S. 1718: Invest America Act

This bill, titled the Invest America Act, aims to create a new type of savings account called "Invest America accounts." Below are the key components of the legislation:

1. Invest America Accounts

Invest America accounts will be special trust accounts established for individuals in the U.S., specifically designed with several stipulations:

• Tax Exemption: These accounts will be exempt from taxation under certain conditions, but will still be subject to unrelated business income taxes applicable to charitable organizations.
• Contribution Rules: Only cash contributions will be accepted, and there is a contribution limit of $5,000 per year, which can be adjusted for inflation starting in 2027.
• Beneficiary Age Restriction: Distributions from these accounts cannot be made until the beneficiary turns 18 years old, except for certain rollover contributions.
• Custodianship: The accounts must be managed by a bank or an approved institution, ensuring compliance with the account's requirements.
• Investment Options: Funds in these accounts can only be invested in specific mutual funds or exchange-traded funds that track the Standard & Poor's 500 index.

2. Contributions

Contributions made to an Invest America account will not be considered taxable income, which includes federal contributions from the government:

• Government Contributions: Eligible individuals will automatically receive a $1,000 contribution to their Invest America account shortly after birth.
• Eligibility: To qualify for this contribution, individuals must be born after July 4, 2026, be U.S. citizens, and have at least one parent who is a U.S. citizen at the time of their birth.

3. Tax Treatment of Distributions

Distributions from Invest America accounts will be subject to taxation at the same rate as capital gains:

• Tax Rate: When money is withdrawn, taxes will be applied based on the net capital gains tax rates.

4. Reporting and Compliance

Account trustees must comply with reporting requirements to both the government and account beneficiaries about contributions and distributions.

5. Excess Contributions

There will be penalties for contributions exceeding the allowed limits, with specific provisions on how to determine excess amounts.

6. Effective Date

The provisions outlined in this bill will become effective starting from taxable years beginning after December 31, 2024.

Relevant Companies

• BLK (BlackRock, Inc.): BlackRock could see an increase in investments in mutual funds that track the S&P 500, potentially boosting their fund inflows.
• IVV (iShares Core S&P 500 ETF): As a fund likely to be included in the eligible investments for these accounts, IVV could experience increased demand and investment.
• VTI (Vanguard Total Stock Market ETF): Similar to IVV, Vanguard funds tracking the S&P could see increased utilization due to these accounts.