[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2050 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 2050

To amend the Internal Revenue Code of 1986 to restore the deduction for 
     interest on higher education loans and to permit penalty-free 
withdrawals from qualified retirement plans to pay for higher education 
                               expenses.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 18, 1995

    Mr. Baker of Louisiana introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to restore the deduction for 
     interest on higher education loans and to permit penalty-free 
withdrawals from qualified retirement plans to pay for higher education 
                               expenses.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Higher Education Finance Improvement 
Act''.

SEC. 2. RESTORATION OF DEDUCTION FOR INTEREST ON HIGHER EDUCATION 
              LOANS.

    (a) In General.--Paragraph (2) of section 163(h) of the Internal 
Revenue Code of 1986 (defining personal interest) is amended by 
striking ``and'' at the end of subparagraph (D), by redesignating 
subparagraph (E) as subparagraph (F), and by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E) any interest on a qualified higher education 
                loan, and''.
    (b) Qualified Higher Education Loan.--Paragraph (5) of section 
163(h) of such Code (relating to phase-in of limitations) is amended to 
read as follows:
            ``(5) Qualified higher education loan.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `qualified higher 
                education loan' means any indebtedness which--
                            ``(i) is incurred by the taxpayer to pay 
                        qualified higher education expenses which are 
                        paid or incurred within a reasonable period of 
                        time before or after the indebtedness is 
                        incurred, and
                            ``(ii) is incurred pursuant to a Federal or 
                        State loan guarantee or insurance program.
                    ``(B) Qualified higher education expenses.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `qualified 
                        higher education expenses' means tuition and 
                        related expenses of--
                                    ``(I) the taxpayer,
                                    ``(II) the taxpayer's spouse, or
                                    ``(III) the taxpayer's child (as 
                                defined in section 151(c)(3)).
                            ``(ii) Tuition and related expenses.--The 
                        term `tuition and related expenses' means--
                                    ``(I) tuition and fees required for 
                                enrollment or attendance at an eligible 
                                educational institution (as defined in 
                                section 135(c)(3)),
                                    ``(II) fees, books, supplies, and 
                                equipment required for courses of 
                                instruction at such an institution, and
                                    ``(III) reasonable living expenses 
                                for attendance at such an institution 
                                while away from home.
                    ``(C) Coordination with other provisions.--
                            ``(i) Paragraph (3)(c)(ii).--Any qualified 
                        higher education loan shall not be taken into 
                        account for purposes of applying the limitation 
                        of paragraph (3)(C)(ii).
                            ``(ii) Savings bonds provisions.--The 
                        amount of qualified higher education expenses 
                        for any taxable year shall be reduced by any 
                        amount excludable from gross income under 
                        section 135 for the taxable year.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

SEC. 3. PENALTY-FREE WITHDRAWALS FROM QUALIFIED RETIREMENT PLANS FOR 
              HIGHER EDUCATION EXPENSES.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to exceptions to 10 percent additional 
tax on early distributions from qualified retirement plans) is amended 
by adding at the end the following new subparagraph:
                    ``(D) Higher education expenses.--Any distribution 
                to the extent the distribution is used before the close 
                of the 60th day after the day on which the distribution 
                is received to pay qualified higher education expenses 
                (within the meaning of subparagraphs (B) and (C)(ii) of 
                section 163(h)(5)).''
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions made after the date of the enactment of this Act.
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