ``(A) No contribution (other than a rollover contribution described in subsection (e)(5)) will be accepted-- ``(i) unless it is in cash, ``(ii) in excess of $2,000 for the taxable year, or ``(iii) after the date on which such beneficiary attains age 59\1/2\. ``(B) The trustee is a bank (as defined in section 408(n)) or another person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section or who has so demonstrated with respect to any individual retirement plan. ``(C) No part of the trust assets will be invested in life insurance contracts. ``(D) The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund. ``(2) Qualified property tax expenses.-- ``(A) In general.--The term `qualified property tax expenses' means State and local, and foreign, real property taxes imposed on the account beneficiary (determined in accordance with section 164) with respect to the principal residence (within the meaning of section 121) of such beneficiary. Such term shall not include taxes imposed for any real property tax period ending before the date such beneficiary attains age 59\1/2\. ``(B) Jointly held property.--In the case of any residence which is held as joint tenants, tenants by the entirety, or community property by individuals who are married to each other, if one spouse satisfies the age requirement of subparagraph (A), then both spouses shall be treated as satisfying such requirement. ``(3) Account beneficiary.--The term `account beneficiary' means the individual for whose benefit the senior citizen real property tax account was established. ``(4) Certain rules to apply.--Rules similar to the following rules shall apply for purposes of this section: ``(A) Section 219(d)(2) (relating to no deduction for rollovers). ``(B) Section 219(f)(3) (relating to time when contributions deemed made). ``(C) Section 408(d)(6) (relating to transfer of account incident to divorce). ``(D) Section 408(g) (relating to community property laws). ``(E) Section 408(h) (relating to custodial accounts). ``(d) Tax Treatment of Accounts.-- ``(1) In general.--A senior citizen real property tax account is exempt from taxation under this subtitle unless such account has ceased to be such an account. Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations). ``(2) Account terminations.--Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to senior citizen real property tax accounts, and any amount treated as distributed under such rules shall be treated as not used to pay qualified property tax expenses. ``(e) Tax Treatment of Distributions.-- ``(1) In general.--If any distribution is made from a senior citizen real property tax account during the taxable year, the account beneficiary's tax imposed by this chapter for such taxable year shall be increased by an amount equal to-- ``(A) 50 percent of any such distribution which is made before the date the account beneficiary attains age 59\1/2\, and ``(B) 25 percent of any such distribution which is made on or after such date. The increase in tax under the preceding sentence shall be in lieu of any inclusion in gross income. ``(2) Amounts used for qualified property tax expenses.-- ``(A) In general.--Paragraph (1) shall not apply to the extent that the aggregate distributions during the taxable year from the senior citizen real property tax accounts of the account beneficiary do not exceed the aggregate qualified property tax expenses of such beneficiary for such year. ``(B) Exclusion from gross income.--Gross income shall not include any distribution excluded from paragraph (1) by reason of subparagraph (A). ``(3) Treatment after death of account beneficiary; disability.--Paragraph (1) shall not apply to a distribution-- ``(A) which is made by reason of the death of the account beneficiary and is made (either directly or by the estate of such beneficiary) to any senior citizen real property tax account or individual retirement plan of any individual, or ``(B) which is attributable to the account beneficiary's being disabled (within the meaning of section 72(m)(7)). In the case of a distribution which is made by reason of the death of the account beneficiary and to which paragraph (1) applies after the application of the preceding sentence, the tax on such distribution shall be determined under paragraph (1)(A). ``(4) Excess contributions returned before the due date of return.-- ``(A) In general.--If any excess contribution is contributed for a taxable year to a senior citizen real property tax account of an individual, paragraph (1) shall not apply to distributions from the senior citizen real property tax accounts of such individual (to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year) if-- ``(i) such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual'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 the gross income of the individual for the taxable year in which it is received. ``(B) Excess contribution.--For purposes of subparagraph (A), the term `excess contribution' means any contribution (other than a rollover contribution) that is not deductible under this section. ``(5) Rollover contribution.