Notice 2015-18 — Internal Revenue Bulletin 2020-50

2015 proposed regulations stated that the Treasury Department and the IRS intend to provide transition relief to enable qualified ABLE programs and ABLE accounts established before the issuance of final regulations to be brought into compliance with the requirements of the final regulations. One commenter asked that State legislatures and qualified ABLE programs be given a period of not less than one full taxable year after the issuance of final regulations to bring their legislation and programs into full compliance with Federal standards. Another commenter asked that the final regulations provide transition relief to qualified ABLE programs that begin operations within the six-month period following the issuance of final regulations, while still another asked that the relief be provided for programs that launch during the transition period.

The final regulations provide transition relief for all qualified ABLE programs, including programs that begin operation after the publication of the final regulations. The final regulations provide that, generally, a program and each account established under that program will be treated as a qualified ABLE program and as an ABLE account, respectively, during the transition period, provided that the program is established and operated in accordance with a reasonable, good faith interpretation of section 529A. Establishment and operation in accordance with the regulations under section 529A as proposed in 80 FR 35602 and as supplemented by Notice 2015-81, 2015-49 I.R.B. 784, and 84 FR 54529 is deemed to be establishment and operation in accordance with a reasonable, good faith interpretation of section 529A. However, such a program and all accounts established under that program must meet the requirements of these final regulations before the later of November 21, 2022, or the first day of the qualified ABLE program’s first taxable year beginning after the close of the first regular session of the State legislature that begins after November 19, 2020. If a State has a two-year legislative session, each calendar year of the session is deemed to be a separate regular session of the State legislature.

One commenter expressed concern for individuals who are eligible to establish an ABLE account under the 2015 proposed regulations but who later fail to meet the eligibility criteria under the final regulations. The commenter suggested that the final regulations allow such individuals to be “grandfathered” into a qualified ABLE program provided the individual continues to meet the eligibility requirements under the 2015 proposed regulations. Because the definition of an eligible individual and the criteria for establishing satisfaction of that definition has not been changed in the final regulations, the Treasury Department and the IRS do not adopt this suggestion.

Miscellaneous

Numerous comments were received concerning programs administered by the SSA or the Centers for Medicare & Medicaid Services (CMS). For example, several of these comments requested confirmation that the provisions of section 103 of the ABLE Act, which exclude ABLE accounts from the assets and income of the designated beneficiary in determinations of eligibility for certain public benefits, continue to apply in certain specific situations not addressed in the 2015 proposed regulations. Because these are not tax issues, the final regulations do not address these and other comments regarding matters that are outside of the jurisdiction of the Treasury Department and the IRS. The IRS, however, has shared these comments with the SSA and the CMS.

A few other comments were received regarding non-legal issues that are not within the scope of these final regulations. Several other minor changes were made throughout the final regulations to increase clarity and consistency and to comply with Federal Register requirements, none of which substantively change the 2015 or 2019 proposed regulations.

Special Analyses

This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations.

Paperwork Reduction Act

The collection of information contained in these final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control numbers 1545-2262 and 1545-2293. The collections of information in this final regulation are in §§ 1.529A-2, 1.529A5, 1.529A-6, and 1.529A-7. The collection of information flows from sections 529A(d)(1), (d)(2), (d)(3), (e)(1), and (e)(2) of the Code. Section 529A(d)(1) requires qualified ABLE programs to provide reports to the Secretary and to designated beneficiaries with respect to contributions, distributions, the return of excess contributions, and such other matters as the Secretary may require. Section 529A(d)(2) directs the Secretary to make available to the public reports containing aggregate information, by diagnosis and other relevant characteristics, on contributions and distributions from the qualified ABLE program. Section 529A(d) (3) requires qualified ABLE programs to provide notice to the Secretary upon the establishment of an ABLE account, containing the name of the designated beneficiary and such other information as the Secretary may require. Section 529A(e) (1) requires that a disability certification with respect to certain individuals be filed with the Secretary. Section 529A(e)(2) provides that the disability certification include a certification to the satisfaction of the Secretary that the individual has a described medically determinable physical or mental impairment that occurred before the date on which the individual attained age 26, as well as a copy of a physician’s diagnosis. The burden under §§ 1.529A-5, 1.529A-6, and 1.529A7 is reflected in the burden under Form 5498-QA, “ABLE Account Contribution Information,” and Form 1099-QA, “Distributions from ABLE Accounts,” respectively.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number.

Books or records relating to a collection of information must be retained as long as their contents may become mate

December 7, 2020 1580 Bulletin No. 2020–50

Redesignating the second sentence in paragraph (d)(4)(i) as (d)(4)(i)(B) introductory text;
Adding a heading to newly designated paragraph (d)(4)(i)(A);
In newly designated paragraph (d)(4) (i)(B), adding a heading and removing from the introductory text “principle” and adding “paragraph (d)(4)(i)” in its place;
Redesignating undesignated Examples 1 through 3 following newly designated paragraph (d)(4)(i)(B) introductory text as paragraphs (d)(4)(i) (B)(1) through (3); and
Adding paragraph (d)(4)(i)(B)(4). The additions read as follows:

§ 1.513-1 Definition of unrelated trade or business.

(d) * * * (4) * * * (i) * * * (A) In general . * * * (B) Examples . * * * ( 4 ) Example 4 . P is a qualified ABLE program described in section 529A and § 1.529A-1(b)(14). P receives amounts in order to establish or maintain ABLE accounts, as administrative or maintenance fees and other similar fees including service charges. Because the payment of these amounts is essential to the operation of a qualified ABLE program, the income generated from the activity does not constitute gross income from an unrelated trade or business.

Par. 4. An undesignated center heading and §§ 1.529A-0 through 1.529A-8 are added immediately following § 1.528-10 to read as follows:

Qualified Able Programs

§ 1.529A-0 Table of contents. § 1.529A-1 Exempt status of qualified ABLE program and definitions. § 1.529A-2 Qualified ABLE program. § 1.529A-3 Tax treatment. § 1.529A-4 Gift, estate, and generation-skipping transfer taxes. § 1.529A-5 Reporting of the establishment of and contributions to an ABLE account. § 1.529A-6 Reporting of distributions from and termination of an ABLE account. § 1.529A-7 Electronic furnishing of statements to designated beneficiaries and contributors.

rial in the administration of any internal revenue law. Generally, tax returns and return information are confidential, as required by 26 U.S.C. 6103.

Regulatory Flexibility Act

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these regulations will not impact a substantial number of small entities. These regulations primarily affect states and individuals and therefore will not have a significant economic impact on a substantial number of small entities. Pursuant to section 7805(f) of the Code, the NPRMs preceding these regulations were submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on their impact on small business. No comments were received from the Chief Counsel for the Office of Advocacy of the Small Business Administration.

Drafting Information

The principal authors of these regulations are Terri Harris and Julia Parnell of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the Treasury Department and the IRS participated in the development of these regulations.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 25

Gift taxes, Reporting and recordkeeping requirements.

26 CFR Part 26

Estate taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping requirements.

Amendments to the Regulations

Accordingly, 26 CFR parts 1, 25, 26, 301, and 602 are amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding an entry for §§ 1.529A-0 through 1.529A-8 in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805, unless otherwise noted.

Sections 1.529A-0 through 1.529A-8 also issued under 26 U.S.C. 529A(g).

Par. 2. Section 1.511-2 is amended by adding paragraph (e) to read as follows:

§ 1.511-2 Organizations subject to tax.

(e) ABLE programs —(1) Unrelated business taxable income . A qualified ABLE program described in section 529A and § 1.529A-1(b)(14) generally is exempt from Federal income taxation, but is subject to taxes imposed by section 511 relating to the imposition of tax on unrelated business income. A qualified ABLE program is required to file Form 990-T, “Exempt Organization Business Income Tax Return,” if such filing would be required under the rules of §§ 1.6012-2(e) and 1.6012-3(a)(5) if the ABLE program were an organization described in those sections.

(2) Applicability date . This paragraph (e) applies to taxable years beginning after December 31, 2020.

Par. 3. Section 1.513-1 is amended as follows:

Redesignating the first full sentence following the heading in paragraph (d)(4)(i) as (d)(4)(i)(A);

Bulletin No. 2020–50 1581 December 7, 2020

§ 1.529A-8 Applicability dates and transition relief.

Qualified Able Programs

§ 1.529A-0 Table of contents.

This section lists the following captions contained in §§ 1.529A-1 through 1.529A-8.

§ 1.529A-1 Exempt status of qualified

ABLE program and definitions .

(a) In general. (b) Definitions. (1) ABLE account. (2) Contribution. (3) Designated beneficiary. (4) Disability certification. (5) Distribution. (6) Earnings. (7) Earnings ratio. (8) Eligible individual. (9) Excess contribution. (10) Excess aggregate contribution. (11) Investment in the account. (12) Member of the family. (13) Program-to-program transfer. (14) Qualified ABLE program. (15) Qualified disability expenses. (16) Rollover. (c) Applicability date.

§ 1.529A-2 Qualified ABLE program .

§ 1.529A-4 Gift, estate, and generation- skipping transfer taxes .

(a) Contributions. (1) In general. (2) Generation-skipping transfer (GST) tax.

(3) Designated beneficiary as contributor.

(b) Distributions. (c) Transfer to another designated beneficiary.

(d) Transfer tax on death of designated beneficiary.

(e) Applicability date.

§ 1.529A-5 Reporting of the establishment of and contributions to an ABLE account .

(a) In general. (b) Established and maintained by a State or agency or instrumentality of a State.

(1) Established. (2) Maintained. (i) In general. (ii) Multiple States, agencies, or instrumentalities.

(3) Community Development Financial Institutions (CDFIs).

(1) Establishment of the ABLE account.

(2) Signature authority. (3) Only one ABLE account. (4) Beneficial interest. (d) Eligible individual. (1) Documentation. (2) Frequency of recertification.

(3) Loss of qualification as an eligible individual.

(e) Disability certification. (1) In general. (2) Marked and severe functional limitations.

(3) Compassionate allowance list. (4) Additional guidance. (5) Restriction on use of certification. (f) Change of designated beneficiary. (1) In general. (2) Change effective upon death. (g) Contributions. (1) Permissible property. (2) Annual contributions limit. (3) Cumulative limit. (4) Return of excess contributions, excess compensation contributions, and excess aggregate contributions.

