Sponsors (2)
The bill creates tax-advantaged Universal Savings Accounts and stronger protections against misuse, but it imposes new reporting obligations, penalties for excess contributions, and added legal/compliance risks for account custodians and related parties.
Taxpayers can use new tax-advantaged Universal Savings Accounts (USAs) to save for future expenses, reducing taxable income or growing savings tax-free under defined contribution and rollover rules.
Taxpayers who mistakenly overcontribute can correct the error by withdrawing the excess contribution plus earnings before the tax return due date to avoid the excess-contribution excise tax.
Account holders are better protected from misuse and insider benefit because reporting requirements and prohibited-transaction rules are extended, which helps deter and penalize improper transactions.
Taxpayers who exceed contribution limits will face an excise tax on excess contributions, increasing costs for people who miscalculate limits or miss correction windows.
New reporting requirements create a compliance burden and can trigger $50-per-failure penalties for custodians or account holders that miss filing rules, raising administrative costs and potential small fines.
Extending prohibited-transaction rules increases legal risk and administrative complexity for account managers, family members, or others who transact with accounts, potentially exposing them to penalties for certain transfers.
Based on analysis of 2 sections of legislative text.
Creates a new Universal Savings Account category in the tax code and extends excess-contribution taxes, prohibited-transaction rules, and reporting penalties to these accounts.
Official title: To amend the Internal Revenue Code of 1986 to create Universal Savings Accounts.
Introduced May 5, 2025 by Diana Harshbarger · Last progress May 5, 2025
Creates a new type of tax-advantaged account called a Universal Savings Account by adding a new part to Subchapter F of the Internal Revenue Code and updating related tax rules. It defines how excess contributions to these accounts are calculated, adds rollover and corrective-distribution rules, and extends existing prohibited-transaction and reporting-penalty provisions to cover the new accounts. The bill is technical and narrow: it amends the Internal Revenue Code, inserts cross-references into existing penalty and prohibited-transaction rules, and applies the changes to taxable years beginning after December 31, 2024.