(1) ELIGIBLE INDIVIDUAL-
(A) IN GENERAL- The term ‘eligible individual’ means, with respect to any taxable year, an individual who--
(i) has attained the age of 18 but not the age of 61 as of the last day of such taxable year,
(ii) is a citizen or lawful permanent resident (within the meaning of section 7701(b)(6) of the Internal Revenue Code of 1986) of the United States as of the last day of such taxable year,
(iii) was not a student (as defined in section 151(c)(4) of such Code) for the immediately preceding taxable year,
(iv) is not an individual with respect to whom a deduction under section 151 of such Code is allowable to another taxpayer for a taxable year of the other taxpayer ending during the immediately preceding taxable year of the individual,
(v) is not a taxpayer described in subsection (c), (d), or (e) of section 6402 of such Code for the immediately preceding taxable year,
(vi) is not a taxpayer described in section 1(d) of such Code for the immediately preceding taxable year, and
(vii) is a taxpayer the modified adjusted gross income of whom for the immediately preceding taxable year does not exceed--
(I) $20,000, in the case of a taxpayer described in section 1(c) of such Code,
(II) $30,000, in the case of a taxpayer described in section 1(b) of such Code, and
(III) $40,000, in the case of a taxpayer described in section 1(a) of such Code.
(B) INFLATION ADJUSTMENT-
(i) IN GENERAL- In the case of any taxable year beginning after 2010, each dollar amount referred to in subparagraph (A)(vii) 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) of the Internal Revenue Code of 1986 for the calendar year in which the taxable year begins, by substituting ‘2009’ for ‘1992’.
(ii) ROUNDING- If any amount as adjusted under clause (i) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.
(C) MODIFIED ADJUSTED GROSS INCOME- For purposes of subparagraph (A)(v), the term ‘modified adjusted gross income’ means adjusted gross income--
(i) determined without regard to sections 86, 893, 911, 931, and 933 of the Internal Revenue Code of 1986, and
(ii) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.
(2) INDIVIDUAL DEVELOPMENT ACCOUNT- The term ‘Individual Development Account’ means an account established for an eligible individual as part of a qualified individual development account program, but only if the written governing instrument creating the account meets the following requirements:
(A) The owner of the account is the individual for whom the account was established.
(B) No contribution will be accepted unless it is in cash, and, except in the case of any qualified rollover, contributions will not be accepted for the taxable year in excess of $1,500 on behalf of any individual.
(C) The trustee of the account is a qualified financial institution.
(D) The assets of the account will not be commingled with other property except in a common trust fund or common investment fund.
(E) Except as provided in section 7(b), any amount in the account may be paid out only for the purpose of paying the qualified expenses of the account owner.
(3) PARALLEL ACCOUNT- The term ‘parallel account’ means a separate, parallel individual or pooled account for all matching funds and earnings dedicated to an Individual Development Account owner as part of a qualified individual development account program, the trustee of which is a qualified financial institution.
(4) QUALIFIED FINANCIAL INSTITUTION-
(A) IN GENERAL- The term ‘qualified financial institution’ means any person authorized to be a trustee of any individual retirement account under section 408(a)(2) of the Internal Revenue Code of 1986.
(B) RULE OF CONSTRUCTION-
(i) IN GENERAL- Nothing in this paragraph shall be construed as preventing a person described in subparagraph (A) from collaborating with 1 or more qualified nonprofit organizations or Indian tribes to carry out an individual development account program established under section 4.
(ii) QUALIFIED NONPROFIT ORGANIZATION- The term ‘qualified nonprofit organization’ means--
(I) any organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code,
(II) any community development financial institution certified by the Community Development Financial Institution Fund,
(III) any credit union chartered under Federal or State law, or
(IV) any public housing agency as defined in section 3(b)(6) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)(6)).
(iii) INDIAN TRIBE- The term ‘Indian tribe’ means any Indian tribe as defined in section 4(12) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(12), and includes any tribally designated housing entity (as defined in section 4(21) of such Act (25 U.S.C. 4103(21)), tribal subsidiary, subdivision, or other wholly owned tribal entity.