(5) Restriction of contributors. (h) Qualified disability expenses. (1) In general. (2) Example. (i) Separate accounting. (j) Program-to-program transfers. (k) Carryover of attributes. (1) In general. (2) Annual contribution limit. (3) Investment direction limit. (l) Investment direction. (m) No pledging of interest as security. (n) No sale or exchange. (o) Post-death payments. (p) Reporting requirements. (q) Applicability date.

§ 1.529A-3 Tax treatment .

(a) Taxation of distributions. (1) In general. (2) Additional period. (b) Additional exclusions from gross income.

(1) Rollover. (2) Program-to-program transfers. (3) Change of designated beneficiary. (4) Payments to creditors post-death. (c) Computation of earnings. (d) Additional tax on amounts includible in gross income.

(1) In general. (2) Exceptions. (e) Tax on excess contributions. (f) Filing requirements. (g) No inference outside section 529A. (h) Applicability date.

(a) In general. (b) Additional definitions. (1) Filer. (2) TIN. (c) Requirement to file return. (1) Form of return. (2) Information included on return. (3) Time and manner of filing return. (d) Requirement to furnish statement. (1) In general. (2) Time and manner of furnishing statement.

(3) Copy of Form 5498-QA. (e) Request for TIN of designated beneficiary.

(f) Penalties. (1) Failure to file return. (2) Failure to furnish TIN. (g) Applicability date.

§ 1.529A-6 Reporting of distributions from and termination of an ABLE account .

(a) In general. (b) Requirement to file return. (1) Form of return. (2) Information included on return. (3) Information excluded. (4) Time and manner of filing return. (c) Requirement to furnish statement. (1) In general. (2) Time and manner of furnishing statement.

(3) Copy of Form 1099-QA. (d) Request for TIN of contributor(s). (1) In general.

December 7, 2020 1582 Bulletin No. 2020–50

(2) Exception. (e) Penalties. (1) Failure to file return. (2) Failure to furnish TIN. (f) Applicability date.

§ 1.529A-7 Electronic furnishing of statements to designated beneficiaries and contributors .

(a) Electronic furnishing of statements. (1) In general. (2) Consent. (3) Required disclosures. (4) Format. (5) Notice. (6) Access period. (b) Applicability date.

§ 1.529A-8 Applicability dates and transition relief .

(a) Applicability dates. (b)Transition relief. (1) In general. (2) Transition period. (3) Compliance after transition period.

§ 1.529A-1 Exempt status of qualified ABLE program and definitions.

(a) In general . A qualified ABLE program described in section 529A is exempt from Federal income tax, except for the tax imposed under section 511 on any unrelated business taxable income of that program. See § 1.511-2(e).

(b) Definitions . For purposes of section 529A, this section and §§ 1.529A-2 through 1.529A-8—

(1) ABLE account means an account established under a qualified ABLE program and owned by the designated beneficiary of that account.

(2) Contribution means any payment directly allocated to an ABLE account for the benefit of a designated beneficiary, including amounts transferred to an ABLE account between December 22, 2017, and January 1, 2026, from a qualified tuition program described in section 529.

(3) Designated beneficiary means the individual for whom the account was established at a time when he or she was an eligible individual or who has succeeded the former designated beneficiary in that capacity (successor designated benefi

ciary). The designated beneficiary is the owner of the ABLE account. If the designated beneficiary is not able to exercise signature authority over his or her ABLE account or chooses to have an ABLE account established but not to exercise signature authority, references to the designated beneficiary with respect to his or her actions include actions by the person with signature authority over the account. See § 1.529A-2(c)(1) and (2). (4) Disability certification means a certification to establish a certain level of an individual’s physical or mental impairment that meets the requirements described in § 1.529A-2(e).

(5) Distribution means any payment from an ABLE account. However, a program-to-program transfer, a Medicaid reimbursement under § 1.529A-2(o), or a payment of administrative or investment fees charged by a qualified ABLE program is not a distribution.

(6) Earnings attributable to an ABLE account are the excess of the total account balance on a particular date over the investment in the account as of that date.

(7) Earnings ratio as applied to a particular distribution means the amount of earnings attributable to the ABLE account as of the date of the distribution, divided by the total account balance on that same date.

(8) Eligible individual for a taxable year means an individual who either:

(i) Is receiving benefits under title II or XVI of the Social Security Act based on blindness or disability or whose entitlement to such benefits under title XVI has been suspended solely due to excess income or resources, provided that such blindness or disability occurred before the date on which the individual attained age 26 (and, for this purpose, an individual is deemed to attain age 26 on his or her 26th birthday); or

(ii) Is the subject of a disability certification filed with the Secretary of the Treasury or his delegate (Secretary) for that taxable year.

(9) Excess contribution means the amount by which the amount contributed during the taxable year of the designated beneficiary to an ABLE account exceeds the limit in effect under section 2503(b) for the calendar year in which the taxable year of the designated beneficiary begins.

(10) Excess aggregate contribution means—

(i) The amount contributed during the taxable year of the designated beneficiary that causes the total of amounts contributed since the establishment of the ABLE account (or of an ABLE account for the same designated beneficiary that was rolled into the current ABLE account) to exceed the limit in effect under section 529(b)(6); or (ii) In the context of the safe harbor in § 1.529A-2(g)(3), the amount contributed that causes the account balance to exceed the limit in effect under section 529(b)(6).

(11) Investment in the account means— (i) The sum of all contributions made to the ABLE account, reduced by the aggregate amount of contributions included in distributions, if any, made from the account; or

(ii) In the case of a rollover contribution into an ABLE account, the amount of the rollover contribution that constituted the amount described in paragraph (b) (11)(i) of this section with respect to the ABLE account from which the rollover contribution was made.

(12) Member of the family means a sibling, whether by blood or by adoption, and includes a brother, sister, stepbrother, stepsister, half-brother, and half-sister.

(13) Program-to-program transfer means—

(i) The direct transfer of the entire balance of an ABLE account into an ABLE account of the same designated beneficiary after which the transferor ABLE account is closed upon completion of the transfer; or

(ii) The direct transfer of part or all of the balance to an ABLE account of another eligible individual who is a member of the family of the former designated beneficiary.

(14) Qualified ABLE program means a program established and maintained by a State, or agency or instrumentality of a State, under which an ABLE account may be established by and for the benefit of the account’s designated beneficiary who is an eligible individual, and that meets the requirements described in § 1.529A-2.

(15) Qualified disability expenses means any expenses incurred at a time when the designated beneficiary is an eligible individual that relate to the blindness

Bulletin No. 2020–50 1583 December 7, 2020

or disability of the designated beneficiary of an ABLE account, including expenses that are for the benefit of the designated beneficiary in maintaining or improving his or her health, independence, or quality of life. See § 1.529A-2(h). However, any expenses incurred at a time when a designated beneficiary is neither disabled nor blind within the meaning of § 1.529A-1(b) (8)(i) or § 1.529A-2(e)(1)(i), even if the designated beneficiary is an eligible individual for that entire taxable year, do not relate to blindness or disability and therefore are not qualified disability expenses.

(16) Rollover means a contribution to an ABLE account of a designated beneficiary (or of an eligible individual who is a member of the family of the designated beneficiary) of all or a portion of an amount distributed from the designated beneficiary’s ABLE account, provided the contribution is made within 60 days of the date of the withdrawal and, in the case of a rollover to the designated beneficiary’s ABLE account, no rollover has been made to an ABLE account of the designated beneficiary within the 12 month period immediately preceding the rollover to the ABLE account.

(c) Applicability date . This section applies to calendar years beginning on or after January 1, 2021. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-2 Qualified ABLE program.

(a) In general . A qualified ABLE program is a program established and maintained by a State, or an agency or instrumentality of a State, that satisfies all of the requirements of this section and under which—

(1) An ABLE account may be established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account;

(2) A designated beneficiary is limited to only one ABLE account at a time except as otherwise provided in paragraph (c)(3) of this section;

(3) Any person may make contributions to such an ABLE account, subject to the limitations described in paragraph (g) of this section; and

(4) Distributions (other than returns of contributions as described in paragraph (g)(4) of this section) may be made only

to or for the benefit of the designated beneficiary of the ABLE account.

(b) Established and maintained by a State or agency or instrumentality of a State —(1) Established . A program is established by a State or its agency or instrumentality if the program is initiated by State statute or regulation or by an act of a State official or agency with the authority to act on behalf of the State.

(2) Maintained —(i) In general . A program is maintained by a State or an agency or instrumentality of a State if—

(A) The State or its agency or instrumentality sets all of the terms and conditions of the program, including but not limited to who may contribute to the program, who may be a designated beneficiary of the program, and what benefits the program may provide; and

(B) The State or its agency or instrumentality is actively involved on an ongoing basis in the administration of the program, including supervising the implementation of decisions relating to the investment of assets contributed under the program. Factors that are relevant in determining whether a State or its agency or instrumentality is actively involved in the administration of the program include, but are not limited to: whether the State or its agency or instrumentality provides services to designated beneficiaries that are not provided to persons who are not designated beneficiaries; whether the State or its agency or instrumentality establishes detailed operating rules for administering the program; whether officials of the State or its agency or instrumentality play a substantial role in the operation of the program, including selecting, supervising, monitoring, auditing, and terminating the relationship with any private contractors that provide services under the program; whether the State or its agency or instrumentality holds the private contractors that provide services under the program to the same standards and requirements that apply when private contractors handle funds that belong to the State or its agency or instrumentality or provide services to the State or its agency or instrumentality; whether the State or its agency or instrumentality provides funding for the program; and whether the State or its agency or instrumentality acts as trustee or holds program assets directly or for the

benefit of the designated beneficiaries. For example, if the State or its agency or instrumentality exercises the same authority over the funds invested in the program as it does over the investments in or pool of funds of a State employees’ defined benefit pension plan, then the State or its agency or instrumentality will be considered actively involved on an ongoing basis in the administration of the program.

