II
109th CONGRESS
1st Session
S. 2086
IN THE SENATE OF THE UNITED STATES
December 13, 2005
Mr. Lautenberg (for himself and Mr. Smith) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to modify the definition of compensation for purposes of determining the limits on contributions to individual retirement accounts and annuities, and for other purposes.
Short title
This Act may be cited as the
IRA Equity Act of
2005
.
Computation of limits on IRA and Roth IRA contributions
Certain wage replacement income treated as compensation
Wage replacement income
Section 219(f) of the Internal Revenue Code of 1986 (relating to other definitions and special rules) is amended by adding at the end the following new paragraph:
Treatment of certain wage replacement income as compensation
In general
Notwithstanding paragraph (1), applicable wage replacement income not otherwise treated as compensation shall be treated as compensation for purposes of this section.
Applicable wage replacement income
For purposes of this paragraph, the term applicable wage replacement income means any amount received by an individual—
as the result of the individual having become disabled,
as unemployment compensation (as defined in section 85(b)),
under workmen's compensation acts, or
which constitutes wage replacement income under regulations prescribed by the Secretary.
Certain excludable amounts may be taken into account for purposes of Roth IRAs
Section 408A(c)(2) of such Code (relating to contribution limit) is amended by adding at the end the following new flush sentence:
In determining the maximum amount under subparagraph (A), subsections (b)(1)(B) and (c) of section 219 shall be applied by taking into account compensation described in section 219(f)(8) without regard to whether it is includible in gross income.
Effective date
The amendments made by this subsection shall apply to taxable years beginning after December 31, 2004.
Computation of maximum IRA deduction for Roth IRAs using compensation from 2 preceding taxable years
In general
Section 408A(c) of the Internal Revenue Code of 1986 (relating to treatment of contributions) is amended by adding at the end the following new paragraph:
Compensation from preceding 2 years may be taken into account
In general
A taxpayer may elect for purposes of paragraph (2) to take into account any unused compensation from the 2 taxable years immediately preceding the taxable year.
Unused compensation
For purposes of this paragraph, the term unused compensation means with respect to an individual for any taxable year the compensation includible in the individual's gross income for the taxable year reduced by the sum of—
the amount allowed as a deduction under 219(a) to such individual for such taxable year,
the amount of any designated nondeductible contribution (as defined in section 408(o)) on behalf of such individual for such taxable year,
the amount of any contribution on behalf of such individual to a Roth IRA under this section for such taxable year, and
the amount of compensation includible in such individual's gross income for such taxable year taken into account under section 219(c) in determining the limitation under section 219 or paragraph (2) for the individual's spouse.
Application to special rule for married individuals
Under rules prescribed by the Secretary, in applying section 219(c) for any taxable year for purposes of applying paragraph (2)(A), unused compensation of an individual or an individual's spouse for the 2 taxable years immediately preceding the taxable year may be taken into account.
Effective date
The amendment made by this subsection shall apply to taxable years beginning after December 31, 2004, but unused compensation for taxable years beginning before January 1, 2005, may be taken into account for taxable years beginning after December 31, 2004.