[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1869 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 1869

   To amend the Internal Revenue Code of 1986 to establish lifelong 
  learning accounts to provide an incentive for employees to save for 
    career-related skills development and to promote a competitive 
                  workforce through lifelong learning.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 12, 2011

Mr. Larson of Connecticut (for himself, Mr. Roskam, Mr. Polis, and Mr. 
   Paulsen) introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Education and the Workforce, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to establish lifelong 
  learning accounts to provide an incentive for employees to save for 
    career-related skills development and to promote a competitive 
                  workforce through lifelong learning.

    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 ``Lifelong Learning Accounts Act of 
2011''.

SEC. 2. LIFELONG LEARNING ACCOUNTS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by inserting after section 36C the following new section:

``SEC. 36D. CONTRIBUTIONS TO LIFELONG LEARNING ACCOUNTS.

    ``(a) Credit Allowed.--In the case of an eligible individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to the applicable percentage of 
the contributions (other than rollover contributions described in 
subsection (e)(5)) paid in cash during such taxable year by or on 
behalf of such individual to a lifelong learning account of such 
individual.
    ``(b) Limitations and Definitions Related to Allowance of Credit.--
            ``(1) Dollar limitation.--
                    ``(A) In general.--The amount of contributions 
                taken into account under subsection (a) with respect to 
                any eligible individual for any taxable year shall not 
                exceed the lesser of--
                            ``(i) $2,500, or
                            ``(ii) an amount equal to the compensation 
                        (as defined in section 219(f)(1)) includible in 
                        the individual's gross income for such taxable 
                        year.
                    ``(B) Catch-up contributions for individuals 50 or 
                older.--
                            ``(i) In general.--In the case of an 
                        individual who has attained the age of 50 
                        before the close of the taxable year, the 
                        dollar limitation otherwise applicable under 
                        subparagraph (A)(i) (without regard to 
                        paragraph (2)) for such taxable year shall be 
                        increased by--
                                    ``(I) $1,000 in the case of taxable 
                                years beginning after 2011 and before 
                                2016, and
                                    ``(II) $1,500 in the case of 
                                taxable years beginning after 2015.
                    ``(C) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2015, the $2,500 amount in subparagraph (A) 
                        shall be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f) for the calendar year in which the 
                                taxable year begins, determined by 
                                substituting `calendar year 2014' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $100, such amount shall be rounded to the 
                        next lower multiple of $100.
            ``(2) Limitations based on modified adjusted gross 
        income.--
                    ``(A) In general.--The dollar amount applicable 
                under paragraph (1) for any taxable year (without 
                regard to this paragraph) shall be reduced (but not 
                below zero) by the reduction amount.
                    ``(B) Reduction amount.--For purposes of 
                subparagraph (A), the reduction amount is the amount 
                which bears the same ratio to the dollar amount 
                applicable under paragraph (1) for any taxable year 
                (without regard to this paragraph) as--
                            ``(i) the excess of--
                                    ``(I) the account beneficiary's 
                                modified adjusted gross income for such 
                                taxable year, over
                                    ``(II) $100,000 (twice such amount 
                                in the case of a joint return), bears 
                                to
                            ``(ii) $20,000 (twice such amount in the 
                        case of a joint return).
                For purposes of the preceding sentence, the term 
                `modified adjusted gross income' means adjusted gross 
                income increased by any amount excluded from gross 
                income under section 911, 931, or 933.
                    ``(C) Special rule for married individuals filing a 
                separate return.--In the case of a married individual 
                filing a separate return, subparagraph (B)(i)(II) shall 
                be applied by substituting `zero' for the dollar amount 
                therein.
            ``(3) Treatment of employer contributions.--
                    ``(A) Exclusion from gross income.--Gross income 
                shall not include any contribution to a lifelong 
                learning account made by an employer of the account 
                beneficiary to the extent that the aggregate amount of 
                such contributions made during the taxable year does 
                not exceed the limitation in effect under paragraph (1) 
                (determined without regard to subparagraph (B) of this 
                paragraph) for such taxable year with respect to such 
                beneficiary.
                    ``(B) Coordination with credit.--The limitation 
                which would (but for this subparagraph) apply under 
                paragraph (1) with respect to the eligible individual 
                for any taxable year shall be reduced (but not below 
                zero) by the aggregate amount contributed to lifelong 
                learning accounts of such individual which is 
                excludable from the taxpayer's gross income for such 
                taxable year under subparagraph (A) (and such amount 
                shall not be taken into account in determining the 
                credit under subsection (a)).