(ii) Multiple States, agencies, or instru- mentalities . A program may be maintained by two or more States or the agencies or instrumentalities of two or more States if the program meets the requirements of paragraph (b)(2)(i) of this section for each of the States represented. If a State or an agency or instrumentality of a State participates in such a consortium of States or agencies or instrumentalities of States, the consortium’s program is considered to be the program of each State represented.

(3) Community Development Financial Institutions (CDFIs) . In addition to having the ability to contract with private contractors as provided in paragraph (b)(2)(i)(B) of this section, a State or its agency or instrumentality or qualified ABLE program may contract with one or more Community Development Financial Institutions (CDFIs) (as defined in 12 U.S.C. 4702(5) and 12 CFR 1805.104) to perform some or all of the services described in paragraphs (b)(2)(i)(A) and (B) of this section.

(c) Establishment of an ABLE account and signature authority —(1) Establish- ment of the ABLE account —(i) In general . A qualified ABLE program must provide that an ABLE account may be established only for an eligible individual.

(A) The ABLE account may be established by the eligible individual;

(B) The ABLE account may be established by a person selected by the eligible individual; or

(C) If an eligible individual (whether a minor or adult) is unable to establish his or her own ABLE account, an ABLE account may be established on behalf of the eligible individual by the eligible individual’s agent under a power of attorney or, if none, by a conservator or legal guardian, spouse, parent, sibling, grandparent of the eligible individual, or a representative payee appointed for the eligible individual by the Social Security Administration (SSA), in that order.

December 7, 2020 1584 Bulletin No. 2020–50

(ii) Authority . A qualified ABLE program may accept a certification, made under penalties of perjury, from the person seeking to establish an ABLE account as to the basis for the person’s authority to establish the ABLE account, and that there is no other person with a higher priority, under paragraphs (c)(1)(i)(A), (B), and (C) of this section, to establish the ABLE account.

(2) Signature authority —(i) Signatory . In general, the designated beneficiary will have signature authority over his or her ABLE account. However, if an individual other than the designated beneficiary establishes the account in accordance with paragraph (c)(1)(i)(B) or (C) of this section, such individual will have signature authority.

(A) At any time, the designated beneficiary may remove and replace any person with signature authority over the designated beneficiary’s ABLE account. The replacement may be the designated beneficiary or any other person selected by the designated beneficiary.

(B) The designated beneficiary may designate a successor to the person with signature authority. In the absence of any designation of a successor by the designated beneficiary, a person with signature authority over the designated beneficiary’s ABLE account may designate a successor, consistent with the ordering rules in paragraph (c)(1)(i)(C) of this section.

(ii) Co-signatories . A qualified ABLE program may permit an ABLE account to have co-signatories, consistent with paragraph (c)(1)(i)(C) of this section. If co-signatories are permitted, all of the other provisions of this paragraph (c)(2) continue to apply, and references to the signatory refer to the co-signatories acting separately or jointly, as determined by that qualified ABLE program.

(iii) Authority over sub-accounts . The person with signature authority over the ABLE account may appoint and from time to time may remove, replace, or name a successor for any person with signature authority over a sub-account described in paragraph (c)(3)(iii) of this section.

(3) Only one ABLE account —(i) In general . Except as provided in paragraph (c)(3)(ii) of this section, a designated beneficiary is limited to one ABLE account at a time, regardless of where located. To

ensure that this requirement is met, a qualified ABLE program must obtain a verification, signed under penalties of perjury by the person establishing the ABLE account, that the individual establishing the ABLE account neither knows nor has reason to know that the eligible individual already has an existing ABLE account (other than an ABLE account that will terminate with the rollover or program-to-program transfer of its assets into the new ABLE account) before that program can permit the establishment of an ABLE account for that eligible individual. In the case of a rollover, the ABLE account from which amounts were distributed must be closed as of the 60th day after the date of the distribution in order to allow the account receiving the rollover to be treated as an ABLE account.

(ii) Treatment of additional accounts . If an individual is the designated beneficiary of an ABLE account established in accordance with paragraph (c)(1) of this section, no other account subsequently established for that individual under a qualified ABLE program (additional account) will be an ABLE account. The preceding sentence does not apply to an additional account, and that additional account is an ABLE account, if—

(A) The additional account is established for the purpose of receiving a rollover or program-to-program transfer;

(B) All of the contributions to the additional account are returned in accordance with the rules that apply to the return of excess contributions and excess aggregate contributions under paragraph (g)(4) of this section; or

(C) All amounts in the additional account are transferred to the designated beneficiary’s preexisting ABLE account and any excess contributions and excess aggregate contributions are returned in accordance with the rules that apply to the return of excess contributions and excess aggregate contributions under paragraph (g)(4) of this section.

(iii) Sub-accounts . A qualified ABLE program may establish an ABLE account (primary account) that may include multiple sub-accounts. The person with signature authority over the ABLE account, at any time and from time to time, may create one or more sub-accounts, may transfer funds in the ABLE account to

one or more of the sub-accounts, and may close one or more of the sub-accounts, to facilitate the acquisition of certain goods or services for the designated beneficiary. Each sub-account may have a different person with signature authority over that sub-account, appointed in accordance with the rules of paragraph (c)(2)(iii) of this section, and that person’s authority is limited to making distributions from that sub-account. The primary account and the sub-accounts collectively constitute a single ABLE account and therefore must be aggregated for all purposes, including without limitation the limit on the number of permissible changes in investment direction under paragraph (l) of this section, the contribution limits under paragraphs (g)(2) and (3) of this section, the computation of gross income and other tax provisions, and the reporting requirements.

(iv) Investment options . A qualified ABLE program may offer different investment options within each ABLE account without violating the only-one-ABLEaccount rule in this paragraph (c)(3). For example, an ABLE account may include a cash fund as well as one or more stock or bond funds.

(4) Beneficial interest . A person other than the designated beneficiary with signature authority over the ABLE account of the designated beneficiary may neither have nor acquire any beneficial interest in the ABLE account during the lifetime of the designated beneficiary and must administer the ABLE account for the benefit of the designated beneficiary of the account.

(d) Eligible individual —(1) Docu- mentation —(i) In general . Whether an individual is an eligible individual is determined for each taxable year of that individual, and that determination applies for the entire year. A qualified ABLE program must specify the documentation that an individual must provide, both at the time an ABLE account is established and thereafter, in order to ensure that the designated beneficiary of the ABLE account is, and continues to be, determined an eligible individual. For purposes of determining whether an individual is an eligible individual, a disability certification as described in paragraph (e)(1) of this section will be deemed to be filed with the Secretary once the qualified ABLE program has

Bulletin No. 2020–50 1585 December 7, 2020

received the disability certification or a disability certification has been deemed to have been received under the rules of the qualified ABLE program, which information the qualified ABLE program will file in accordance with the filing requirements under § 1.529A-5(c)(2)(iv).

(ii) Safe harbor . A qualified ABLE program may establish that an individual is an eligible individual if the person establishing the ABLE account certifies under penalties of perjury—

(A) The basis for the individual’s status as an eligible individual (entitlement to benefits based on blindness or disability under title II or XVI of the Social Security Act, or a disability certification described in paragraph (e)(1) of this section);

(B) That the individual is blind or has a medically determinable physical or mental impairment as described in paragraph (e)(1)(i) of this section;

(C) That such blindness or disability occurred before the date on which the individual attained age 26 (and, for this purpose, an individual is deemed to attain age 26 on his or her 26th birthday); (D) If the basis of the individual’s eligibility is a disability certification, that the individual has received and agrees to retain a written diagnosis as described in paragraph (e)(1)(iii) of this section, accompanied by the name and address of the diagnosing physician and the date of the written diagnosis;

(E) The applicable diagnostic code from those listed on Form 5498-QA (or in the instructions to such form) identifying the type of the individual’s impairment;

(F) That the person establishing the account is the individual who will be the designated beneficiary of the account or is the person authorized under paragraph (c)(1)(i) of this section to establish the account; and

(G) If required by the qualified ABLE program, the information provided by the diagnosing physician as to the categorization of the disability that may be used to determine, under the particular State’s program, the appropriate frequency of required recertifications.

(2) Frequency of recertification —(i) In general . A determination of eligibility must be made annually unless the qualified ABLE program adopts a different method of ensuring a designated beneficiary’s

continuing status as an eligible individual. Alternative methods may include, without limitation, the use of certifications by the designated beneficiary under penalties of perjury, and the imposition of different recertification frequencies for different types of impairments.

(ii) Considerations . In developing its rules on recertification, a qualified ABLE program may take into consideration whether an impairment is incurable and, if so, the likelihood that a cure may be found in the future. For example, a qualified ABLE program may provide that the initial certification will be deemed to be valid for a stated number of years, which may vary with the type of impairment. Even if the qualified ABLE program imposes an enforceable obligation on the designated beneficiary or other person with signature authority over the ABLE account to promptly report changes in the designated beneficiary’s condition that would result in the designated beneficiary’s failing to satisfy the definition of an eligible individual, the designated beneficiary will be considered an eligible individual until the end of the taxable year in which the change in the designated beneficiary’s condition occurred. A qualified ABLE program that is compliant with the rules regarding recertification will not be considered to be noncompliant solely because a designated beneficiary fails to comply with this enforceable obligation.

(3) Loss of qualification as an eligible individual . If the designated beneficiary of an ABLE account ceases to be an eligible individual, then for each taxable year in which the designated beneficiary is not an eligible individual, the account will continue to be an ABLE account, the designated beneficiary will continue to be the designated beneficiary of the ABLE account (and will be referred to as such), and the ABLE account will not be deemed to have been distributed. However, beginning on the first day of the designated beneficiary’s first taxable year for which the designated beneficiary does not satisfy the definition of an eligible individual, additional contributions to the designated beneficiary’s ABLE account must not be accepted by the qualified ABLE program. In addition, no expense incurred at a time when a designated beneficiary is neither

disabled nor blind within the meaning of § 1.529A-1(b)(8)(i) or § 1.529A-2(e)(1)(i), whichever had applied, is a qualified disability expense even if the individual is an eligible individual for the rest of the year under paragraph (d)(1)(i) of this section. If the designated beneficiary subsequently again satisfies the definition of an eligible individual, contributions to the designated beneficiary’s ABLE account again may be accepted, subject to the contribution limits under section 529A, and expenses that are incurred thereafter may meet the definition of a qualified disability expense in § 1.529A-1(b)(15) and paragraph (h) of this section.

