RETIREMENT SAVINGS FOR CERTAIN MARRIED INDIVIDUALS.

SEC. 1501. RETIREMENT SAVINGS FOR CERTAIN MARRIED INDIVIDUALS. (a) Allowance of Deduction.— Part VII of subchapter B of chapter 1 (relating to additional itemized deductions for individuals) is amended by redesignating section 220 as 221 and by inserting after section 219 the following new section: “SEC. 220. RETIREMENT SAVINGS FOR CERTAIN MARRIED INDIVIDUALS. “(a) Deduction Allowed.— In the case of an individual, there is allowed as a deduction amounts paid in cash for a taxable year by or on behalf of such individual for the benefit of himself and his spouse— “(1) to an individual retirement account described in section 408(a), “(2) for an individual retirement annuity described in section 408(b),or “(3) for a retirement, bond described in section 409 (but only if the bond is not redeemed within 12 months of the date of its issuance). For purposes of this title, any amount paid by an employer to such a retirement account or for such a retirement, annuity or retirement bond constitutes payment of compensation to the employee (other than a self-employed individual who is an employee within the meaning of section 401(c)(1)) includible in his gross income, whether or not a deduction for such payment is allowable under this section to the employee after the application of subsection (b). “(b) Limitations and Restrictions.— “(1) Maximum deduction.— The amount, allowable as a deduction under subsection (a) to an individual for any taxable year may not exceed— “(A) twice the amount paid to the account or annuity, or for the bond, established for the individual or for his spouse to or for which the lesser amount was paid for the taxable year, “(B) an amount equal to 15 percent of the compensation includible in the individual’s gross income for the taxable year, or “(C) $1,750, whichever is the smallest amount. “(2) Alternative deduction.— No deduction is allowed under subsection (a) for the taxable year if the individual claims the deduction allowed by section 219 for the taxable year. “(3) Coverage under certain other plans.— No deduction is allowed under subsection (a) for an individual for the taxable year if for any part of such year— “(A) he or his spouse was an active participant in— “(i) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a), “(ii) an annuity plan described in section 403(a), “(iii) a qualified bond purchase plan described in section 405(a), or 90 STAT. 1735 “(iv) a plan established for its employees by the United States, by a State or political subdivision thereof, or by an agency or instrumentality of any of the foregoing, or “(B) amounts were contributed by his employer, or his spouse’s employer, for an annuity contract described in section 403 (b)(whether or not his, or his spouse’s, rights in such contract are nonforfeitable). “(4) Contributions after age 70½.— No deduction is allowed under subsection (a) with respect to any payment which is made for a taxable year of an individual if either the individual or his spouse has attained age 10% before the close of such taxable year. “(5) Recontributed amounts.— No deduction is allowed under this section with respect to a rollover contribution described in section 402(a)(5), 403(a)(4), 408(d)(3), or 409(b)(3)(C). “(6) Amounts contributed under endowment contract.— In the case of an endowment contract described in section 408(b), no deduction is allowed under subsection (a) for that portion of the amounts paid under the contract for the taxable year properly allocable, under regulations prescribed by the Secretary, to the cost of life insurance. “(7) Employed spouses.— No deduction is allowed under subsection (a) with respect to a payment described in subsection (a) made for any taxable year of the individual if the spouse of the individual has any compensation (determined without regard to section 911) for the taxable year of such spouse ending with or within such taxable year. “(c) Definitions and Special Rules.— “(1) Compensation.— For purposes of this section, the term ‘compensation’ includes earned income as defined in section 401 W(2). ’ “(2) Married individuals.— This section shall be applied without regard to any community property laws. “(3) Determination of marital status.— The determination of whether an individual is married for purposes of this section shall be made in accordance with the provisions of section 143(a). “(4) Time when contributions deemed made.— For purposes of this section, a taxpayer shall be deemed to have made a contribution 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 45 days after the end of such taxable year. “(5) Participation in govern mental plans by certain individuals.— A member of a reserve component of the armed forces or a volunteer firefighter is not considered to be an active participant in a plan described in subsection (b)(3)(A)(iv) if, under section 219(c)(4), he is not considered to be an active participant in such a plan.” (b) Conforming Amendments.