            ``(4) Applicable percentage.--For purposes of this section, 
        the term `applicable percentage' means--
                    ``(A) 50 percent with respect to the first $500 of 
                contributions taken into account under subsection (a) 
                with respect to any eligible individual for any taxable 
                year, and
                    ``(B) 25 percent with respect to so much of such 
                contributions as exceeds $500.
            ``(5) Eligible individual.--For purposes of this section, 
        the term `eligible individual' means any individual for any 
        taxable year if, as of the first day of such taxable year, such 
        individual has attained age 18 but has not attained age 71.
    ``(c) Lifelong Learning Accounts.--For purposes of this section--
            ``(1) In general.--The term `lifelong learning account' 
        means a trust created or organized in the United States as a 
        lifelong learning account exclusively for the purpose of paying 
        the qualified education expenses of the account beneficiary, 
        but only if the written governing instrument creating the trust 
        meets the following requirements:
                    ``(A) No contribution will be accepted unless it is 
                in cash.
                    ``(B) Except in the case of a rollover contribution 
                described in subsection (e)(5), no contribution will be 
                accepted if such contribution, when added to all 
                previous contributions to the trust for the calendar 
                year, would exceed the dollar amount applicable to the 
                account beneficiary under subsection (b).
                    ``(C) The trustee is a bank (as defined in section 
                408(n)), an agency or instrumentality of a State, or 
                another person who demonstrates to the satisfaction of 
                the Secretary that the manner in which that person will 
                administer the trust will be consistent with the 
                requirements of this section.
                    ``(D) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(E) No part of the trust assets will be invested 
                in any collectible (as defined in section 408(m)).
                    ``(F) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(G) The interest of an individual in the balance 
                in his account is nonforfeitable.
            ``(2) Qualified education expenses.--The term `qualified 
        education expenses' means amounts paid by the account 
        beneficiary for education of, or courses of instruction 
        (including training and apprenticeship programs) for, the 
        account beneficiary, including--
                    ``(A) tuition, fees, and similar payments, and
                    ``(B) books, supplies, equipment, tools, and 
                information technology devices, required for such 
                course or education.
        Such term shall not include amounts paid for any course or 
        other education involving sports, games, or hobbies.
            ``(3) Account beneficiary.--The term `account beneficiary' 
        means the individual on whose behalf the lifelong learning 
        account was established.
            ``(4) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                    ``(B) Section 408(g) (relating to community 
                property laws).
                    ``(C) Section 408(h) (relating to custodial 
                accounts).
    ``(d) Tax Treatment of Accounts.--
            ``(1) In general.--A lifelong learning account is exempt 
        from taxation under this subtitle unless such account has 
        ceased to be a lifelong learning account. Notwithstanding the 
        preceding sentence, any such account is subject to the taxes 
        imposed by section 511 (relating to imposition of tax on 
        unrelated business income of charitable, etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to 
        lifelong learning accounts, and any amount treated as 
        distributed under such rules shall be treated as not used to 
        pay qualified education expenses.
    ``(e) Tax Treatment of Distributions.--
            ``(1) Inclusion in gross income.--Any amount distributed 
        out of a lifelong learning account shall be included in gross 
        income by the distributee.
            ``(2) Additional tax.--
                    ``(A) In general.--Except as otherwise provided in 
                this subsection, the tax imposed by this chapter on the 
                account beneficiary for any taxable year in which there 
                is a nonqualified distribution from a lifelong learning 
                account shall be increased by 10 percent of the amount 
                of such distribution.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                if the distribution is made after the account 
                beneficiary dies, becomes disabled (within the meaning 
                of section 72(m)(7)), or has attained age 70.
            ``(3) Nonqualified distribution.--For purposes of this 
        section, the term `nonqualified distribution' means the excess 
        (if any) of--
                    ``(A) the aggregate distributions from the account 
                during the taxable year, over
                    ``(B) the qualified education expenses of the 
                account beneficiary for the taxable year.
