From Joel Crocker, PLAN / RDSP
Did you hear that the US has proposed rules to create its own RDSP-like program through the ABLE (Achieving A Better Life Experience) Act.
YES (see below Brock comment on this).
They are accepting comments until Sept. 21 2015 before a public hearing is scheduled in the US capital on October 14.
THANKS – I had NOT seen this.
Some US-American Canadians are suggesting this might be a good opportunity to highlight to the States their inconsistency between treatment of RDSPs and RRSPs in the hopes of improving reporting requirements for RDSP holders .
What do you think?
ABSOLUTELY. I can post on Brock this and any suggestions you have on how best to do this.
Further to http://isaacbrocksociety.ca/2014/12/03/more-u-s-hypocrisy/
Well guess what bit of legislation just passed in the House of Representatives today? The legislation is the ABLE Act or Achieving a Better Life Experience. This new act uses the tax system to allow disabled people to save for their future needs. Ironically enough it sounds a lot like Canada’s Registered Disability Savings Program (RDSP).
Guidance Under Section 529A: Qualified ABLE Programs
Comment Now / View Comments:
Notice Of Proposed Rulemaking And Notice Of Public Hearing.
This document contains proposed regulations under section 529A of the Internal Revenue Code that provide guidance regarding programs under The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014. Section 529A provides rules under which States or State agencies or instrumentalities may establish and maintain a new type of tax-favored savings program through which contributions may be made to the account of an eligible disabled individual to meet qualified disability expenses. These accounts also receive favorable treatment for purposes of certain means-tested Federal programs. In addition, these proposed regulations provide corresponding amendments to regulations under sections 511 and 513, with respect to unrelated business taxable income, sections 2501, 2503, 2511, 2642 and 2652, with respect to gift and generation-skipping transfer taxes, and section 6011, with respect to reporting requirements. This document also provides notice of a public hearing on these proposed regulations.
Table of Contents
- FOR FURTHER INFORMATION CONTACT:
- SUPPLEMENTARY INFORMATION:
- Paperwork Reduction Act
- Explanation of Provisions
- Qualification as an ABLE program
- Established and Maintained
- Establishment of an ABLE Account
- Disability Determination
- Change in Eligible Individual Status
- Contributions to an ABLE Account
- Application of Gift Tax to Contributions to an ABLE Account
- Qualified Disability Expenses
- Limitation on Number of ABLE Accounts of a Designated Beneficiary
- Residency Requirements
- Investment Direction
- Cap on Contributions
- Gift and Generation-Skipping Transfer (GST) Taxes
- Distribution on Death
- Unrelated Business Taxable Income and Filing Requirements
- Reporting Requirements
- Effective Date/Applicability Date
- Special Analyses
- Comments and Public Hearing
- Drafting Information
- List of Subjects
- Proposed Amendments to the Regulations
- PART 1—INCOME TAXES
- Example 4.
- Qualified Able Programs
- Example 1.
- Example 2.
- Example 3.
- PART 25—GIFT TAXES
- PART 26—ESTATE TAXES
- PART 301—REPORTING AND RECORDKEEPING REQUIREMENTS
Comments must be received by September 21, 2015. Outlines of topics to be discussed at the public hearing scheduled for October 14, 2015, at 10 a.m., must be received by September 21, 2015.
Send submissions to: CC:PA:LPD:PR (REG-102837-15), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-102837- 15), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-102837-15). The public hearing will be held in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations under section 529A, Taina Edlund or Terri Harris, (202) 317-4541, or Sean Barnett, (202) 317-5800; concerning the proposed estate and gift tax regulations, Theresa Melchiorre, (202) 317-4643; concerning the reporting provisions under section 529A, Mark Bond, (202) 317-6844; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, call Regina Johnson, (202) 317-6901 (not toll-free numbers).
Related at Brock:
August 7, 2014 at 2:13 pm
I wonder how he would feel about his 529 for the disabled being taxed by a foreign country because it isn’t protected by the tax treaty. Same deal as the Canadian accounts.
August 7, 2014 at 5:45 pm
Your response to the Schumer article I mention is exceptional. I just took a bit of a swipe. You laid it out like a pro.
My comment was:
Another comment there was:
Submitted on 2014/12/20 at 10:42 am
News is coming in about Obama signing the tax extenders bill. This bill creates ABLE accounts. Based on 529 plans for people with severe impediments.
Obviously we can go on about the US treatment of accounts overseas.
Submitted on 2014/12/03 at 3:52 am
Calgary411—How about this development in the US, reported today? Will there be a thought to extending the idea to Americans abroad? (Rhetorical question, of course.)
Dec. 2 — A bill that would make tax-free savings accounts available to people with disabilities is set to move to the House floor Dec. 3.
