[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3120 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 3120

 To amend the Internal Revenue Code of 1986 to provide additional tax 
                       incentives for education.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 21, 1999

  Mr. Bachus 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 provide additional tax 
                       incentives for education.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 2. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN INCOME LIMITATION 
              ON STUDENT LOAN INTEREST DEDUCTION.

    (a) Elimination of 60-Month Limit.--
            (1) In general.--Section 221 (relating to interest on 
        education loans) is amended by striking subsection (d) and by 
        redesignating subsections (e), (f), and (g) as subsections (d), 
        (e), and (f), respectively.
            (2) Conforming amendment.--Section 6050S(e) is amended by 
        striking ``section 221(e)(1)'' and inserting ``section 
        221(d)(1)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to any loan interest paid during the 
        period after December 31, 1999, and before January 1, 2005, in 
        taxable years ending after such period.
    (b) Increase in Income Limitation.--
            (1) In general.--Section 221(b)(2)(B) (relating to amount 
        of reduction) is amended by striking clauses (i) and (ii) and 
        inserting the following:
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $45,000 ($90,000 in the case 
                                of a joint return), bears to
                            ``(ii) $15,000.''.
            (2) Conforming amendment.--Section 221(g)(1) is amended by 
        striking ``$40,000 and $60,000 amounts'' and inserting 
        ``$45,000 and $90,000 amounts''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after December 31, 1999, 
        and before January 1, 2005.