(e) Disability certification —(1) In gen- eral . Except as provided in paragraph (e) (3) of this section or in additional guidance described in paragraph (e)(4) of this section, a disability certification with respect to an individual, that will be deemed filed with the Secretary as provided in paragraph (d)(1)(i) of this section, and is deemed satisfactory to the Secretary, is a certification signed under penalties of perjury by the individual, or by another individual establishing the ABLE account for the individual, that—

(i) Certifies that the individual— (A) Has a medically determinable physical or mental impairment that results in marked and severe functional limitations (as defined in paragraph (e)(2) of this section), and that—

( 1 ) Can be expected to result in death; or

( 2 ) Has lasted or can be expected to last for a continuous period of not less than 12 months; or

(B) Is blind (within the meaning of section 1614(a)(2) of the Social Security Act);

(ii) Certifies that such blindness or disability occurred before the date on which the individual attained age 26 (and, for this purpose, an individual is deemed to attain age 26 on his or her 26th birthday); and

(iii) Includes a certification that the individual has obtained and will continue to retain a copy of the individual’s diagnosis relating to the individual’s relevant impairment or impairments, signed by a physician meeting the criteria of section 1861(r)(1) of the Social Security Act (42 U.S.C. 1395x(r)) and including the name

December 7, 2020 1586 Bulletin No. 2020–50

and address of the diagnosing physician and the date of the diagnosis.

(2) Marked and severe functional lim- itations . For purposes of paragraph (e) (1) of this section, the phrase marked and severe functional limitations means the standard of disability in the Social Security Act for children claiming Supplemental Security Income for the Aged, Blind, and Disabled (SSI) benefits based on disability (see 20 CFR 416.906), but without regard to age or to whether the individual engages in substantial gainful activity. Specifically, this is a level of severity that meets, medically equals, or functionally equals the severity of any listing in appendix 1 of subpart P of 20 CFR part 404. See 20 CFR 416.906, 416.924 and 416.926a. Such phrase also includes any impairment or standard of disability identified in future guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2) of this chapter). Consistent with the regulations promulgated by the SSA, the level of severity is determined by taking into account the effect of the individual’s prescribed treatment. See 20 CFR 416.930.

(3) Compassionate allowance list . Conditions listed in the “List of Compassionate Allowances Conditions” maintained by the SSA are deemed to meet the requirements of section 529A(e)(1)(B) regarding the filing of a disability certification, if the condition was present and produced marked and severe functional limitations before the date on which the individual attained age 26. To establish that an individual with such a condition satisfies the definition of an eligible individual, the individual must identify the condition and certify to the qualified ABLE program both the presence of the condition and its resulting marked and severe functional limitations prior to age 26, in a manner specified by the qualified ABLE program.

(4) Additional guidance . Additional guidance on conditions deemed to meet the requirements of section 529A(e)(1)(B) may be identified in future guidance published in the Internal Revenue Bulletin. See § 601.601(d)(2) of this chapter.

(5) Restriction on use of certification . No inference may be drawn from a disability certification described in this paragraph (e) for purposes of establishing eli

gibility for benefits under title II, XVI, or XIX of the Social Security Act.

(f) Change of designated beneficiary (1) In general . A qualified ABLE program must permit a change in the designated beneficiary of an ABLE account made during the life of the designated beneficiary. At the time when the change becomes effective, the successor designated beneficiary must be an eligible individual. However, a qualified ABLE program may limit the change in designated beneficiary to a member of the family as defined in § 1.529A-1(b)(12) of the current designated beneficiary.

(2) Change effective upon death . A qualified ABLE program may permit a change in the designated beneficiary of an ABLE account, made during the life of the designated beneficiary, to take effect upon the death of the designated beneficiary. The amount to be transferred pursuant to such a beneficiary designation is first subject to the payment of any qualified disability expenses incurred before the designated beneficiary’s death but not yet paid and those described in paragraph (o) of this section, and is subject to the provisions of § 1.529A-4.

(g) Contributions —(1) Permissible property . Except in the case of a program-to-program transfer or a change in designated beneficiary to a new designated beneficiary who is an eligible individual and a member of the family of the former designated beneficiary, contributions to an ABLE account may be made only in cash. A qualified ABLE program may allow cash contributions to be made in the form of a check, money order, credit card, electronic transfer, after-tax payroll deduction, or similar method.

(2) Annual contributions limit —(i) In general . Except as provided in paragraph (g)(2)(ii) of this section, a qualified ABLE program must provide that no contribution to an ABLE account will be accepted to the extent such contribution, when added to all other contributions (whether from the designated beneficiary or one or more other persons) to that ABLE account made during the designated beneficiary’s taxable year causes the total of such contributions during that year to exceed the amount in effect under section 2503(b) for the calendar year in which the designated beneficiary’s taxable year begins. See paragraph

(k)(2) of this section for purposes of applying the rules in this paragraph (g)(2) to rollovers, program-to-program transfers, and designated beneficiary changes.

(ii) Additional contributions by an em- ployed designated beneficiary —(A) In general . An employed designated beneficiary defined in paragraph (g)(2)(iii)(A) of this section may contribute amounts up to the limit specified in paragraph (g) (2)(ii)(B) of this section in addition to the amount specified in paragraph (g)(2)(i) of this section. Although a designated beneficiary’s contributions subject to this compensation income limit do not have to be made from that compensation income, any contribution of the designated beneficiary’s compensation income made directly by the designated beneficiary’s employer is a contribution made by the designated beneficiary. Once the designated beneficiary has made contributions equal to the limit described in paragraph (g)(2)(ii)(B) of this section, additional contributions by the designated beneficiary may be made if permissible under paragraph (g)(2)(i) of this section.

(B) Amount of additional permissible contribution . Any additional contribution made by the designated beneficiary pursuant to paragraph (g)(2)(ii)(A) of this section is limited to the lesser of—

( 1 ) The designated beneficiary’s compensation as defined by section 219(f)(1) for the taxable year; or

( 2 ) An amount equal to the applicable poverty line, as defined in paragraph (g) (2)(iii)(B) of this section, for a one-person household for the calendar year preceding the calendar year in which the designated beneficiary’s taxable year begins.

(iii) Additional definitions. In addition to the definitions in § 1.529A-1(b), the following definitions also apply for the purposes of this section—

(A) Employed designated beneficiary means a designated beneficiary who is an employee (including an employee within the meaning of section 401(c)), with respect to whom no contribution is made for the taxable year to—

( 1 ) A defined contribution plan (within the meaning of section 414(i)) with respect to which the requirements of sections 401(a) or 403(a) are met;

( 2 ) An annuity contract described in section 403(b); and

Bulletin No. 2020–50 1587 December 7, 2020

( 3 ) An eligible deferred compensation plan described in section 457(b).

(B) Applicable poverty line means the amount provided in the poverty guidelines updated periodically in the Federal Regis- ter by the U.S. Department of Health and Human Services under the authority of 42 U.S.C. 9902(2) for the State of residence of the employed designated beneficiary. If the designated beneficiary lives in more than one State during the taxable year, the applicable poverty line is the poverty line for the State in which the designated beneficiary resided longer than in any other State during that year.

(C) Excess compensation contribution means the amount by which the amount contributed during the taxable year of an employed designated beneficiary to the designated beneficiary’s ABLE account exceeds the limit in effect under section 529A(b)(2)(B)(ii) and paragraph (g)(2)(ii)(B) of this section for the calendar year in which the taxable year of the employed designated beneficiary begins. (iv) Example . The provisions of paragraph (g)(2)(ii) of this section may be illustrated by the following example: In 2020, A, an employed designated beneficiary as defined in paragraph (g)(2)(iii)(A) of this section, lives in Hawaii. A’s compensation, as defined by section 219(f)(1), for 2020 is $20,000. The poverty line for a one-person household in Hawaii was $14,380 in 2019. Because A’s compensation exceeded the applicable poverty line amount, A’s additional permissible contribution in 2019 is limited to $14,380, the amount of the 2019 applicable poverty line.

(v) Ensuring contribution limit is met —(A) Responsibility . The employed designated beneficiary, or the person acting on his or her behalf, is solely responsible for ensuring that the requirements in section 529A(b)(2)(B)(ii) and paragraph (g)(2)(ii) of this section are met and for maintaining adequate records for that purpose.

(B) Certification . A qualified ABLE program may allow a designated beneficiary (or the person acting on his or her behalf) to certify, under penalties of perjury, and in the manner specified by the qualified ABLE program that—

( 1 ) The designated beneficiary is an employed designated beneficiary; and

( 2 ) The designated beneficiary’s contributions of compensation are not excess compensation contributions.

(3) Cumulative limit —(i) In general . A qualified ABLE program must provide adequate safeguards to prevent aggregate contributions on behalf of a designated beneficiary in excess of the limit established by that State under section 529(b)(6). For purposes of the preceding sentence, aggregate contributions on behalf of a designated beneficiary include contributions to any prior ABLE account maintained by any State or its agency or instrumentality for the same designated beneficiary, or any former designated beneficiary to the extent his or her ABLE account funds were transferred to the designated beneficiary’s ABLE account. The transfer of a designated beneficiary’s ABLE account from one qualified ABLE program to another with a lower cumulative limit will not violate this rule, but qualified ABLE programs must prohibit subsequent contributions under this general rule. For purposes of this paragraph (g)(3), contributions do not include rollovers, program-to-program transfers or a designated beneficiary change to a new designated beneficiary who is an eligible individual and member of the family of the former designated beneficiary as defined in § 1.529A-1(b)(12).

(ii) Safe harbor . A qualified ABLE program maintained by a State or its agency or instrumentality satisfies the requirement under section 529A(b)(6) if it refuses to accept any additional contribution to an ABLE account (except as provided to the contrary in paragraph (g)(3)(i) of this section) while the balance in that account equals or exceeds the limit established by that State under section 529(b)(6). Nevertheless, without regard to the categories of transfers that caused the account balance to exceed the State limit, once the account balance falls below that limit, additional contributions, subject to the annual contributions limit under paragraph (g)(2) of this section and the limit established by such State under section 529(b)(6), again may be accepted.

