text: 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.
target: 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).
feat_title: Seniors Real Property Tax Relief Act of 1998