            ``(4) Excess contributions returned before due date of 
        return.--
                    ``(A) In general.--If any excess contribution is 
                contributed for a taxable year to any lifelong learning 
                account of an individual, paragraphs (1) and (2) shall 
                not apply to distributions from the lifelong learning 
                accounts of such individual (to the extent such 
                distributions do not exceed the aggregate excess 
                contributions to all such accounts of such individual 
                for such year) if--
                            ``(i) such distribution is received by the 
                        individual on or before the last day prescribed 
                        by law (including extensions of time) for 
                        filing such individual's return for such 
                        taxable year, and
                            ``(ii) such distribution is accompanied by 
                        the amount of net income attributable to such 
                        excess contribution.
                Any net income described in clause (ii) shall be 
                included in the gross income of the individual for the 
                taxable year in which it is received.
                    ``(B) Excess contribution.--For purposes of 
                subparagraph (A), the term `excess contribution' means 
                any contribution (other than a rollover contribution 
                described in paragraph (5)) which is not taken into 
                account for purposes of determining the credit allowed 
                under subsection (a) or the amount excludable from the 
                taxpayer's gross income under subsection (b)(3).
            ``(5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraphs (1) and (2) shall not 
                apply to any amount paid or distributed from a lifelong 
                learning account to the account beneficiary to the 
                extent the amount received is paid into a lifelong 
                learning account for the benefit of such beneficiary 
                not later than the 60th day after the day on which the 
                beneficiary receives the payment or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from a lifelong learning account if, at 
                any time during the 1-year period ending on the day of 
                such receipt, such individual received any other amount 
                described in subparagraph (A) from a lifelong learning 
                account to which paragraphs (1) and (2) did not apply 
                by reason of the application of this paragraph.
            ``(6) Transfer of account incident to divorce.--The 
        transfer of an individual's interest in a lifelong learning 
        account to an individual's spouse or former spouse under a 
        divorce or separation instrument described in subparagraph (A) 
        of section 71(b)(2) shall not be considered a taxable transfer 
        made by such individual notwithstanding any other provision of 
        this subtitle, and such interest shall, after such transfer, be 
        treated as a lifelong learning account with respect to which 
        such spouse is the account beneficiary.
            ``(7) Treatment after death of account beneficiary.--
                    ``(A) Treatment if designated beneficiary is 
                spouse.--If the account beneficiary's surviving spouse 
                acquires such beneficiary's interest in a lifelong 
                learning account by reason of being the designated 
                beneficiary of such account at the death of the account 
                beneficiary, such lifelong learning account shall be 
                treated as if the spouse were the account beneficiary.
                    ``(B) Other cases.--
                            ``(i) In general.--If, by reason of the 
                        death of the account beneficiary, any person 
                        acquires the account beneficiary's interest in 
                        a lifelong learning account in a case to which 
                        subparagraph (A) does not apply--
                                    ``(I) such account shall cease to 
                                be a lifelong learning account as of 
                                the date of death, and
                                    ``(II) an amount equal to the fair 
                                market value of the assets in such 
                                account on such date shall be 
                                includible if such person is not the 
                                estate of such beneficiary, in such 
                                person's gross income for the taxable 
                                year which includes such date, or if 
                                such person is the estate of such 
                                beneficiary, in such beneficiary's 
                                gross income for the last taxable year 
                                of such beneficiary.
                            ``(ii) Deduction for estate taxes.--An 
                        appropriate deduction shall be allowed under 
                        section 691(c) to any person (other than the 
                        decedent or the decedent's spouse) with respect 
                        to amounts included in gross income under 
                        clause (i) by such person.
    ``(f) Reports.--The trustee of a lifelong learning account shall 
make such reports regarding such account to the Secretary and to the 
account beneficiary with respect to contributions, distributions, and 
such other matters as the Secretary may require under regulations. The 
reports required by this subsection shall be filed at such time and in 
such manner and furnished to such individuals at such time and in such 
manner as may be required by those regulations.''.
