To amend the Internal Revenue Code of 1986 to expand incentives for saving.

July 28, 2005

Mr. MACK (for himself, Mr. FEENEY, Mr. MILLER of Florida, Mrs. BONO, and Mr. FOLEY) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to expand incentives for saving.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Lifetime Prosperity Act of 2005'.

SEC. 2. EXPANSION OF SAVERS CREDIT.

(a) Credit Extended and Made Permanent-

(1) PERMANENT EXTENSION OF CREDIT- Section 25B of the Internal Revenue Code of 1986 (relating to elective deferrals and IRA contributions by certain individuals) is amended by striking subsection (h).

(2) SUNSET MADE INAPPLICABLE- Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to the amendments made by section 618 of such Act (relating to nonrefundable credit to certain individuals for elective deferrals and IRA contributions).

(b) Expansion of Credit- Subsections (a) and (b) of section 25B of such Code are amended to read as follows:

`(a) Allowance of Credit- In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 50 percent of the qualified retirement savings contributions of the eligible individual for the taxable year.

`(b) Limitation-

`(1) IN GENERAL- The amount allowed as a credit under subsection (a) for a taxable year shall not exceed the applicable dollar limit.

`(2) APPLICABLE DOLLAR LIMIT- For purposes of paragraph (1)--

`(A) IN GENERAL- Except as provided in subparagraph (B), the applicable dollar limit is--

`(i) in the case of a joint return, $3,000, and

`(ii) in the case of any other return, 50 percent of the dollar amount applicable for the taxable year under clause (i).

`(B) LIMITATION BASED ON ADJUSTED GROSS INCOME- The applicable dollar limit shall be zero in the case of a taxpayer whose adjusted gross income for the taxable year exceeds--

`(i) $150,000 in the case of a joint return, and

`(ii) $95,000 in any other case.

`(3) INFLATION ADJUSTMENT- In the case of any taxable year beginning after 2006, the amounts contained in subparagraph (A)(i) and clauses (i) and (ii) of subparagraph (B) of paragraph (2) shall each be increased by an amount equal to--

`(A) such dollar amount, multiplied by

`(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting `calendar year 2005' for `calendar year 1992' in subparagraph (B) thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.'.

(c) Credit Allowed for Contributions to Roth IRAs for Children-

(1) IN GENERAL- Paragraph (1) of section 25B(d) of such Code (defining qualified retirement savings contributions) is amended by striking `and' at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting `, and', and by inserting after subparagraph (C) the following new subparagraph:

`(D) the amount of contributions made by the eligible individual to all Roth IRAs for children under section 408A(g).'.

(2) LIMITATION- Paragraph (1) of section 25B(d) of such Code (defining qualified retirement savings contributions) is amended by adding at the end the following flush sentence: `The amount taken into account under subparagraph (D) shall not exceed the aggregate amount of contributions allowed to all Roth IRAs of such eligible individual under section 408A(g).'.

(d) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 3. ROTH IRAS FOR CHILDREN.

(a) In General- Section 408A of the Internal Revenue Code of 1986 (relating to Roth IRAs) is amended by adding at the end the following new subsection:

`(g) Special Rules for Roth IRAs for Children-

`(1) GENERAL RULE- A Roth IRA maintained for the benefit of an individual who has not attained age 25 before the close of the taxable year shall be maintained under this section, as modified by this subsection.

`(2) CONTRIBUTION LIMITS-

`(A) IN GENERAL- For so long as a Roth IRA is subject to this subsection, contributions to such Roth IRA shall be subject to this paragraph and not to subsection (c)(2), and subsection (c)(3) shall not apply.

`(B) LIMIT- The aggregate amount of contributions for any taxable year to all child Roth IRAs maintained for the benefit of an individual under this subsection shall not exceed the maximum amount allowable as a deduction under subsection (b)(1) of section 219 for such taxable year (computed without regard to subsections (b)(1)(B), (d)(1), and (g) of such section).'.

(b) Enforcement of Contribution Limits- Paragraphs (1)(B) and (2)(B) of section 4973(f) of such Code are each amended by striking `and (c)(3)' and inserting `, (c)(3), and (f)(2)'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

END