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H.R.3885 - Farm Risk Abatement and Mitigation Election Act of 2012
To amend the Internal Revenue Code of 1986 to authorize agricultural producers to establish and contribute to tax-exempt farm risk management accounts.
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SECTION 1. SHORT TITLE.
SEC. 2. FARM RISK MANAGEMENT ACCOUNTS.
(a) In General- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:CommentsClose CommentsPermalink
‘SEC. 224. FRAME ACCOUNTS.
‘(a) Deduction Allowed- In the case of a qualified farmer, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of such individual to a FRAME account of such individual.CommentsClose CommentsPermalink
‘(1) IN GENERAL- The term ‘FRAME account’ means a trust created or organized in the United States as a FRAME account exclusively for the purpose of making qualified distributions, but only if the written governing instrument creating the trust meets the following requirements:CommentsClose CommentsPermalink
‘(B) The trustee is a bank (as defined in section 408(n)) or another person who demonstrates to the satisfaction of the Secretary that the manner in which such person will administer the trust will be consistent with the requirements of this section.CommentsClose CommentsPermalink
‘(A) Any distributions in a taxable year during which the gross income attributable to farm to which the FRAME account relates is less than 95 percent of the average gross income attributable to such farm for the 5 preceding taxable years, but only so much as does not exceed such difference.CommentsClose CommentsPermalink
‘(B) Any distributions to the extent such distribution does not exceed amounts necessary to protect the solvency of the farm to which the FRAME account relates, as determined by the Secretary.CommentsClose CommentsPermalink
‘(C) Any distributions to the extent such distributions do not exceed amounts paid or incurred to procure revenue or crop insurance with respect to the farm to which the FRAME account relates.CommentsClose CommentsPermalink
‘(4) ACCOUNTS PER FARM LIMITATION- The Secretary of Agriculture shall have in effect not more than 4 agreements for FRAME accounts with respect to any farm. The Secretary of Agriculture shall by regulation prescribe rules preventing the avoidance of the preceding limitation through use of multiple entities, related parties, division of farms, or de minimis ownership.CommentsClose CommentsPermalink
‘(1) IN GENERAL- A FRAME account is exempt from taxation under this subtitle unless such account has ceased to be a FRAME account. Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).CommentsClose CommentsPermalink
‘(1) IN GENERAL- Any amount paid or distributed out of a FRAME account (other than a rollover contribution described in paragraph (4)) shall be included in gross income.CommentsClose CommentsPermalink
‘(A) IN GENERAL- The tax imposed by this chapter on the account beneficiary for any taxable year in which there is a payment or distribution from a FRAME account of such beneficiary which is not a qualified distribution shall be increased by 20 percent of the amount of such payment or distribution which is not a qualified distribution.CommentsClose CommentsPermalink
‘(B) EXCEPTION FOR DISABILITY OR DEATH- Subparagraph (A) shall not apply if the payment or distribution is made after the account beneficiary becomes disabled within the meaning of section 72(m)(7) or dies.CommentsClose CommentsPermalink
‘(A) IN GENERAL- If any excess contribution is contributed for a taxable year to a FRAME account of an individual, paragraph (2) shall not apply to distributions from the FRAME accounts of such individual (to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year) if--CommentsClose CommentsPermalink
‘(i) such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year, andCommentsClose CommentsPermalink
‘(B) EXCESS CONTRIBUTION- For purposes of subparagraph (A), the term ‘excess contribution’ means any contribution (other than a rollover contribution) which is not deductible under this section.CommentsClose CommentsPermalink
‘(A) IN GENERAL- For purposes of this section, any amount paid or distributed from a FRAME account to the account beneficiary shall be treated as a qualified distribution to the extent the amount received is paid into a FRAME account for the benefit of such beneficiary not later than the 60th day after the day on which the beneficiary receives the payment or distribution.CommentsClose CommentsPermalink
