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Tax Credits for Individual Development Accounts, February 8, 2006 1 (February 8, 2006)

handle is hein.tera/crstax0397 and id is 1 raw text is: Order Code RS21813 Updated February 8, 2006 CRS Report for Congress Received through the CRS Web Tax Credits for Individual Development Accounts Christine Scott Specialist in Tax Economics Domestic Social Policy Division Summary An individual development account (IDA) is a structured savings instrument for lower income individuals. Currently, IDAs are associated with (1) state programs using Temporary Aid to Needy Families (TANF) block grants; (2) a federal five-year demonstration project established by the Assets for Independence Act (Title IV of P.L. 105-285); and (3) accounts established for refugees by the Office of Refugee Resettlement. These IDA programs use government funds to encourage the establishment of IDA programs and participation by qualified individuals and program sponsors. A new approach, that of using federal tax credits to encourage establishing and funding IDA programs, was a component of legislation introduced in the 108th Congress (Savings for Working Families Act of 2003). In the 109th Congress, legislation (S. 6, S. 922, and S. 1780) has been introduced to establish IDA programs utilizing tax benefits to encourage program development. This report will be updated as warranted by legislative activity. Current (Government Funded) IDA Programs There are three current forms of individual development account (IDA) programs, all of which are funded by federal, state, or local governments.' Based on the funding mechanism and statutory authority for the program, the three types of programs are as follows. Temporary Aid to Needy Families Programs. The 1996 welfare reform law (P.L. 104-193) allowed states to use funds from the Temporary Aid to Needy Families (TANF) block grant for IDAs for TANF-eligible persons. States may establish IDA For more information on federal IDA grant programs, see CRS Report RS22185, Individual Development Accounts (IDAs): Background and Current Legislation for Federal Grant Programs to Help Low-Income Families Save, by Gene Falk. Congressional Research Service oe The Library of Congress

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