(5) QUALIFIED INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAM- The term ‘qualified individual development account program’ means a program established upon approval of the Secretary under section 4 after December 31, 2009, under which--
(A) Individual Development Accounts and parallel accounts are held in trust by a qualified financial institution, and
(B) additional activities determined by the Secretary, in consultation with the Secretary of Health and Human Services, as necessary to responsibly develop and administer accounts, including recruiting, providing financial education and other training to Account owners, and regular program monitoring, are carried out by the qualified financial institution.
(6) QUALIFIED EXPENSE DISTRIBUTION-
(A) IN GENERAL- The term ‘qualified expense distribution’ means any amount paid (including through electronic payments) or distributed out of an Individual Development Account or a parallel account established for an eligible individual if such amount--
(i) is used exclusively to pay the qualified expenses of the Individual Development Account owner or such owner’s spouse or dependents,
(ii) is paid by the qualified financial institution--
(I) except as otherwise provided in this clause, directly to the unrelated third party to whom the amount is due,
(II) in the case of any qualified rollover, directly to another Individual Development Account and parallel account, or
(III) in the case of a qualified final distribution, directly to the spouse, dependent, or other named beneficiary of the deceased Account owner, and
(iii) is paid after the Account owner has completed a financial education course if required under section 5(b).
(B) QUALIFIED EXPENSES-
(i) IN GENERAL- The term ‘qualified expenses’ means any of the following expenses approved by the qualified financial institution:
(I) Qualified higher education expenses.
(II) Qualified first-time homebuyer costs.
(III) Qualified business capitalization or expansion costs.
(IV) Qualified rollovers.
(V) Qualified final distribution.
(ii) QUALIFIED HIGHER EDUCATION EXPENSES-
(I) IN GENERAL- The term ‘qualified higher education expenses’ has the meaning given such term by section 529(e)(3) of the Internal Revenue Code of 1986, determined by treating the Account owner, the owner’s spouse, or one or more of the owner’s dependents as a designated beneficiary, and reduced as provided in section 25A(g)(2) of such Code.
(II) COORDINATION WITH OTHER BENEFITS- The amount of expenses which may be taken into account for purposes of section 135, 529, or 530 of such Code for any taxable year shall be reduced by the amount of any qualified higher education expenses taken into account as qualified expense distributions during such taxable year.
(iii) QUALIFIED FIRST-TIME HOMEBUYER COSTS- The term ‘qualified first-time homebuyer costs’ means qualified acquisition costs (as defined in section 72(t)(8)(C) of the Internal Revenue Code of 1986) with respect to a principal residence (within the meaning of section 121 of such Code) for a qualified first-time homebuyer (as defined in section 72(t)(8)(D)(i) of such Code).
(iv) QUALIFIED BUSINESS CAPITALIZATION OR EXPANSION COSTS-
(I) IN GENERAL- The term ‘qualified business capitalization or expansion costs’ means qualified expenditures for the capitalization or expansion of a qualified business pursuant to a qualified business plan.
(II) QUALIFIED EXPENDITURES- The term ‘qualified expenditures’ means expenditures normally associated with starting or expanding a business and included in a qualified business plan, including costs for capital, plant, and equipment, inventory expenses, and attorney and accounting fees.
(III) QUALIFIED BUSINESS- The term ‘qualified business’ means any business that does not contravene any law.
(IV) QUALIFIED BUSINESS PLAN- The term ‘qualified business plan’ means a business plan which has been approved by the qualified financial institution and which meets such requirements as the Secretary may specify.
(v) QUALIFIED ROLLOVERS- The term ‘qualified rollover’ means the complete distribution of the amounts in an Individual Development Account and parallel account to another Individual Development Account and parallel account established in another qualified financial institution for the benefit of the Account owner.
(vi) QUALIFIED FINAL DISTRIBUTION- The term ‘qualified final distribution’ means, in the case of a deceased Account owner, the complete distribution of the amounts in the Individual Development Account and parallel account directly to the spouse, any dependent, or other named beneficiary of the deceased.
(7) SECRETARY- The term ‘Secretary’ means the Secretary of the Treasury.