[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 289 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 289

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 8, 2001

Mr. Sessions (for himself and Mr. Graham, Mr. Bingaman, Mr. Frist, Mr. 
   Gramm, Mr. Hutchinson, Mr. Murkowski, Mr. Breaux, Mr. Shelby, Ms. 
    Collins, Mr. Helms, Mr. Inhofe, Mr. Roberts, Mr. Santorum, Ms. 
   Landrieu) introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 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. SHORT TITLE.

    This Act may be cited as the ``Collegiate Learning and Student 
Savings Act''.

SEC. 2. ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO MAINTAIN 
              QUALIFIED TUITION PROGRAMS.

  (a) In General.--Section 529(b)(1) of the Internal Revenue Code of 
1986 (defining qualified State tuition program) is amended by inserting 
``or by 1 or more eligible educational institutions or a consortium 
that consists solely of eligible educational institutions'' after 
``maintained by a State or agency or instrumentality thereof''.
    (b) Private Qualified Tuition Programs Limited to Benefit Plans.--
Clause (ii) of section 529(b)(1)(A) of the Internal Revenue Code of 
1986 is amended by inserting ``in the case of a program established and 
maintained by a State or agency or instrumentality thereof'' before 
``may make''.
    (c) Conforming Amendments.--
            (1) The text and headings of each of the sections 72(e)(9), 
        135(c)(2(C), 135(d)(1)(D), 529, 530(b)(2)(B), 4973(e), and 
        6693(a)(2)(C) of the Internal Revenue Code of 1986 is amended 
        by striking ``qualified State tuition'' each place it appears 
        and inserting ``qualified tuition''.
            (2)(A) The section heading of section 529 of such Code is 
        amended to read as follows:

``SEC. 529. QUALIFIED TUITION PROGRAMS.''.

            (B) The item relating to section 529 in the table of 
        sections for part VIII of subchapter F of chapter 1 of such 
        Code is amended by striking ``State''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 3. EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM 
              QUALIFIED TUITION PROGRAMS.

    (a) In General.--Section 529(c)(3)(B) of the Internal Revenue Code 
of 1986 (relating to distributions) is amended to read as follows:
                    ``(B) Distributions for qualified higher education 
                expenses.--
                            ``(i) In general.--If a distributee elects 
                        the application of this clause for any taxable 
                        year--
                                    ``(I) 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, and
                                    ``(II) the amount which (but for 
                                the election) would be includible in 
                                gross income under subparagraph (A) by 
                                reason of any other distribution shall 
                                not be so includible in an amount which 
                                bears the same ratio to the amount 
                                which would be so includible as such 
                                expenses bear to such aggregate 
                                distributions.
                            ``(ii) 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.
                            ``(iii) 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 subparagraph.''.
    (b) Beneficiary May Change Program.--Section 529(c)(3)(C) of the 
Internal Revenue Code of 1986 (relating to change in beneficiaries) is 
amended--
            (1) in clause (i), by inserting ``to another qualified 
        tuition program for the benefit of the designated beneficiary 
        or'' after ``transferred'', and
            (2) in the heading, by inserting ``or programs'' after 
        ``beneficiaries''.
    (c) Additional Tax on Amounts Not Used for Higher Education 
Expenses.--Section 529(c)(3) of the Internal Revenue Code of 1986 
(relating to distributions) is amended by adding at the end the 
following:
                    ``(E) Additional tax on amounts not used for higher 
                education expenses.--The tax imposed by section 
                530(d)(4) shall apply to payments and distributions 
                from qualified tuition programs in the same manner as 
                such tax applies to education individual retirement 
                accounts.''.
    (d) Coordination With Education Credits.--Section 25A(e)(2) of the 
Internal Revenue Code of 1986 (relating to coordination with 
exclusions) is amended--
            (1) by inserting ``a qualified 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)''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to distributions 
        made after December 31, 2001, for education furnished in 
        academic periods beginning after such date.
            (2) Private programs.--In the case of a qualified tuition 
        program established and maintained by an entity other than a 
        State or agency or instrumentality thereof, the amendments made 
        by subsections (a), (c), and (d) shall apply to distributions 
        made after December 31, 2005, for education furnished in 
        academic periods beginning after such date.

SEC. 4. QUALIFIED TUITION PROGRAMS INCLUDED IN SECURITIES EXEMPTION.

    (a) Exempted Securities.--Section 3(a)(4) of the Securities Act of 
1933 (15 U.S.C. 77c(a)(4)) is amended by striking ``individual;'' and 
inserting ``individual or any security issued by a prepaid tuition 
program described in section 529 of the Internal Revenue Code of 
1986;''.
    (b) Qualified Tuition Programs Not Investment Companies.--Section 
3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)) is 
amended by adding at the end the following:
            ``(15) Any prepaid tuition program described in section 529 
        of the Internal Revenue Code of 1986.''.
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