(4) Return of excess contributions, ex- cess compensation contributions, and ex- cess aggregate contributions . If an excess contribution as defined in § 1.529A-1(b) (9), an excess compensation contribution

as defined in paragraph (g)(2)(iii)(C) of this section, or an excess aggregate contribution as defined in § 1.529A-1(b)(10) is deposited into or allocated to the ABLE account of a designated beneficiary, a qualified ABLE program must return that excess contribution, excess compensation contribution, or excess aggregate contribution, including all net income attributable to that contribution, as determined under the rules set forth in § 1.408-11 (treating references to an IRA as references to an ABLE account and references to returned contributions under section 408(d)(4) as references to excess contributions or excess aggregate contributions), to the person or persons who made that contribution. Each excess contribution, excess compensation contribution, and excess aggregate contribution must be returned to its contributor(s) on a last-in-first-out basis until the entire excess, along with all net income attributable to such excess, has been returned. In the case of an excess compensation contribution, the employed designated beneficiary, or the person acting on the employed designated beneficiary’s behalf, is responsible for identifying any excess compensation contribution and for requesting the return of the excess compensation contribution. Returned contributions must be received by the contributor(s) on or before the due date (including extensions) of the Federal income tax return of the designated beneficiary for the taxable year in which the excess contribution or excess aggregate contribution was made. See § 1.529A-3(a) for Federal income tax considerations for the contributor(s). If an excess contribution or excess aggregate contribution and the net income attributable to the excess contribution or excess aggregate contribution are returned to a contributor other than the designated beneficiary, the qualified ABLE program must notify the designated beneficiary of such return at the time of the return. No notification is required if amounts are rejected by the qualified ABLE program before they are deposited into or allocated to the designated beneficiary’s ABLE account.

(5) Restriction of contributors . A qualified ABLE program may allow the designated beneficiary, from time to time, to restrict who may make contributions to the designated beneficiary’s ABLE account.

December 7, 2020 1588 Bulletin No. 2020–50

(h) Qualified disability expenses —(1) In general . Qualified disability expenses are expenses incurred that relate to the blindness or disability of the designated beneficiary of the ABLE account and are for the benefit of that designated beneficiary in maintaining or improving his or her health, independence, or quality of life. See § 1.529A-1(b)(15). Such expenses include, but are not limited to, expenses related to the designated beneficiary’s education, housing, transportation, employment training and support, assistive technology and related services, personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, and funeral and burial expenses, as well as other expenses that may be identified from time to time in future guidance published in the Internal Revenue Bulletin. See § 601.601(d)(2) of this chapter. Qualified disability expenses include basic living expenses and are not limited to items for which there is a medical necessity or which solely benefit an individual with a disability.

(2) Example . The following example illustrates this paragraph (h): B, an individual, has a medically determined mental impairment that causes marked and severe limitations on B’s ability to navigate and communicate. A smart phone would enable B to navigate and communicate more safely and effectively, thereby helping B to maintain B’s independence and to improve B’s quality of life. Therefore, the expense of buying, using, and maintaining a smart phone that is used by B would be a qualified disability expense.

(i) Separate accounting . A program will not be treated as a qualified ABLE program unless it provides separate accounting for each ABLE account. Separate accounting requires that contributions for the benefit of a designated beneficiary and any earnings attributable thereto must be allocated to that designated beneficiary’s ABLE account. Whether or not a program provides each designated beneficiary an annual account statement showing the total account balance, the investment in the account, the accrued earnings, and the distributions from the account, the program must give this information to the designated beneficiary upon request.

(j) Program-to-program transfers . A qualified ABLE program may permit a change of qualified ABLE program or a change of designated beneficiary by means of a program-to-program transfer as defined in § 1.529A-1(b)(13). In that event, subject to any contrary provisions or limitations adopted by the qualified ABLE program, rules similar to the rules of § 1.401(a)(31)-1, Q&A-3 and 4 (which apply for purposes of a direct rollover from a qualified plan to an eligible retirement plan) apply for purposes of determining whether an amount is paid in the form of a program-to-program transfer.

(k) Carryover of attributes —(1) In general . Upon a rollover, program-to-program transfer, or change of designated beneficiary, all of the attributes of the former ABLE account relevant for purposes of calculating the investment in the account are applicable to the recipient ABLE account. The portion of the rollover or transfer amount that constituted investment in the account from which the distribution or transfer was made is added to investment in the recipient ABLE account. In addition, the portion of the rollover or transfer amount that constituted earnings of the account from which the distribution or transfer was made is added to the earnings of the recipient ABLE account.

(2) Annual contribution limit . Upon a rollover or program-to-program transfer, for purposes of applying the annual contribution limit under paragraph (g)(2) of this section to the transferee account, annual contributions to the designated beneficiary’s transferor ABLE account during the taxable year in which the rollover or program-to-program transfer occurs are included. However, upon a change of designated beneficiary, or upon a rollover or program-to-program transfer to the ABLE account of a different designated beneficiary who is both a member of the family as defined in § 1.529A-1(b)(12) and an eligible individual, no amounts contributed to the prior designated beneficiary’s ABLE account are included when applying the annual contribution limit under paragraph (g)(2) of this section.

(3) Investment direction limit . Upon a rollover or program-to-program transfer, the number of investment directions by the designated beneficiary include the number

of investment directions made prior to the rollover or program-to-program transfer during the same taxable year for purposes of paragraph (l) of this section. However, upon a change of designated beneficiary, or upon a rollover or program-to-program transfer to the ABLE account of a different designated beneficiary who is both a member of the family as defined in § 1.529A-1(b)(12) and an eligible individual, the number of investment directions made for the prior designated beneficiary’s ABLE account are not included in determining the number of investment directions made for the new designated beneficiary’s ABLE account in that same year.

(l) Investment direction . A program will not be treated as a qualified ABLE program unless it provides that the designated beneficiary of an ABLE account established under such program may direct, whether directly or indirectly, the investment of any contributions to the program (or any earnings thereon) no more than two times in any calendar year. Such an investment direction does not include a request to transfer any part of the account balance from an investment option to a cash equivalent option to effectuate a distribution, or the automatic rebalancing of the assets of an ABLE account to maintain the asset allocation level chosen when the account was established or by a subsequent investment direction.

(m) No pledging of interest as security for a loan . A program will not be treated as a qualified ABLE program unless the terms of the program, or a State statute or regulation that governs the program, prohibit any interest in the program or any portion thereof from being used as security for a loan. For this purpose, the program administrator’s advance of funds to satisfy a withdrawal request during the period between the sale of an asset in the ABLE account (whose value is sufficient to satisfy the withdrawal request) and the clearing or settlement of that sale, does not constitute a loan, pledge, or grant of security for a loan. Similarly, the use of checking accounts or debit cards to facilitate a qualified ABLE program’s ability to make distributions will not be treated as a pledge or grant of security for a loan during the period between the use of the check or debit card and the clearing or settlement of that transaction, provided

Bulletin No. 2020–50 1589 December 7, 2020

that the ABLE program does not advance funds to a designated beneficiary in excess of the amount in the designated beneficiary’s ABLE account.

(n) No sale or exchange . A qualified ABLE program must ensure that no interest in an ABLE account may be sold or exchanged.

(o) Post-death payments . A qualified ABLE program must provide that a portion or all of the balance remaining in the ABLE account of a deceased designated beneficiary must be distributed to a State that files a claim against the designated beneficiary or the ABLE account itself with respect to benefits provided to the designated beneficiary under that State’s Medicaid plan established under title XIX of the Social Security Act. The payment of such claim (if any) will be made only after providing for the payment from the designated beneficiary’s ABLE account of the designated beneficiary’s funeral and burial expenses (including the unpaid balance of a pre-death contract for those services) and all outstanding payments due for his or her other qualified disability expenses, and will be limited to the amount of the total medical assistance paid for the designated beneficiary after the establishment of the ABLE account over the amount of any premiums paid, whether from the ABLE account or otherwise by or on behalf of the designated beneficiary, to a Medicaid Buy-In program under any such State Medicaid plan. The establishment of the ABLE account is the date on which the ABLE account was established or, if earlier, the date on which was established any ABLE account for the same designated beneficiary from which amounts were rolled over or transferred to the ABLE account, but in no event earlier than the date on which the designated beneficiary became the designated beneficiary of the account from which amounts were transferred. After the expiration of the applicable statute of limitations for filing Medicaid claims against the designated beneficiary’s estate, a qualified ABLE program may distribute the balance of the ABLE account to the successor designated beneficiary or, if none, to the deceased designated beneficiary’s estate. A State law prohibiting the filing of such a claim against either the ABLE account or the designated beneficiary’s estate will not

prevent that State’s program from being a qualified ABLE program.

(p) Reporting requirements . A qualified ABLE program must comply with all applicable reporting requirements, including without limitation those described in §§ 1.529A-5 through 1.529A-7. (q) Applicability date . This section applies to calendar years beginning on or after January 1, 2021. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-3 Tax treatment.

(a) Taxation of distributions —(1) In general . Each distribution from an ABLE account consists of an earnings portion of the account (computed in accordance with paragraph (c) of this section) and investment in the account. If the total amount distributed from an ABLE account to or for the benefit of the designated beneficiary of that ABLE account during his or her taxable year does not exceed the qualified disability expenses of the designated beneficiary paid during that year, no amount distributed is includible in the gross income of the designated beneficiary for that year. If the total amount distributed from an ABLE account to or for the benefit of the designated beneficiary of that ABLE account during his or her taxable year exceeds the qualified disability expenses of the designated beneficiary paid during that year (regardless of when incurred), the distributions from the ABLE account, except to the extent excluded from gross income under this section or any other provision of chapter 1 of the Internal Revenue Code, must be included in the gross income of the designated beneficiary in the manner provided under this section and section 72. The amount to be included in gross income is based on the earnings portion of each distribution, computed in accordance with paragraph (c) of this section. The earnings portion that is includible in gross income is the sum of the earnings portion of all distributions made in that year, reduced by an amount that bears the same ratio to the total earnings portion as the amount of qualified disability expenses paid during the year bears to such total distributions during the year. If an excess contribution or excess aggregate contribution is returned within the time period required in § 1.529A-2(g)(4), any net in

come distributed is includible in the gross income of the contributor(s) in the taxable year in which the excess contribution or excess aggregate contribution was made.