— (1) Paragraph (10) of section 62 (relating to retirement savings) is amended by inserting before the period the following: “and the deduction allowed by section 220 (relating to retirement savings for certain married individuals)”. (2) Paragraph (2) of section 408(c) is amended by inserting “(or spouse of an employee or member)” after “member”. (3) Subsection (a) of section 415 (relating to limitations on benefits and contributions under qualified plans) is amended— (A) by striking out “In the case” in paragraph (2) and inserting in lieu thereof “Except as provided in paragraph (3), in the case”, and 90 STAT. 1736 (B) by adding at the end thereof the following new paragraph: “(3) Accounts, etc., established for non-employed spouse.— Paragraph (2) shall not apply for any year to an account, annuity, or bond described in section 408(a), 408(b), or 409, respectively, established for the benefit of the spouse of the individual contributing to such account, or for such annuity or bond, if a deduction is allowed under section 220 to such individual with respect to such contribution for such year.”. (4) Section 219 (relating to retirement savings) is amended— (A) by striking out “during” in subsection (a) and inserting in lieu thereof “for”, (B) by adding at the end of subsection (b) the following new paragraph: “(6) Alternative deduction.— No deduction is allowed under subsection (a) for the taxable year if the individual claims the deduction allowed by section 220 for the taxable year.”, (C) by adding at the end of subsection (c)(2) the following new sentence: “For purposes of this section, the determination of whether an individual is married shall be made in accordance with the provisions of section 143(a).”, and (D) by adding at the end of subsection (c) the following new paragraph: “(3) Time when contributions deemed made.— For purposes of this section, a taxpayer shall be deemed to have made a contribution 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 45 days after the end of such taxable year.” (5) Paragraph (4) of section 408(d) (relating to excess contributions returned before due date of return) is amended— (A) by inserting “or 220” after “219”, and (B) by striking out the last sentence and inserting in lieu thereof the following: “In the case of such a distribution, for purposes of section 61, any net income described in subparagraph (C) shall be deemed to have been earned and receivable in the taxable year in which such excess contribution is made.” (6) Paragraph (4) of section 409(a) (relating to retirement bonds) is amended by striking out “in any taxable year” and inserting in lieu thereof “for any taxable year”. (7) Paragraph (12) of section 3401(a) (relating to definition of wages) is amended by inserting “or 220(a)” after “219(a)”. (8) Section 4973 (relating to tax on excess contributions to individual retirement accounts, etc.) is amended— (A) by striking out “such individual” in the last sentence of subsection (a) and inserting in lieu thereof the following: “the individual to whom a deduction is allowed for the taxable year under section 219 (determined without regard to subsection (b)(1) thereof) or section 220 (determined without regard to subsection (b)(1) thereof) , whichever is appropriate”; (B) by inserting “or 220” after “219” in subsection (b)(1)(B);and (C) by striking out paragraph (2) of subsection (b) and inserting in lieu thereof the following: “(2) the amount determined under this subsection for the preceding taxable year, reduced by the excess (if any) of the maximum amount allowable as a deduction under section 219 90 STAT. 1737or 220 for the taxable year over the amount contributed to the accounts or for the annuities or bonds for the taxable year and reduced by the sum of the distributions out of the account (for the taxable year and all prior taxable years) which were included in the gross income of the payee under section 408(d)(1). For purposes of this subsection, any contribution which is distributed from the individual retirement account, individual retirement annuity, or bond in a distribution to which section 408(d)(4) applies shall be treated as an amount not contributed if such distribution consists of an excess contribution solely because of employer contributions to a plan or contract described in section 219(b)(2) or by reason of the application of section 219(b)(1)(without regard to the $1,500 limitation) or section 220(b)(1)(without regard to the $1,750 limitation) and only if such distribution does not exceed the excess of $1,500 or $1,750 if applicable, over the amount described in paragraph (1)(B)” (9) Subsection (d) of section 6047 (relating to other programs) is amended by inserting “or 220(a)” after “219(a)”. (10) Paragraph (1) of section 408(d) (relating to tax treatment of distributions) is amended by striking out the second sentence, and inserting in lieu thereof the following: “Notwithstanding any other provision of this title (including chapters 11 and 12), the basis any person in such an account or annuity is zero.”. (c) Clerical Amendment.— The table of sections for part. VII of subchapter B of chapter 1 is amended by striking out the item relating to section 220 and inserting in lieu thereof the following: “Sec. 220. Retirement savings for certain married individuals. “Sec. 221. Cross references.”. (d) Effective Date.— The amendments made by this section, other than the amendment made by subsection (b)(3), shall apply to taxable years beginning after December 31, 1976. The amendment, made by subsection (b)(3) shall apply to years beginning after December 31, 1976.