[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7 Introduced in House (IH)]
106th CONGRESS
1st Session
H. R. 7
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 1, 1999
Mr. Hulshof (for himself and Mr. Lipinski) 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 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.
(a) Short Title.--This Act may be cited as the ``Education Savings
and School Excellence Act of 1999''.
(b) 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. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
(a) Tax-Free Expenditures for Elementary and Secondary School
Expenses.--
(1) In general.--Section 530(b)(2) (defining qualified
higher education expenses) 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).
``(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) (relating to definitions and special
rules) 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--
``(i) expenses for tuition, fees, academic
tutoring, special needs services, books,
supplies, computer equipment (including related
software and services), and other equipment
which are incurred in connection with the
enrollment or attendance of the designated
beneficiary of the trust as an elementary or
secondary school student at a public, private,
or religious school, or
``(ii) expenses for room and board,
uniforms, transportation, and supplementary
items and services (including extended day
programs) which are required or provided by a
public, private, or religious school in
connection with such enrollment or attendance.
``(B) Special rule for homeschooling.--Such term
shall include expenses described in subparagraph (A)(i)
in connection with education provided by 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 (kindergarten through grade 12), as
determined under State law.''.
(3) Conforming amendments.--Subsections (b)(1) and (d)(2)
of section 530 are each amended by striking ``higher'' each
place it appears in the text and heading thereof.
(b) Maximum Annual Contributions.--Sections 530(b)(1)(A)(iii) and
4973(e)(1)(A) are each amended by striking ``$500'' and inserting
``$2,000''.
(c) Waiver of Age Limitations for Children With Special Needs.--
(1) Section 530(b)(1) (defining education individual
retirement account) is amended by adding at the end the
following flush sentence:
``The age limitations in subparagraphs (A) and (E) shall not
apply to any designated beneficiary with special needs (as
determined under regulations prescribed by the Secretary).''.
(2) Section 530(d)(5) is amended by striking ``who has not
attained age 30 as of such date'' and inserting ``who, as of
such date, either has not attained age 30 or has special needs
(as determined under regulations prescribed by the
Secretary)''.
(3) Section 530(d)(6) is amended by striking all that
follows ``old beneficiary'' and inserting ``and, as of the date
of such change, either has not attained age 30 or has special
needs (as so determined).''
(d) Corporations Permitted To Contribute to Accounts.--Section
530(c)(1) (relating to reduction in permitted contributions based on
adjusted gross income) 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.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 3. EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM
QUALIFIED STATE TUITION PROGRAMS.
(a) In General.--Section 529(c)(3)(B) (relating to distributions)
is amended to read as follows:
``(B) Distributions for qualified higher education
expenses.--
``(i) In general.--No amount shall be
includible in gross income under subparagraph
(A) if the qualified higher education expenses
of the designated beneficiary during the
taxable year are not less than the aggregate
distributions during the taxable year.
``(ii) Distributions in excess of
expenses.--If such aggregate distributions
exceed such expenses during the taxable year,
the amount otherwise includible in gross income
under subparagraph (A) shall be reduced by the
amount which bears the same ratio to the amount
so includible (without regard to this
subparagraph) as such expenses bear to such
aggregate distributions.
``(iii) Election to waive exclusion.--A
taxpayer may elect to waive the application of
this subparagraph for any taxable year.
``(iv) In-kind distributions.--Any benefit
furnished to a designated beneficiary under a
qualified State tuition program shall be
treated as a distribution to the beneficiary
for purposes of this paragraph.
``(v) Disallowance of excluded amounts as
credit or deduction.--No deduction or credit
shall be allowed to the taxpayer under any
other section of this chapter for any qualified
higher education expenses to the extent taken
into account in determining the amount of the
exclusion under this paragraph.''.
(b) Definition of Qualified Higher Education Expenses.--Section
529(e)(3)(A) (defining qualified higher education expenses) is amended
to read as follows:
``(A) In general.--The term `qualified higher
education expenses' means expenses for tuition, fees,
academic tutoring, special needs services, books,
supplies, computer equipment (including related
software and services), and other equipment which are
incurred in connection with the enrollment or
attendance of the designated beneficiary at an eligible
educational institution.''.
(c) Coordination With Education Credits.--Section 25A(e)(2)
(relating to coordination with exclusions) is amended--
(1) by inserting ``a qualified State tuition program or''
before ``an education individual retirement account''; and
(2) by striking ``section 530(d)(2)'' and inserting
``section 529(c)(3)(B) or 530(d)(2)''.
(d) 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 prepaid
plans.--Section 529(b)(1) is amended by adding at the end the
following flush sentence:
``Clause (ii) of subparagraph (A) shall only apply to a program
established and maintained by a State or any agency or
instrumentality thereof.''.
(3) Tax on excess contributions.--
(A) In general.--Section 4973(a) (relating to tax
imposed) is amended by striking ``or'' at the end of
paragraph (3), inserting ``or'' at the end of paragraph
(4), and inserting after paragraph (4) the following
new paragraph:
``(5) a private qualified tuition program (as defined in
subsection (g)),''.
(B) Excess contributions defined.--Section 4973 is
amended by adding at the end the following new
subsection:
``(g) Excess Contributions to Private Qualified Tuition Program.--
For purposes of this section--
``(1) In general.--In the case of private qualified tuition
programs, the term `excess contributions' means, with respect
to any one beneficiary, the amount contributed to a private
qualified tuition program for any taxable year if any amount is
contributed during such year for the benefit of such
beneficiary to a qualified tuition program (as defined in
section 529) other than a private qualified tuition program.
``(2) Private qualified tuition program.--The term `private
qualified tuition program' means a qualified tuition program
(as defined in section 529) not established and maintained by a
State or any agency or instrumentality thereof.''.
(4) Technical amendments.--
(A) The text of sections 25A(e)(2), 72(e)(9), 529,
530(b)(2)(B), and 4973(e)(1)(B), as previously amended
by this Act, are each amended by striking ``qualified
State tuition program'' each place it appears and
inserting ``qualified tuition program''.
(B)(i) The heading of section 529 is amended to
read as follows:
``SEC. 529. QUALIFIED TUITION PROGRAMS.''.
(ii) 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''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 4. PERMANENT EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED
EDUCATIONAL ASSISTANCE.
Section 127 (relating to educational assistance programs) is
amended by striking subsection (d) and by redesignating subsection (e)
as subsection (d).
SEC. 5. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION FOR
GOVERNMENTAL BONDS USED TO FINANCE EDUCATION FACILITIES.
(a) In General.--Section 148(f)(4)(D)(vii) (relating to increase in
exception for bonds financing public school capital expenditures) is
amended by striking ``$5,000,000'' the second place it appears and
inserting ``$10,000,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to obligations issued after December 31, 1999.
SEC. 6. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE NATIONAL HEALTH
CORPS SCHOLARSHIP PROGRAM AND THE F. EDWARD HEBERT ARMED
FORCES HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL
ASSISTANCE PROGRAM.
(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 Corps Scholarship Program
under section 338A(g)(1)(A) of the Public Health
Service Act; or
``(B) the Armed Forces Health Professions
Scholarship and Financial Assistance Program under
subchapter I of chapter 105 of title 10, United States
Code.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to amounts received in taxable years beginning after December 31,
1993.
<all>