Although the Achieving a Better Life Experience (ABLE) Act (H.R. 647, S. 313) enjoys bipartisan support, lawmakers Dec. 2 said they were concerned about the bill’s use of Medicare offsets.
The ABLE Act was introduced in 2013 by Rep. Ander Crenshaw (R-Fla.) and has 380 co-sponsors in the House and 74 in the Senate. It would make tax-free savings accounts available for people with disabilities and their caretakers to cover qualified expenses such as education, housing and transportation.
Thank you Calgary 411 for keeping us apprised of the progress that this copycat bit of legislation is making in the U.S. It might be of interest if people also knew that the U.S. created its IRA accounts after Canada made the RRSP. The IRA’s are in fact based upon Canada’s RRSP’s and yet Canadian residents have to get a special dispensation each year for their RRSP’s from the IRS.
I was just going to email you with the link, recalcitrantexpat!
Thanks for the extra information in your comment that I didn’t realize:
Canadians no longer have to get an annual dispensation. The RRSP form 8891 has been abolished. Now you report withdrawals as income when taken and a credit for Canadian taxes paid.
Right — would that go backwards for those who did not know this and did not do this, Duke?
It’s about time.
Calgary411 Yes AFAIK.
Chuck Schumer is wilfully blind to the plight of Americans abroad.
P.s. Hodgen law has extensive coverage of this. Go to Hodgen.com and under RRSP is “The Ultimate “RRSP and the IRS” Essay”
Of course it isn’t simple .they are still FUBAR and 8938 reportable. Hodgen covers this as well.
… and if you did pay to be able to properly file Form 8891 in previous years, too bad – so sad.
If the US goes down that route, they’re make it complicated, a form filling in exercise, and of course the FFIs need to earn a profit as well. The US Congress can keep it. Why would someone living abroad want their savings in US Dollars? You’d want local currency at the least to avoid exchange risk.
In my inbox this morning.
Tax tips for disabled taxpayers:
My submitted comment:
On the Bloomberg BNA site and sent to me by email by the author, Laura Davison:
Daily Report for Executives:
Tax Incentives: ABLE Accounts Highlight Issue of Foreign Account Taxation
Development: U.S. citizens living abroad shouldn’t have to pay tax on saving previous accounts for expenses tied to disabilities.
Takeaway: Those same taxpayers would get tax-favored accounts were they to live in the U.S.
By Laura Davison
Aug. 14 — Disabled U.S. taxpayers living abroad should be previous able to keep savings accounts for living and health expenses that aren’t subject to foreign trust taxation, a practitioner said.
U.S. accounts created under the Achieving a Better Life Experience (ABLE) Act, signed in December 2014, allow disabled U.S. taxpayers to open tax-favored savings account for living and health expenses. Taxpayers living abroad should be able to take advantage of the savings programs offered by the government of their resident country, such as Canada’s registered disability savings plan (RDSP), without having to pay U.S. tax on the account, John Richardson, a U.S. citizenship lawyer, told Bloomberg BNA Aug. 14.
“RDSP is exactly the same concept as ABLE accounts,” Richardson, who is based in Toronto, said. “Why should they not be able to take advantage of something that is analogous to the ABLE in their country of residence?”
The tax treatment of previous accounts outside the U.S. has been under increased scrutiny since the implementation of the Foreign Account Tax Compliance Act in 2010. The disparity in treatment of disability savings accounts highlights one issue with the law, taxpayers told the Internal Revenue Service in comment letters.
Disabled people who live outside the U.S. don’t have access to ABLE accounts and shouldn’t have to pay tax to the U.S. government on the savings accounts established and partially funded by their local country, Stephen Kish, a professor at the University of Toronto, said in a comment letter.
“The disabled persons derive no benefit whatsoever from the United States that would warrant such payment,” Kish said in the comment letter released Aug. 13.
Taxing disability accounts is unfair to countries that contribute public funds to disabled residents, an anonymous commenter said.
“A portion of the funds that come from the Canadian taxpayer meant for benefit to Canadians with disability thus end up in the hands of the U.S. IRS,” the commenter said.
Taxpayers with some mental disabilities aren’t allowed to renounce their U.S. citizenship because of their conditions; as a result, their families or guardians, who cannot renounce their citizenship for them, must continue to meet reporting requirements and pay U.S. tax indefinitely.
“U.S. citizens abroad with disabilities are—no pun intended—disabled of taking benefits of programs because they live outside of the U.S.,” Richardson said. “The rules are that we’re all citizens so we all pay tax. Logically, we should all get the same tax benefits.”
To contact the reporter on this story: Laura Davison in Washington at email@example.com
To contact the editor responsible for this story: Cheryl Saenz at firstname.lastname@example.org
For More Information
Texts of the comment letters from Stephen Kish and the anonymous commenter are in TaxCore.