‘(B) LIMITATION- This paragraph shall not apply to any amount described in subparagraph (A) received by an individual from a FRAME account if, at any time during the 1-year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from a FRAME account which was not included in the individual’s gross income because of the application of this paragraph.CommentsClose CommentsPermalink
‘(5) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE- The transfer of an individual’s interest in a FRAME account to an individual’s spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest shall, after such transfer, be treated as a FRAME account with respect to which such spouse is the account beneficiary.CommentsClose CommentsPermalink
‘(A) TREATMENT IN CASE OF INDIVIDUAL DESIGNATED BENEFICIARY- If any individual acquires such beneficiary’s interest in a FRAME account by reason of being the designated beneficiary of such account at the death of the account beneficiary, such FRAME account shall be treated as if such individual were the account beneficiary.CommentsClose CommentsPermalink
‘(i) IN GENERAL- If, by reason of the death of the account beneficiary, any person acquires the account beneficiary’s interest in a FRAME account in a case to which subparagraph (A) does not apply--CommentsClose CommentsPermalink
‘(II) an amount equal to the fair market value of the assets in such account on such date shall be included if such person is not the estate of such beneficiary, in such person’s gross income for the taxable year which includes such date, or if such person is the estate of such beneficiary, in such beneficiary’s gross income for the last taxable year of such beneficiary.CommentsClose CommentsPermalink
‘(ii) DEDUCTION FOR ESTATE TAXES- An appropriate deduction shall be allowed under section 691(c) to any person (other than the decedent or the decedent’s spouse) with respect to amounts included in gross income under clause (i) by such person.CommentsClose CommentsPermalink
‘(g) Reports- The Secretary may require the trustee of a FRAME account to make such reports regarding such account to the Secretary and to the account beneficiary with respect to contributions, distributions, and such other matters as the Secretary determines appropriate. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary.’.CommentsClose CommentsPermalink
(b) Deduction Allowed Whether or Not Individual Itemizes Other Deductions- Subsection (a) of section 62 of such Code is amended by inserting after paragraph (20) the following new paragraph:CommentsClose CommentsPermalink
(1) by striking ‘or’ at the end of subsection (a)(4), by inserting ‘or’ at the end of subsection (a)(5), and by inserting after subsection (a)(5) the following new paragraph:CommentsClose CommentsPermalink
‘(h) Excess Contributions to FRAME Accounts- For purposes of this section, in the case of FRAME accounts (within the meaning of section 224(d)), the term ‘excess contribution’ means the sum of--CommentsClose CommentsPermalink
‘(1) the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions described in section 224(f)(4)) which is not allowable as a deduction under section 224 for such year, andCommentsClose CommentsPermalink
For purposes of this subsection, any contribution which is distributed out of the FRAME account in a distribution to which section 224(f)(3) applies shall be treated as an amount not contributed.’.CommentsClose CommentsPermalink
‘(7) SPECIAL RULE FOR FRAME ACCOUNTS- An individual for whose benefit a FRAME account (within the meaning of section 224(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a FRAME account by reason of the application of section 224(e)(2) to such account.’.CommentsClose CommentsPermalink
(2) Section 4975(e)(1) of such Code is amended by redesignating subparagraphs (F) and (G) as subparagraphs (G) and (H), respectively, and by inserting after subparagraph (E) the following new subparagraph:CommentsClose CommentsPermalink
(e) Failure To Provide Reports on FRAME Accounts- Section 6693(a)(2) of such Code (relating to reports) is amended by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph:CommentsClose CommentsPermalink
SEC. 3. FRAME CONTRIBUTION CREDIT.
‘SEC. 45S. FRAME CONTRIBUTION CREDIT.
‘(a) General Rule- For purposes of section 38, in the case of a qualified farmer (as defined in section 224(c)), the FRAME contribution credit determined under this section for any taxable year is an amount equal to the applicable percentage of the taxpayer’s contributions to any FRAME account of the taxpayer.CommentsClose CommentsPermalink
(b) Credit Made Part of General Business Credit- Subsection (b) of section 38 of such Code is amended by striking ‘plus’ at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting ‘, plus’, and by adding at the end the following new paragraph:CommentsClose CommentsPermalink