[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2646 Engrossed in House (EH)]


  1st Session

                               H. R. 2646

_______________________________________________________________________

                                 AN ACT

     To amend the Internal Revenue Code of 1986 to allow tax-free 
    expenditures from education individual retirement accounts for 
   elementary and secondary school expenses, to increase the maximum 
    annual amount of contributions to such accounts, and for other 
                               purposes.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
105th CONGRESS
  1st Session
                                H. R. 2646

_______________________________________________________________________

                                 AN ACT


 
     To amend the Internal Revenue Code of 1986 to allow tax-free 
    expenditures from education individual retirement accounts for 
   elementary and secondary school expenses, to increase the maximum 
    annual amount of contributions to such accounts, and for other 
                               purposes.

    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 ``Education Savings Act for Public and 
Private Schools''.

SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.

    (a) Tax-Free Expenditures for Elementary and Secondary School 
Expenses.--
            (1) In general.--Section 530(b)(2) of the Internal Revenue 
        Code of 1986 is amended to read as follows:
            ``(2) Qualified education expenses.--
                    ``(A) In general.--The term `qualified education 
                expenses' means--
                            ``(i) qualified higher education expenses 
                        (as defined in section 529(e)(3)), and
                            ``(ii) qualified elementary and secondary 
                        education expenses (as defined in paragraph 
                        (4)).
                Such expenses shall be reduced as provided in section 
                25A(g)(2) but only with respect to amounts in the 
                account which are attributable to contributions for any 
                taxable year ending before January 1, 2003, and 
                earnings on such contributions.
                    ``(B) Qualified state tuition programs.--Such term 
                shall include amounts paid or incurred to purchase 
                tuition credits or certificates, or to make 
                contributions to an account, under a qualified State 
                tuition program (as defined in section 529(b)) for the 
                benefit of the beneficiary of the account.''.
            (2) Qualified elementary and secondary education 
        expenses.--Section 530(b) of such Code is amended by adding at 
        the end the following new paragraph:
            ``(4) Qualified elementary and secondary education 
        expenses.--
                    ``(A) In general.--The term `qualified elementary 
                and secondary education expenses' means tuition, fees, 
                tutoring, special needs services, books, supplies, 
                computer equipment (including related software and 
                services) and other equipment, transportation, and 
                supplementary expenses required for the enrollment or 
                attendance of the designated beneficiary of the trust 
                at a public, private, or religious school.
                    ``(B) Special rule for home- schooling.--Such term 
                shall include expenses described in subparagraph (A) 
                required for education provided for homeschooling if 
                the requirements of any applicable State or local law 
                are met with respect to such education.
                    ``(C) School.--The term `school' means any school 
                which provides elementary education or secondary 
                education (through grade 12), as determined under State 
                law.''.
            (3) Conforming amendments.--Subsections (b)(1) and (d)(2) 
        of section 530 of such Code are each amended by striking 
        ``higher'' each place it appears in the text and heading 
        thereof.
    (b) Temporary Increase in Maximum Annual Contributions.--
            (1) In general.--Section 530(b)(1)(A)(iii) of the Internal 
        Revenue Code of 1986 is amended by striking ``$500'' and 
        inserting ``the contribution limit for such taxable year''.
            (2) Contribution limit.--Section 530(b) of such Code is 
        amended by adding at the end the following new paragraph:
            ``(4) Contribution limit.--The term `contribution limit' 
        means $2,500 ($500 in the case of any taxable year ending after 
        December 31, 2002).''.
            (3) Conforming amendments.--
                    (A) Section 530(d)(4)(C) of such Code is amended by 
                striking ``$500'' and inserting ``the contribution 
                limit for such taxable year''.
                    (B) Section 4973(e)(1)(A) of such Code is amended 
                by striking ``$500'' and inserting ``the contribution 
                limit (as defined in section 530(b)(4)) for such 
                taxable year''.
    (c) Waiver of Age Limitations for Children With Special Needs.--
Paragraph (1) of section 530(b) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following flush sentence:
        ``The age limitations in the preceding sentence shall not apply 
        to any designated beneficiary with special needs (as determined 
        under regulations prescribed by the Secretary).''.
    (d) Corporations Permitted To Contribute to Accounts.--Paragraph 
(1) of section 530(c) of the Internal Revenue Code of 1986 is amended 
by striking ``The maximum amount which a contributor'' and inserting 
``In the case of a contributor who is an individual, the maximum amount 
the contributor''.
    (e) Effective Date; References.--
            (1) Effective date.--The amendments made by this section 
        shall take effect as if included in the amendments made by 
        section 213 of the Taxpayer Relief Act of 1997.
            (2) References.--Any reference in this section to any 
        section of the Internal Revenue Code of 1986 shall be a 
        reference to such section as added by the Taxpayer Relief Act 
        of 1997.

SEC. 3. OVERRULING OF SCHMIDT BAKING COMPANY CASE.

    (a) In General.--The Internal Revenue Code of 1986 shall be applied 
without regard to the result reached in the case of Schmidt Baking 
Company, Inc. v. Commissioner of Internal Revenue, 107 T.C. 271 (1996).
    (b) Regulations.--The Secretary of the Treasury or the Secretary's 
delegate shall prescribe regulations to reflect subsection (a).
    (c) Effective Date.--
            (1) In general.--Subsections (a) and (b) shall apply to 
        taxable years ending after October 8, 1997.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by this section to change its method of 
        accounting for its first taxable year ending after October 8, 
        1997--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account in such first taxable year.

            Passed the House of Representatives October 23, 1997.

            Attest:

                                                                 Clerk.