(2) Additional period . The designated beneficiary may treat as having been paid during the preceding taxable year qualified disability expenses paid on or before the 60th day immediately following the end of the designated beneficiary’s preceding taxable year. Qualified disability expenses treated, pursuant to the rule in the preceding sentence, as having been paid during the designated beneficiary’s taxable year immediately prior to the year of their actual payment may not be included in the total qualified disability expenses for the year in which they were paid.

(b) Additional exclusions from gross income —(1) Rollover . A rollover as defined in § 1.529A-1(b)(16) is not included in gross income under paragraph (a) of this section.

(2) Program-to-program transfers . A program-to-program transfer as defined in § 1.529A-1(b)(13) is not a distribution and is not included in gross income under paragraph (a) of this section.

(3) Change of designated beneficia- ry —(i) In general . A change of designated beneficiary of an ABLE account is not treated as a distribution for purposes of section 529A, and is not included in gross income under paragraph (a) of this section, if the successor designated beneficiary is—

(A) An eligible individual for the taxable year in which the change is made; and

(B) A member of the family (as defined in § 1.529A-1(b)(12)) of the former designated beneficiary.

(ii) Other designated beneficiary changes . In the case of any change of designated beneficiary not described in paragraph (b)(3)(i) of this section, the former designated beneficiary of that ABLE account will be treated as having received a distribution of the fair market value of the assets in that ABLE account on the date on which the change is made to the new designated beneficiary.

(4) Payments to creditors post-death . Distributions made after the death of the designated beneficiary in payment of outstanding obligations due for qualified disability expenses, as well as the funeral and burial expenses of the designated ben

December 7, 2020 1590 Bulletin No. 2020–50

eficiary, are not included in gross income of the designated beneficiary or his or her estate. Included among these obligations is the post-death payment of any part of a claim filed against the deceased designated beneficiary or his or her estate or ABLE account by a State with respect to benefits provided to the designated beneficiary under that State’s Medicaid plan.

(c) Computation of earnings . The earnings portion of a distribution is equal to the product of the amount of the distribution and the earnings ratio, as defined in § 1.529A-1(b)(7). The balance of the distribution (the amount of the distribution minus the earnings portion of that distribution) is the portion of that distribution that constitutes the return of investment in the account.

(d) Additional tax on amounts inclu- dible in gross income —(1) In general . If any amount of a distribution from an ABLE account is includible in the gross income of a person for any taxable year under paragraph (a) of this section (includible amount), the income tax imposed on that person by chapter 1 of the Internal Revenue Code will be increased by an amount equal to 10 percent of the includible amount.

(2) Exceptions —(i) Distributions on or after the death of the designated ben- eficiary . Paragraph (d)(1) of this section does not apply to any distribution made from the ABLE account on or after the death of the designated beneficiary to the estate of the designated beneficiary, to an heir or legatee of the designated beneficiary, or to a creditor described in paragraph (b)(4) of this section.

(ii) Returned excess contributions and additional accounts . Paragraph (d)(1) of this section does not apply to any return made in accordance with § 1.529A-2(g) (4) of an excess contribution as defined in § 1.529A-1(b)(9), an excess compensation contribution as defined in § 1.529A-2(g) (2)(iii)(C), excess aggregate contribution as defined in § 1.529A-1(b)(10), or an additional account as referenced in § 1.529A-2(c)(3)(ii)(A), (B), or (C). (e) Tax on excess contributions . Under section 4973(h), a contribution to an ABLE account in excess of the annual contributions limit described in § 1.529A-2(g)(2) is subject to an excise tax in an amount equal to 6 percent of the ex

cess contribution. However, any the excess contribution or excess compensation contribution as defined in § 1.529A-2(g) (2)(iii)(C) returned in accordance with the provisions of § 1.529A-2(g)(4) is not treated as a contribution.

(f) Filing requirements . A qualified ABLE program is not required to file Form 990, “Return of Organization Exempt From Income Tax,” Form 1041, “U.S. Income Tax Return for Estates and Trusts,” or Form 1120, “U.S. Corporation Income Tax Return.” However, a qualified ABLE program is required to file Form 990-T, “Exempt Organization Business Income Tax Return,” if such filing would be required under the rules of §§ 1.60122(e) and 1.6012-3(a)(5) if the ABLE program were an organization described in those sections.

(g) No inference outside section 529A . The rules provided in this section concerning the Federal tax treatment of contributions apply only for purposes of the application of section 529A. No inference is intended with respect to the application of any other Code provisions or Federal tax doctrines. For example, a contribution made by an employer to the ABLE account of an employee or an employee’s family member is subject to the rules governing the Federal taxation of compensation.

(h) Applicability date . This section applies to calendar years beginning on or after January 1, 2021. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-4 Gift, estate, and generation- skipping transfer taxes.

(a) Contributions —(1) In general . Each contribution by a person to an ABLE account other than by the designated beneficiary of that account is treated as a completed gift to the designated beneficiary of the account for gift tax purposes. Under the applicable Federal gift tax rules, a contribution from a corporation, partnership, trust, estate, or other entity is treated as a gift by the shareholders, partners, or other beneficial owners in proportion to their respective ownership interests in the entity. See § 25.2511-1(c) and (h) of this chapter. A gift to an ABLE account is not treated as either a gift of a future interest in property, or a qualified transfer under section

2503(e). To the extent a contributor’s gifts to the designated beneficiary, including gifts paid into the designated beneficiary’s ABLE account, do not exceed the annual limit in section 2503(b), the contribution is not a taxable gift. This provision, however, does not change any other provision applicable to the transfer. For example, a contribution by the employer of the designated beneficiary’s parent continues to constitute earned income to the parent and then a gift by the parent to the designated beneficiary. The timely return of an excess contribution or an excess aggregate contribution in accordance with § 1.529A-2(g) (4) is not a taxable gift.

(2) Generation-skipping transfer (GST) tax . To the extent the contribution into an ABLE account is a nontaxable gift for Federal gift tax purposes, the inclusion ratio for purposes of the GST tax will be zero pursuant to section 2642(c)(1).

(3) Designated beneficiary as contribu- tor . A designated beneficiary may make a contribution to fund his or her own ABLE account. That contribution is not a gift.

(b) Distributions . No distribution from an ABLE account to or for the benefit of the designated beneficiary is treated as a taxable gift to that designated beneficiary.

(c) Transfer to another designated beneficiary . Neither gift tax nor generation-skipping transfer tax applies to the transfer (by rollover, program-to-program transfer, or change of beneficiary) of part or all of an ABLE account to the ABLE account of a different designated beneficiary if the successor designated beneficiary is both an eligible individual and a member of the family (as described in § 1.529A-1(b)(12)) of the designated beneficiary. Any other transfer will constitute a gift by the designated beneficiary to the successor designated beneficiary, and the usual gift and GST tax rules will apply.

(d) Transfer tax on death of designated beneficiary . Upon the death of the designated beneficiary, the designated beneficiary’s ABLE account is includible in his or her gross estate for estate tax purposes under section 2031. The payment of outstanding qualified disability expenses and the payment of certain claims made by a State under its Medicaid plan may be deductible for estate tax purposes if the requirements of section 2053 are satisfied.

Bulletin No. 2020–50 1591 December 7, 2020

(e) Applicability date . This section applies to calendar years beginning on or after January 1, 2021. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-5 Reporting of the establishment of and contributions to an ABLE account.

(a) In general . A filer defined in paragraph (b)(1) of this section must, with respect to each ABLE account—

(1) File an annual information return, as described in paragraph (c) of this section, with the Internal Revenue Service; and

(2) Furnish an annual statement, as described in paragraph (d) of this section, to the designated beneficiary of the ABLE account.

(b) Additional definitions . In addition to the definitions in § 1.529A-1(b), the following definitions also apply for purposes of this section—

(1) Filer means the State or its agency or instrumentality that establishes and maintains the qualified ABLE program under which an ABLE account is established. The filing may be done by either an officer or employee of the State or its agency or instrumentality having control of the qualified ABLE program, or the officer’s or employee’s designee.

(2) TIN means taxpayer identification number as defined in section 7701(a)(41).

(c) Requirement to file return —(1) Form of return . For purposes of reporting the information described in paragraph (c)(2) of this section, the filer must file Form 5498QA, “ABLE Account Contribution Information,” or any successor form, together with Form 1096, “Annual Summary and Transmittal of U.S. Information Returns.”

(2) Information included on return . With respect to each ABLE account, the filer must include on the return—

(i) The name, address, and TIN of the designated beneficiary of the ABLE account;

(ii) The name, address, and TIN of the filer;

(iii) Information regarding the establishment of the ABLE account, as required by the form and its instructions;

(iv) Information regarding the disability certification or other basis for eligibility of the designated beneficiary, as required

by the form and its instructions. For further information regarding eligibility and disability certification, see § 1.529A-2(d) and (e), respectively;

(v) The total amount of any contributions made with respect to the ABLE account during the calendar year; such contributions do not include any contribution rejected and returned to the contributor before being deposited into or allocated to the ABLE account or any excess contributions, excess compensation contributions, or excess aggregate contributions returned as described in § 1.529A-2(g)(4);

(vi) The fair market value of the ABLE account as of the last day of the calendar year; and

(vii) Any other information required by the form, its instructions, or published guidance. See §§ 601.601(d) and 601.602 of this chapter.

(3) Time and manner of filing re- turn —(i) In general . Except as provided in paragraph (c)(3)(ii) of this section, the information returns required under this paragraph must be filed on or before May 31 of the year following the calendar year with respect to which the return is being filed, in accordance with the forms and their instructions.

(ii) Extensions of time . See §§ 1.6081-1 and 1.6081-8 for rules relating to extensions of time to file information returns required in this section.

(iii) Electronic filing . See § 301.6011-2 of this chapter for rules relating to electronic filing. See also Instructions for Forms 1099-QA and 5498-QA, Distributions From ABLE Accounts and ABLE Account Contribution Information.

(iv) Substitute forms . The filer may file the returns required under this paragraph (c) on an acceptable substitute form. See Publication 1179, “General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.”

