Money Accounts for Growth and Advancement Act

Bill Number

H.R. 3407

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-05-14: Referred to the House Committee on Ways and Means.

Last Updated

2025-06-06T18:34:29Z

AI-Generated Summary

Purpose

The MAGA Act (Money Accounts for Growth and Advancement Act) aims to encourage long-term savings for young children by creating tax-exempt investment accounts. These accounts are designed to fund future expenses like education, home purchases, or starting a small business, with a one-time government contribution pilot program to seed accounts for eligible newborns.

Key Provisions

• Establishment of MAGA Accounts:
• MAGA accounts are trusts set up for the exclusive benefit of a child under age 8, designated as such when created.
• Contributions start January 1, 2026, limited to $5,000 per year (adjusted annually for inflation after 2026), in cash only.
• Funds must be invested in low-cost, diversified U.S. stock index funds (no leverage allowed) managed by approved banks or financial institutions.
• Accounts are nonforfeitable (owner can't lose rights to the balance) and assets can't be mixed with other property except in common funds.

• Tax Treatment:
• The account itself is exempt from income taxes, except for unrelated business income taxes on charitable organizations.
• Contributions (principal) distributed are tax-free.
• Earnings distributed for "qualified expenses" (e.g., higher education, post-secondary credentials, first-time home purchase, or small business loans) are taxed at favorable long-term capital gains rates.
• Non-qualified distributions are fully taxable as ordinary income, with a 10% additional penalty if withdrawn before age 30.
• Accounts terminate at age 31, with remaining funds treated as taxable distributions; duplicate accounts trigger taxes and penalties.

• Distribution Rules:
• No withdrawals before age 18, except rollovers to another MAGA account for the same beneficiary.
• For beneficiaries not yet 25, total distributions can't exceed half the account's value at age 18 without penalties.
• Rollovers between accounts are allowed tax-free.

• Pilot Program for Government Contributions:
• Provides a one-time $1,000 tax credit per eligible child (born 2025–2028, U.S. citizen at birth) to their MAGA account.
• If no account exists, the IRS establishes one automatically, notifying parents who can opt out.
• Requires Social Security numbers on tax returns; improper claims face $500–$1,000 penalties for negligence or fraud.
• Trustee selection prioritizes reliability, low costs, and customer service.

• Other Rules:
• Allows group contributions from tax-exempt organizations (e.g., charities) to accounts of unrelated children based on criteria like location or school district.
• IRS can disclose limited taxpayer info (e.g., names, SSNs, account details) to facilitate these contributions.
• Trustees must report contributions, distributions, and balances to the IRS and beneficiaries.
• Excess contributions over limits incur a 6% annual excise tax.

Significant Changes to Existing Law

• Adds a new Part IX to Subchapter F of the Internal Revenue Code (IRC), creating MAGA accounts similar to but distinct from existing 529 education savings plans or IRAs—broader qualified uses, child-specific, and investment-restricted to index funds.
• Amends IRC Section 1(h) to treat certain MAGA distributions as net capital gains for lower tax rates.
• Expands IRC Section 4973 to impose excise taxes on excess MAGA contributions, mirroring IRA rules.
• Adds IRC Section 6434 for the pilot credit in Chapter 65, with new penalties under Section 6659 and math/clerical error rules under Section 6213(g).
• Updates disclosure rules in IRC Section 6103(l) to allow IRS sharing of info for group contributions, and reporting requirements in Section 6693.

Effective for tax years after December 31, 2024.

Potential Impacts

• On Citizens: Enables tax-advantaged saving for middle- and low-income families, potentially building wealth for children's education (tuition, credentials), homeownership, or entrepreneurship. The pilot program could benefit up to millions of newborns with seed money, but restrictions (e.g., age limits, investment rules) may limit flexibility. Early withdrawals could lead to penalties, discouraging misuse.
• On Government Agencies: Increases IRS administrative burden for account setup, reporting, disclosures, and fraud prevention; potential revenue loss from tax exemptions and credits (estimated billions over time, though not specified). Treasury must regulate trustees and eligible investments.
• On International Relations: No direct impact; focuses on domestic U.S. citizens and investments in U.S. equities.

Main Stakeholders Affected

• Children (Account Beneficiaries): Primarily U.S. children born 2025–2028 for the pilot, and any under age 8 for general accounts; gain long-term savings vehicle.
• Parents and Taxpayers: Can contribute and claim the $1,000 credit; must provide SSNs and comply with rules to avoid penalties.
• Financial Institutions (Trustees): Banks or approved entities manage accounts, handle investments, and reporting; must meet IRS criteria for low fees and compliance.
• Non-Profit Organizations: Tax-exempt groups (e.g., 501(c)(3) charities) can make bulk contributions to promote equity.
• IRS and U.S. Treasury: Oversee implementation, account creation, disclosures, and enforcement.

Notable Legal, Constitutional, or Political Implications

• Legal: Expands tax-advantaged savings options beyond 529 plans (education-focused) or Roth IRAs (retirement), with strict investment limits to ensure safety and growth. Introduces novel group contribution and automatic account setup mechanisms, potentially challenging IRS enforcement if fraud rises. Penalties and disclosures align with existing IRC safeguards to prevent abuse.
• Constitutional: Appears consistent with Congress's taxing and spending powers under Article I; no apparent free speech, privacy, or equal protection issues, though SSN requirements could raise minor data privacy concerns under existing tax laws.
• Political: The acronym "MAGA" may evoke partisan associations, but the bill is framed as a neutral savings incentive. Could spark debate on fiscal policy (revenue costs vs. social mobility benefits) and equity (benefits skewed to families who file taxes and open accounts).

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Moore, Blake D. [R-UT-1]

Recent Actions

• 2025-05-14: Referred to the House Committee on Ways and Means.
• 2025-05-14: Introduced in House
• 2025-05-14: Introduced in House

Bill Versions

• Money Accounts for Growth and Advancement Act — issued 2025-05-14 — PDF (22 pages)