SEC. 3. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

    (a) Short Title.--This section may be cited as the ``Collegiate 
Learning and Student Savings (CLASS) Act''.
    (b) Eligible Educational Institutions Permitted To Maintain 
Qualified Tuition Programs.--
            (1) In general.--Section 529(b)(1) (defining qualified 
        State tuition program) is amended by inserting ``or by one or 
        more eligible educational institutions'' after ``maintained by 
        a State or agency or instrumentality thereof''.
            (2) Private qualified tuition programs limited to benefit 
        plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
        inserting ``in the case of a program established and maintained 
        by a State or agency or instrumentality thereof,'' before ``may 
        make''.
            (3) Conforming amendments.--
                    (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 
                529, 530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are each 
                amended by striking ``qualified State tuition'' each 
                place it appears and inserting ``qualified tuition''.
                    (B) The headings for sections 72(e)(9) and 
                135(c)(2)(C) are each amended by striking ``qualified 
                state tuition'' and inserting ``qualified tuition''.
                    (C) The headings for sections 529(b) and 
                530(b)(2)(B) are each amended by striking ``Qualified 
                state tuition'' and inserting ``Qualified tuition''.
                    (D) The heading for section 529 is amended by 
                striking ``STATE''.
                    (E) The item relating to section 529 in the table 
                of sections for part VIII of subchapter F of chapter 1 
                is amended by striking ``State''.
    (c) Exclusion From Gross Income of Education Distributions From 
Qualified Tuition Programs.--
            (1) In general.--Section 529(c)(3)(B) (relating to 
        distributions) is amended to read as follows:
                    ``(B) Distributions for qualified higher education 
                expenses.--For purposes of this paragraph--
                            ``(i) In-kind distributions.--No amount 
                        shall be includible in gross income under 
                        subparagraph (A) by reason of a distribution 
                        which consists of providing a benefit to the 
                        distributee which, if paid for by the 
                        distributee, would constitute payment of a 
                        qualified higher education expense.
                            ``(ii) Cash distributions.--In the case of 
                        distributions not described in clause (i), if--
                                    ``(I) such distributions do not 
                                exceed the qualified higher education 
                                expenses (reduced by expenses described 
                                in clause (i)), no amount shall be 
                                includible in gross income, and
                                    ``(II) in any other case, the 
                                amount otherwise includible in gross 
                                income shall be reduced by an amount 
                                which bears the same ratio to such 
                                amount as such expenses bear to such 
                                distributions.
                            ``(iii) Exception for institutional 
                        programs.--In the case of any taxable year 
                        beginning before January 1, 2004, clauses (i) 
                        and (ii) shall not apply with respect to any 
                        distribution during such taxable year under a 
                        qualified tuition program established and 
                        maintained by one or more eligible educational 
                        institutions.
                            ``(iv) Treatment as distributions.--Any 
                        benefit furnished to a designated beneficiary 
                        under a qualified tuition program shall be 
                        treated as a distribution to the beneficiary 
                        for purposes of this paragraph.
                            ``(v) Coordination with hope and lifetime 
                        learning credits.--The total amount of 
                        qualified higher education expenses with 
                        respect to an individual for the taxable year 
                        shall be reduced--
                                    ``(I) as provided in section 
                                25A(g)(2), and
                                    ``(II) by the amount of such 
                                expenses which were taken into account 
                                in determining the credit allowed to 
                                the taxpayer or any other person under 
                                section 25A.
                            ``(vi) Coordination with education 
                        individual retirement accounts.--If, with 
                        respect to an individual for any taxable year--
                                    ``(I) the aggregate distributions 
                                to which clauses (i) and (ii) and 
                                section 530(d)(2)(A) apply, exceed
                                    ``(II) the total amount of 
                                qualified higher education expenses 
                                otherwise taken into account under 
                                clauses (i) and (ii) (after the 
                                application of clause (v)) for such 
                                year,
                        the taxpayer shall allocate such expenses among 
                        such distributions for purposes of determining 
                        the amount of the exclusion under clauses (i) 
                        and (ii) and section 530(d)(2)(A).''.
            (2) Conforming amendments.--
                    (A) Section 135(d)(2)(B) is amended by striking 
                ``the exclusion under section 530(d)(2)'' and inserting 
                ``the exclusions under sections 529(c)(3)(B)(i) and 
                530(d)(2)''.
                    (B) Section 221(e)(2)(A) is amended by inserting 
                ``529,'' after ``135,''.
    (d) Rollover to Different Program for Benefit of Same Designated 
Beneficiary.--Section 529(c)(3)(C) (relating to change in 
beneficiaries) is amended--
            (1) by striking ``transferred to the credit'' in clause (i) 
        and inserting ``transferred--
                                    ``(I) to another qualified tuition 
                                program for the benefit of the 
                                designated beneficiary, or
                                    ``(II) to the credit'',
            (2) by adding at the end the following new clause:
                            ``(iii) Limitation on certain rollovers.--
                        Clause (i)(I) shall not apply to any amount 
                        transferred with respect to a designated 
                        beneficiary if, at any time during the 1-year 
                        period ending on the day of such transfer, any 
                        other amount was transferred with respect to 
                        such beneficiary which was not includible in 
                        gross income by reason of clause (i)(I).'', and
            (3) by inserting ``or programs'' after ``beneficiaries'' in 
        the heading.
    (e) Member of Family Includes First Cousin.--Section 529(e)(2) 
(defining member of family) is amended by striking ``and'' at the end 
of subparagraph (B), by striking the period at the end of subparagraph 
(C) and by inserting ``; and'', and by adding at the end the following 
new subparagraph:
                    ``(D) any first cousin of such beneficiary.''.
    (f) Definition of Qualified Higher Education Expenses.--
            (1) In general.--Subparagraph (A) of section 529(e)(3) 
        (relating to definition of qualified higher education expenses) 
        is amended to read as follows:
                    ``(A) In general.--The term `qualified higher 
                education expenses' means--
                            ``(i) tuition and fees required for the 
                        enrollment or attendance of a designated 
                        beneficiary at an eligible educational 
                        institution for courses of instruction of such 
                        beneficiary at such institution, and
                            ``(ii) expenses for books, supplies, and 
                        equipment which are incurred in connection with 
                        such enrollment or attendance, but not to 
                        exceed the allowance for books and supplies 
                        included in the cost of attendance (as defined 
                        in section 472 of the Higher Education Act of 
                        1965 (20 U.S.C. 1087ll), as in effect on the 
                        date of the enactment of the Taxpayer Refund 
                        and Relief Act of 1999) as determined by the 
                        eligible educational institution.''.
            (2) Exception for education involving sports, etc.--
        Paragraph (3) of section 529(e) (relating to qualified higher 
        education expenses) is amended by adding at the end the 
        following new subparagraph:
                    ``(C) Exception for education involving sports, 
                etc.--The term `qualified higher education expenses' 
                shall not include expenses with respect to any course 
                or other education involving sports, games, or hobbies 
                unless such course or other education is part of the 
                beneficiary's degree program or is taken to acquire or 
                improve job skills of the beneficiary.''.
    (g) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1999, and 
before January 1, 2005.
            (2) Qualified higher education expenses.--The amendments 
        made by subsection (f) shall apply to amounts paid for courses 
        beginning after December 31, 1999, and before January 1, 2005.

SEC. 4. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE NATIONAL HEALTH 
              SERVICE CORPS SCHOLARSHIP PROGRAM, THE F. EDWARD HEBERT 
              ARMED FORCES HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL 
              ASSISTANCE PROGRAM, AND CERTAIN OTHER PROGRAMS.

    (a) In General.--Section 117(c) (relating to the exclusion from 
gross income amounts received as a qualified scholarship) is amended--
            (1) by striking ``Subsections (a)'' and inserting the 
        following:
            ``(1) In general.--Except as provided in paragraph (2), 
        subsections (a)'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Exceptions.--Paragraph (1) shall not apply to any 
        amount received by an individual under--
                    ``(A) the National Health Service Corps Scholarship 
                program under section 338A(g)(1)(A) of the Public 
                Health Service Act,
                    ``(B) the Armed Forces Health Professions 
                Scholarship and Financial Assistance program under 
                subchapter I of chapter 105 of title 10, United States 
                Code,
                    ``(C) the National Institutes of Health 
                Undergraduate Scholarship program under section 487D of 
                the Public Health Service Act, or
                    ``(D) any State program determined by the Secretary 
                to have substantially similar objectives as such 
                programs.''.
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall apply to amounts 
        received in taxable years beginning after December 31, 1993, 
        and before January 1, 2005.
            (2) State programs.--Section 117(c)(2)(D) of the Internal 
        Revenue Code of 1986 (as added by the amendments made by 
        subsection (a)) shall apply to amounts received in taxable 
        years beginning after December 31, 1999, and before January 1, 
        2005.