(d) Requirement to furnish statement (1) In general . The filer must furnish a statement to the designated beneficiary of the ABLE account for which it is required to file a Form 5498-QA (or any successor form). The statement must include—

(i) The information required under paragraph (c)(2) of this section;

(ii) A legend that identifies the statement as important tax information that is

being furnished to the Internal Revenue Service; and

(iii) The name and address of the office or department of the filer that is the information contact for questions regarding the ABLE account to which the Form 5498QA relates.

(2) Time and manner of furnishing statement —(i) In general . Except as provided in paragraph (d)(2)(ii) of this section, the filer must furnish the statement described in paragraph (d)(1) of this section to the designated beneficiary on or before March 15 of the year following the calendar year with respect to which the statement is being furnished. If mailed, the statement must be sent to the designated beneficiary’s last known address. The statement may be furnished electronically, as provided in § 1.529A-7.

(ii) Extensions of time . The Internal Revenue Service may, at its discretion, grant an extension of time to furnish statements required in this section.

(3) Copy of Form 5498-QA . The filer may satisfy the requirement of this paragraph (d) by furnishing either a copy of Form 5498-QA (or successor form) or an acceptable substitute form. See Publication 1179, “General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.”

(e) Request for TIN of designated ben- eficiary . The filer must request the TIN of the designated beneficiary at the time the ABLE account is established if the filer does not already have a record of the designated beneficiary’s correct TIN. The filer must clearly notify the designated beneficiary that the law requires the designated beneficiary to furnish a TIN so that it may be included on an information return to be filed by the filer. The designated beneficiary may provide his or her TIN in any manner including orally, in writing, or electronically. If the TIN is furnished in writing, no particular form is required. Form W-9, “Request for Taxpayer Identification Number and Certification,” may be used, or the request may be incorporated into the forms related to the establishment of the ABLE account.

(f) Penalties —(1) Failure to file return . The section 6693 penalty may apply to the filer that fails to file information returns at the time and in the manner required by this

December 7, 2020 1592 Bulletin No. 2020–50

section, unless it is shown that such failure is due to reasonable cause. See section 6693 and § 301.6693-1 of this chapter. (2) Failure to furnish TIN . The section 6723 penalty may apply to any designated beneficiary who fails to furnish his or her TIN to the filer. See section 6723, and § 301.6723-1 of this chapter, for rules relating to the penalty for failure to furnish a TIN.

(g) Applicability date . The rules of this section apply to information returns required to be filed, and payee statements required to be furnished, after December 31, 2020. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-6 Reporting of distributions from and termination of an ABLE account.

(a) In general . The filer as defined in § 1.529A-5(b)(1) must, with respect to each ABLE account from which any distribution is made or which is terminated during the calendar year—

(1) File an annual information return, as described paragraph (b) of this section, with the Internal Revenue Service; and

(2) Furnish an annual statement, as described in paragraph (c) of this section, to the designated beneficiary of the ABLE account and to each contributor who received a returned contribution in accordance with § 1.529A-2(g)(4) attributable to the calendar year.

(b) Requirement to file return —(1) Form of return . For purposes of reporting the information in paragraph (b)(2) of this section, the filer must file Form 1099-QA, “Distributions From ABLE Accounts,” or any successor form, together with Form 1096, “Annual Summary and Transmittal of U.S. Information Returns.”

(2) Information included on return . The filer must include on the return—

(i) The name, address, and TIN of the recipient of the payment, whether the designated beneficiary of the ABLE account or any contributor who received a returned contribution in accordance with § 1.529A-2(g)(4) attributable to the calendar year;

(ii) The name, address, and TIN of the filer;

(iii) Whether the return is being filed with respect to the designated beneficiary or to a contributor;

(iv) The aggregate amount of distributions or returned contributions (including net income attributable to the returned contributions) from the ABLE account to the recipient during the calendar year;

(v) Information as to basis and earnings with respect to such distributions or returns of contributions;

(vi) Information regarding termination (if any) of the ABLE account if the recipient is the designated beneficiary;

(vii) Information regarding each program-to-program transfer from the ABLE account during the designated beneficiary’s taxable year; and

(viii) Any other information required by the form, its instructions, or published guidance. See §§ 601.601(d) and 601.602 of this chapter.

(3) Information excluded . A State filing a claim against the estate or ABLE account of a deceased designated beneficiary with respect to benefits provided to the designated beneficiary under that State’s Medicaid plan is a creditor, and not a beneficiary, so the payment of the claim is not a distribution from the ABLE account and should not be reported as such on the Form 1099-QA for that year.

(4) Time and manner of filing return (i) In general . Except as provided in paragraph (b)(4)(ii) of this section, the Forms 1099-QA and 1096 must be filed on or before February 28 (March 31 if filing electronically) of the year following the calendar year with respect to which the return is being filed, in accordance with the forms and their instructions.

(ii) Extensions of time . See §§ 1.6081-1 and 1.6081-8 for rules relating to extensions of time to file information returns required in this section.

(iv) Substitute forms . The filer may file the return required under this paragraph (b) on an acceptable substitute form. See Publication 1179, “General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.”

statement to the designated beneficiary and each contributor (if any) of the ABLE account for which it is required to file a Form 1099-QA (or any successor form). The statement must include—

(i) The information required under paragraph (b)(2) of this section.

(ii) A legend that identifies the statement as important tax information that is being furnished to the Internal Revenue Service; and

(iii) The name and address of the office or department of the filer that is the information contact for questions regarding the ABLE account to which the Form 1099QA relates.

(2) Time and manner of furnishing statement —(i) In general . Except as provided in paragraph (c)(2)(ii) of this section, a filer must furnish the statement described in paragraph (c)(1) of this section to the designated beneficiary or contributor on or before January 31 of the year following the calendar year with respect to which the statement is being furnished. If mailed, the statement must be sent to the recipient’s last known address. The statement may be furnished electronically, as provided in § 1.529A-7.

(ii) Extensions of time . The Internal Revenue Service may, at its discretion, grant an extension of time to furnish statements required in this section.

(3) Copy of Form 1099-QA . A filer may satisfy the requirement of this paragraph (c) by furnishing either a copy of Form 1099-QA (or successor form) or an acceptable substitute form. See Publication 1179, “General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.”

(d) Request for TIN of contributor(s) (1) In general . Except as provided in paragraph (d)(2) of this section, a filer must request the TIN of each contributor to the ABLE account at the time a contribution is made, if the filer does not already have a record of that person’s correct TIN.

(2) Exception . If the filer has a system in place to identify and reject amounts that either would constitute an excess contribution or excess aggregate contribution (as defined in § 1.529A-1(b)(9) or (10), respectively) or were contributed to an additional ABLE account as described in § 1.529A-2(c)(3)(ii)(C) (excess amounts)

Bulletin No. 2020–50 1593 December 7, 2020

before those excess amounts are deposited into or allocated to an ABLE account, the filer need not request the TIN of each contributor at the time of contribution. A filer with such a system must request a contributor’s TIN only if and when an excess contribution or excess aggregate contribution nevertheless is deposited into or allocated to an account and the filer must return the excess amounts including net income to the contributor. The filer must clearly notify each such contributor to the account that the law requires that person to furnish a TIN so that it may be included on an information return to be filed by the filer. The contributor may provide his or her TIN in any manner including orally, in writing, or electronically. If the TIN is furnished in writing, no particular form is required. Form W-9, “Request for Taxpayer Identification Number and Certification,” may be used, or the request may be incorporated into the forms related to the establishment of the ABLE account.

(e) Penalties —(1) Failure to file return . The section 6693 penalty may apply to a filer that fails to file information returns at the time and in the manner required by this section, unless it is shown that such failure is due to reasonable cause. See section 6693 and § 301.6693-1 of this chapter. (2) Failure to furnish TIN . The section 6723 penalty may apply to any contributor who fails to furnish his or her TIN to the filer in accordance with paragraph (d) of this section. See section 6723, and § 301.6723-1 of this chapter, for rules relating to the penalty for failure to furnish a TIN.

(f) Applicability date . The rules of this section apply to information returns required to be filed, and payee statements required to be furnished, after December 31, 2020. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-7 Electronic furnishing of statements to designated beneficiaries and contributors.

(a) Electronic furnishing of state- ments —(1) In general . A filer required under § 1.529A-5 or § 1.529A-6 to furnish a written statement to a designated beneficiary of or contributor to an ABLE account may furnish the statement in an electronic format in lieu of a paper for

mat. A filer who meets the requirements of paragraphs (a)(2) through (6) of this section is treated as furnishing the required statement.

(2) Consent —(i) In general . The recipient of the statement must have affirmatively consented to receive the statement in an electronic format. The consent may be made electronically in any manner that reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished to the recipient. Alternatively, the consent may be made in a paper document if it is confirmed electronically.

(ii) Withdrawal of consent . The consent requirement of this paragraph (a)(2) is not satisfied if the recipient withdraws the consent and the withdrawal takes effect before the statement is furnished. The filer may provide that a withdrawal of consent takes effect either on the date it is received by the filer or on another date no more than 60 days later. The filer also may provide that a request for a paper statement will be treated as a withdrawal of consent.

(iii) Change in hardware or software requirements . If a change in the hardware or software required to access the statement creates a material risk that the recipient will not be able to access the statement, the filer must, prior to changing the hardware or software, provide the recipient with a notice. The notice must describe the revised hardware and software required to access the statement and inform the recipient that a new consent to receive the statement in the revised electronic format must be provided to the filer if the recipient does not want to withdraw the consent. After implementing the revised hardware and software, the filer must obtain from the recipient, in the manner described in paragraph (a)(2)(i) of this section, a new consent or confirmation of consent to receive the statement electronically.

(iv) Examples . For purposes of the following examples that illustrate the rules of this paragraph (a)(2), assume that the requirements of § 1.529A-7(a)(3) have been met:

(A) Example 1 . Filer F sends Recipient R a letter stating that R may consent to receive statements required under § 1.529A-5 or § 1.529A-6 electronically on a website instead of in a paper format. The letter contains instructions explaining how to consent to receive the statements electronically by accessing the website, downloading the consent document,

completing the consent document, and e-mailing the completed consent back to F. The consent document posted on the website uses the same electronic format that F will use for the electronically furnished statements. R reads the instructions and submits the consent in the manner provided in the instructions. R has consented to receive the statements electronically in the manner described in paragraph (a)(2)(i) of this section.