--An amount is described in this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B). ``(A) In general.--Paragraph (1) shall not apply to any amount distributed from a senior citizen real property tax account to the account beneficiary to the extent the amount received is paid into a senior citizen real property tax account for the benefit of such beneficiary not later than the 60th day after the day on which the beneficiary receives the payment or distribution. ``(B) Limitation.--This paragraph shall not apply to any amount described in subparagraph (A) received by an individual from a senior citizen real property tax account if, at any time during the 1-year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from a senior citizen real property tax account which was not includible in the individual's gross income because of the application of this paragraph. ``(f) Special Rules.-- ``(1) Married individuals.--The maximum deduction under subsection (b) shall be computed separately for each individual. ``(2) Time when contributions deemed made.--For purposes of this section, a taxpayer shall be deemed to have made a contribution to a senior citizen real property tax account on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof). ``(g) Reports.--The Secretary may require the trustee of a senior citizen real property tax account to make such reports regarding such account to the Secretary and to the account beneficiary with respect to contributions, distributions, and such other matters as the Secretary determines appropriate. The reports required by this subsection shall be filed at such time and in such a manner and furnished to such individuals at such time and in such manner as may be required by the Secretary.''. (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other Deductions.--Subsection (a) of section 62 of such Code, as amended by section 2, is amended by inserting after paragraph (18) the following new paragraph: ``(19) Senior citizen real property tax accounts.--The deduction allowed by section 222.''. (c) Tax on Prohibited Transactions.-- (1) In general.--Paragraph (1) of section 4975(e) of such Code (relating to prohibited transactions) is amended by redesignating subparagraphs (E) and (F) as subparagraphs (F) and (G), respectively, and by inserting after subparagraph (D) the following new subparagraph: ``(E) a senior citizen real property tax account described in section 222(c),''. (2) Special rule.--Subsection (c) of section 4975 of such Code is amended by adding at the end the following new paragraph: ``(6) Special rule for senior citizen real property tax accounts.--The individual for whose benefit a senior citizen real property tax account is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 222(d)(2) applies with respect to such transaction.''. (d) Failure To Provide Reports on Senior Citizen Real Property Tax accounts.--Paragraph (2) of section 6693(a) of such Code (relating to failure to provide reports on individual retirement accounts or annuities) is amended by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, and by inserting after subparagraph (B) the following new subparagraph: ``(C) section 222(g) (relating to senior citizen real property tax accounts),''. (e) Tax on Excess Contributions.-- (1) In general.--Subsection (a) of section 4973 of such Code is amended by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by inserting after paragraph (2) the following new paragraph: ``(3) a senior citizen real property tax account (as defined in section 222(c)),''. (2) Excess contributions defined.--Section 4973 of such Code is amended by adding at the end the following new subsection: ``(g) Excess Contributions to Senior Citizen Real Property Tax Accounts.--For purposes of this section-- ``(1) In general.--In the case of senior citizen real property tax accounts maintained for the benefit of any 1 beneficiary, the term `excess contributions' means the amount by which the amount contributed for the taxable year to such accounts exceeds $2,000. ``(2) Special rules.--For purposes of paragraph (1), the following contributions shall not be taken into account: ``(A) Any contribution which is distributed out of the senior citizen real property tax account in a distribution to which section 222(e)(4) applies. ``(B) Any rollover contribution.''. (f) Clerical Amendment.--The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items: ``Sec. 222. Senior citizen real property tax accounts. ``Sec. 223. Cross reference.''. (g) Effective Date.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
summary: Seniors Real Property Tax Relief Act of 1998 - Amends the Internal Revenue Code to: (1) allow a deduction for State and local real property taxes paid by certain taxpayers aged 65 or older who do not itemize their deductions; and (2) provide for the establishment of "senior citizen real property tax accounts" (trusts created exclusively for the purpose of paying the qualified property tax expenses of qualified beneficiaries).