SEC. 5. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED EDUCATIONAL 
              ASSISTANCE.

    Section 127(d) (relating to termination of exclusion for 
educational assistance programs) is amended by striking ``May 31, 
2000'' and inserting ``December 31, 2004''.

SEC. 6. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE TO PUBLIC 
              SCHOOL CONSTRUCTION BONDS.

    (a) In General.--Subparagraph (C) of section 148(f)(4) is amended 
by adding at the end the following new clause:
                            ``(xviii) 4-year spending requirement for 
                        public school construction issue.--
                                    ``(I) In general.--In the case of a 
                                public school construction issue, the 
                                spending requirements of clause (ii) 
                                shall be treated as met if at least 10 
                                percent of the available construction 
                                proceeds of the construction issue are 
                                spent for the governmental purposes of 
                                the issue within the 1-year period 
                                beginning on the date the bonds are 
                                issued, 30 percent of such proceeds are 
                                spent for such purposes within the 2-
                                year period beginning on such date, 60 
                                percent of such proceeds are spent for 
                                such purposes within the 3-year period 
                                beginning on such date, and 100 percent 
                                of such proceeds are spent for such 
                                purposes within the 4-year period 
                                beginning on such date.
                                    ``(II) Public school construction 
                                issue.--For purposes of this clause, 
                                the term `public school construction 
                                issue' means any construction issue if 
                                no bond which is part of such issue is 
                                a private activity bond and all of the 
                                available construction proceeds of such 
                                issue are to be used for the 
                                construction (as defined in clause 
                                (iv)) of public school facilities to 
                                provide education or training below the 
                                postsecondary level or for the 
                                acquisition of land that is 
                                functionally related and subordinate to 
                                such facilities.
                                    ``(III) Other rules to apply.--
                                Rules similar to the rules of the 
                                preceding provisions of this 
                                subparagraph which apply to clause (ii) 
                                also apply to this clause.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to obligations issued after December 31, 1999, and before January 1, 
2005.

SEC. 7. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED DEDUCTIONS NOT TO 
              APPLY TO QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES OF 
              ELEMENTARY AND SECONDARY SCHOOL TEACHERS.

    (a) In General.--Section 67(b) (defining miscellaneous itemized 
deductions) is amended by striking ``and'' at the end of paragraph 
(11), by striking the period at the end of paragraph (12) and inserting 
``, and'', and by adding at the end the following new paragraph:
            ``(13) any deduction allowable for the qualified 
        professional development expenses of an eligible teacher.''.
    (b) Definitions.--Section 67 (relating to 2-percent floor on 
miscellaneous itemized deductions) is amended by adding at the end the 
following new subsection:
    ``(g) Qualified Professional Development Expenses of Eligible 
Teachers.--For purposes of subsection (b)(13)--
            ``(1) Qualified professional development expenses.--
                    ``(A) In general.--The term `qualified professional 
                development expenses' means expenses in an amount not 
                to exceed $1,000 for any taxable year--
                            ``(i) for tuition, fees, books, supplies, 
                        equipment, and transportation required for the 
                        enrollment or attendance of an individual in a 
                        qualified course of instruction, and
                            ``(ii) with respect to which a deduction is 
                        allowable under section 162 (determined without 
                        regard to this section).
                    ``(B) Qualified course of instruction.--The term 
                `qualified course of instruction' means a course of 
                instruction which--
                            ``(i) is--
                                    ``(I) at an institution of higher 
                                education (as defined in section 481 of 
                                the Higher Education Act of 1965 (20 
                                U.S.C. 1088), as in effect on the date 
                                of the enactment of this subsection), 
                                or
                                    ``(II) a professional conference, 
                                and
                            ``(ii) is part of a program of professional 
                        development which is approved and certified by 
                        the appropriate local educational agency as 
                        furthering the individual's teaching skills.
            ``(C) Local educational agency.--The term `local 
        educational agency' has the meaning given such term by section 
        14101 of the Elementary and Secondary Education Act of 1965, as 
        so in effect.
            ``(2) Eligible teacher.--
                    ``(A) In general.--The term `eligible teacher' 
                means an individual who is a kindergarten through grade 
                12 classroom teacher, instructor, counselor, aide, or 
                principal in an elementary or secondary school.
                    ``(B) Elementary or secondary school.--The terms 
                `elementary school' and `secondary school' have the 
                meanings given such terms by section 14101 of the 
                Elementary and Secondary Education Act of 1965 (20 
                U.S.C. 8801), as so in effect.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999, and ending 
before January 1, 2005.
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