(B) Example 2 . Filer F sends Recipient R an e-mail stating that R may consent to receive statements required under § 1.529A-5 or § 1.529A-6 electronically instead of in a paper format. The e-mail contains an attachment instructing R how to consent to receive the statements electronically. The e-mail attachment uses the same electronic format that F will use for the electronically furnished statements. R opens the attachment, reads the instructions, and submits the consent in the manner provided in the instructions. R has consented to receive the statements electronically in the manner described in paragraph (a)(2)(i) of this section.

(C) Example 3 . Filer F posts a notice on its website stating that Recipient R may receive statements required under § 1.529A-5 or § 1.529A-6 electronically instead of in a paper format. The website contains instructions on how R may access a secure web page and consent to receive the statements electronically. By accessing the secure web page and giving consent, R has consented to receive the statements electronically in the manner described in paragraph (a)(2)(i) of this section.

(3) Required disclosures —(i) In gener- al . Prior to, or at the time of, a recipient’s consent, the filer must provide to the recipient a clear and conspicuous disclosure statement containing each of the disclosures described in paragraphs (a)(3)(ii) through (viii) of this section.

(ii) Paper statement . The recipient must be informed that the statement will be furnished on paper if the recipient does not consent to receive it electronically.

(iii) Scope and duration of consent . The recipient must be informed of the scope and duration of the consent. For example, the recipient must be informed whether the consent applies to statements furnished every year after the consent is given until it is withdrawn in the manner described in paragraph (a)(3)(v)(A) of this section, or only to the statement required to be furnished on or before the due date immediately following the date on which the consent is given.

(iv) Post-consent request for a paper statement . The recipient must be informed of any procedure for obtaining a paper copy of the recipient’s statement after giving the consent and whether a request for a paper statement will be treated as a withdrawal of consent.

December 7, 2020 1594 Bulletin No. 2020–50

(v) Withdrawal of consent . The recipient must be informed that—

(A) The recipient may withdraw a consent by writing (electronically or on paper) to the person or department whose name, mailing address, and e-mail address is provided in the disclosure statement;

(B) The filer will confirm, in writing (electronically or on paper), the withdrawal and the date on which it takes effect; and

(C) A withdrawal of consent does not apply to a statement that was furnished electronically in the manner described in this paragraph (a) before the date on which the withdrawal of consent takes effect.

(vi) Notice of termination . The recipient must be informed of the conditions under which a filer will cease furnishing statements electronically to the recipient.

(vii) Updating information . The recipient must be informed of the procedures for updating the information needed by the filer to contact the recipient. The filer must inform the recipient of any change in the filer’s contact information.

(viii) Hardware and software require- ments . The recipient must be provided with a description of the hardware and software required to access, print, and retain the statement, and the date when the statement will no longer be available on the website.

(4) Format . The electronic version of the statement must contain all required information. See Publication 1179, “General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.”

(5) Notice —(i) In general . If the statement is furnished on a website, the filer must notify the recipient that the statement is posted on a website. The notice may be delivered by mail, electronic mail, or in person. The notice must provide instructions on how to access and print the statement. The notice must include the following statement in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” If the notice is provided by electronic mail, the foregoing statement must be in the subject line of the electronic mail.

(ii) Undeliverable electronic address . If an electronic notice described in paragraph (a)(5)(i) of this section is returned as undeliverable, and the correct electron

ic address cannot be obtained from the filer’s records or from the recipient, then the filer must furnish the notice by mail or in person within 30 days after the electronic notice is returned.

(iii) Corrected statements . If the filer has corrected a recipient’s statement that was furnished electronically, the filer must furnish the corrected statement to the recipient electronically. If the recipient’s statement was furnished through a website posting and the filer has corrected the statement, the filer must notify the recipient that it has posted the corrected statement on the website within 30 days of such posting in the manner described in paragraph (a)(5)(i) of this section. The corrected statement or the notice must be furnished by mail or in person if—

(A) An electronic notice of the website posting of an original statement or the corrected statement was returned as undeliverable; and

(B) The recipient has not provided a new e-mail address.

(6) Access period . Statements furnished on a website must be retained on the website through October 15 of the year following the calendar year to which the statements relate (or the first business day after such October 15 if October 15 falls on a Saturday, Sunday, or legal holiday). The filer must maintain access to corrected statements that are posted on the website through October 15 of the year following the calendar year to which the statements relate (or the first business day after such October 15 if October 15 falls on a Saturday, Sunday, or legal holiday) or the date 90 days after the corrected statements are posted, whichever is later. The rules in this paragraph (a)(6) do not replace the filer’s obligation to keep records under section 6001 and § 1.6001-1(a). (b) Applicability date . This section applies to statements required to be furnished after December 31, 2020. See § 1.529A-8 for the provision of transition relief.

§ 1.529A-8 Applicability dates and transition relief.

(a) Applicability dates . Except as otherwise provided in paragraph (b) of this section, §§ 1.529A-1 through 1.529A-4 apply for calendar years beginning on or after January 1, 2021, §§ 1.529A-5 and

1.529A-6 apply to information returns required to be filed, and payee statements required to be furnished, after December 31, 2020, and § 1.529A-7 applies to statements required to be furnished after December 31, 2020.

(b) Transition relief —(1) In general . Any program purporting to be a qualified ABLE program will not be disqualified during the transition period set forth in paragraph (b)(2) of this section (transition period) solely because of noncompliance with one or more provisions of §§ 1.529A-1 through 1.529A-7, provided that the program is established and operated in accordance with a reasonable, good faith interpretation of section 529A. Similarly, no ABLE account established and maintained under a program that meets the requirements of this paragraph will fail to qualify as an ABLE account during the transition period. However, to be a qualified ABLE program and an ABLE account under such a program after the transition period, the program and each account established and maintained under the program must be in compliance with §§ 1.529A-1 through 1.529A-7 by the end of the transition period. In no event, however, will a complete failure to file and furnish reports, information returns and payee statements required under section 529A(d)(1) for any accounts established and maintained under the program (including for calendar years beginning prior to January 1, 2021), be deemed to be due to reasonable cause for purposes of avoiding penalties imposed under section 6693.

(2) Transition period . For purposes of paragraph (b)(1) of this section, the transition period begins with the establishment of the program purporting to be a qualified ABLE program and continues through the later of—

(i) November 21, 2022; or (ii) The day immediately preceding the first day of the qualified ABLE program’s first taxable year beginning after the close of the first regular session of the State legislature that begins after November 19, 2020. If a State has a two-year legislative session, each calendar year of such session will be deemed to be a separate regular session of the State legislature for purposes of this paragraph.

(3) Compliance after transition period . After the transition period, a program and

Bulletin No. 2020–50 1595 December 7, 2020

- - - - (b) * * *

CFR part or section where identifed and described	Current OMB Control No.
* * * * *
1.529A-2	1545-2293
1.529A-5	1545-2262
1.529A-6	1545-2262
1.529A-7	1545-2262

Sunita Lough, Deputy Commissioner for Services and Enforcement.

Approved: September 29, 2020

David J. Kautter, Assistant Secretary of the Treasury

(Tax Policy).

(Filed by the Office of the Federal Register on November 18, 2020, 8:45 am, and published in the issue of the Federal Register for November 19, 2020, 85 F.R. 74010)

an account established and maintained under that program must be in compliance with §§ 1.529A-1 through 1.529A-7.

PART 25—GIFT TAXES; GIFTS MADE AFTER DECEMBER 31, 1954

Par. 5. The authority citation for part 25 continues to read in part as follows:

Authority: 26 U.S.C. 7805.

Par. 6. Section 25.2501-1 is amended by adding a sentence to the end of paragraph (a)(1) to read as follows:

§ 25.2501-1 Imposition of tax.

(a) * * * (1) * * * For gift tax rules related to an ABLE account established under section 529A, see § 1.529A-4 of this chapter.

Par. 7. Section 25.2503-3 is amended by adding a sentence to the end of paragraph (a) to read as follows:

§ 25.2503-3 Future interests in property.

(a)* * * A contribution to an ABLE account established under section 529A is not a future interest.

Par. 8. Section 25.2503-6 is amended by adding a sentence to the end of paragraph (a) to read as follows:

§ 25.2503–6 Exclusion for certain qualified transfer for tuition or medical expenses.

(a) * * * A contribution to an ABLE account established under section 529A is not a qualified transfer.

Par. 9. Section 25.2511-2 is amended by adding a sentence to the end of paragraph (a) to read as follows:

§ 25.2511-2 Cessation of donor’s dominion and control.

(a) * * * For gift tax rules related to an ABLE account established under section 529A, see § 1.529A-4 of this chapter.

PART 26—GENERATION-SKIPPING TRANSFER TAX REGULATIONS UNDER THE TAX REFORM ACT OF 1986

Par. 10. The authority citation for part 26 continues to read in part as follows: Authority: 26 U.S.C. 7805 and 26 U.S.C. 2663.

Par. 11. Section 26.2642-1 is amended by adding a sentence to the end of paragraph (a) to read as follows:

§ 26.2642-1 Inclusion ratio.

(a) * * * For generation-skipping transfer tax rules related to an ABLE account established under section 529A, see § 1.529A-4 of this chapter.

Par. 12. Section 26.2652-1 is amended by adding a sentence to the end of paragraph (a)(1) to read as follows:

§ 26.2652-1 Transferor defined; other definitions.

(a) *** * *** (1) * * * For generation-skipping transfer tax rules related to an ABLE account established under section 529A, see § 1.529A-4 of this chapter.

PART 301—PROCEDURE AND ADMINISTRATION

Par. 13. The authority citation for part 301 continues to read in part as follows: Authority: 26 U.S.C. 7805.

§ 301.6011-2 [Amended]

Par. 14. Section 301.6011-2 is amended by adding the word “series” after “5498” in the first sentence of paragraph (b)(1).

PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 15. The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805. Par. 16. In § 602.101, the paragraph (b) table is amended by adding the following entries in numerical order to the table to read as follows:

§ 602.101 OMB Control Numbers.

December 7, 2020 1596 Bulletin No. 2020–50