    (b) Tax on Excess Contributions.--Section 4973 of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``or'' at the end of subsection (a)(4), by 
        inserting ``or'' at the end of subsection (a)(5), and by 
        inserting after subsection (a)(5) the following new paragraph:
            ``(6) a lifelong learning account (within the meaning of 
        section 36D(c)),'', and
            (2) by adding at the end the following new subsection:
    ``(h) Excess Contributions to Lifelong Learning Accounts.--For 
purposes of this section, in the case of lifelong learning accounts 
(within the meaning of section 36D(c)), the term `excess contributions' 
means the sum of--
            ``(1) the aggregate amount contributed for the taxable year 
        to the accounts (other than rollover contributions described in 
        section 36D(e)(5)) which is not taken into account for purposes 
        of determining the credit allowed under section 36D(a) or the 
        amount excludable from the taxpayer's gross income under 
        section 36D(b)(3), and
            ``(2) the amount determined under this subsection for the 
        preceding taxable year, reduced by the sum of--
                    ``(A) the distributions out of the accounts with 
                respect to which additional tax was imposed under 
                section 36D(e)(2)(A) for the taxable year, and
                    ``(B) the excess (if any) of--
                            ``(i) the maximum amount of contributions 
                        which may be taken into account under section 
                        36D(a) for the taxable year, over
                            ``(ii) the amount contributed to the 
                        accounts for the taxable year.
                For purposes of this subsection, any contribution which 
                is distributed out of the lifelong learning account in 
                a distribution to which section 36D(e)(4) applies shall 
                be treated as an amount not contributed.''.
    (c) Tax on Prohibited Transactions.--
            (1) Paragraph (1) of section 4975(e) of the Internal 
        Revenue Code of 1986 (relating to prohibited transactions) is 
        amended by redesignating subparagraph (G) as subparagraph (H), 
        by striking ``or'' at the end of subparagraph (F), and by 
        inserting after subparagraph (F) the following new 
        subparagraph:
                    ``(G) a lifelong learning account described in 
                section 36D(c), or''.
            (2) Subsection (c) of section 4975 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(7) Special rule for lifelong learning accounts.--An 
        individual for whose benefit a lifelong learning account is 
        established shall be exempt from the tax imposed by this 
        section with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) if, with 
        respect to such transaction, the account ceases to be a 
        lifelong learning account by reason of the application of 
        section 36D(d)(2) to such account.''.
    (d) Failure To Provide Reports on Lifelong Learning Accounts.--
Paragraph (2) of section 6693(a) of the Internal Revenue Code of 1986 
is amended by redesignating subparagraphs (A) through (E) as 
subparagraphs (B) through (F), respectively, and by inserting before 
subparagraph (B) (as so redesignated) the following new subparagraph:
                    ``(A) section 36D(f) (relating to lifelong learning 
                accounts),''.
    (e)  Exclusion From Employment Taxes.--
            (1) Federal insurance contributions act.--Subsection (a) of 
        section 3121 of the Internal Revenue Code of 1986 is amended by 
        striking ``or'' at the end of paragraph (22), by striking the 
        period at the end of paragraph (23) and inserting ``; or'', and 
        by inserting after paragraph (23) the following new paragraph:
            ``(24) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 36D(b)(3).''.
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 of such Code is amended by adding at the end the following 
        new paragraph:
            ``(13) Learning account contributions.--The term 
        `compensation' shall not include any payment made to or for the 
        benefit of an employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to exclude 
        such payment from income under section 36D(b)(3).''.
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (19), by striking the period at the end of paragraph (20) and 
        inserting ``; or'', and by inserting after paragraph (20) the 
        following new paragraph:
            ``(21) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 36D(b)(3).''.
            (4) Withholding tax.--Subsection (a) of section 3401 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (22), by striking the period at the end of paragraph (23) and 
        inserting ``; or'', and by inserting after paragraph (23) the 
        following new paragraph:
            ``(24) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 36D(b)(3).''.
            (5) Employer contributions required to be shown on w-2.--
        Subsection (a) of section 6051 of such Code is amended by 
        striking ``and'' at the end of paragraph (13), by striking the 
        period at the end of paragraph (14) and inserting ``, and'', 
        and by inserting after paragraph (14) the following new 
        paragraph:
            ``(15) the amount contributed to any lifelong learning 
        account (as defined in section 36D) on behalf of such 
        employee.''.
            (6) Social security trust funds held harmless.--There is 
        hereby appropriated (out of any money in the Treasury not 
        otherwise appropriated) for each fiscal year to each fund under 
        the Social Security Act an amount equal to the reduction in the 
        transfers to such fund for such fiscal year by reason of the 
        amendment made by paragraph (1).
    (f) Exemption From ERISA Requirements.--Subsection (b) of section 4 
of the Employee Retirement Income Security Act of 1974 is amended by 
striking ``or'' at the end of paragraph (4), by striking the period at 
the end of paragraph (5) and inserting ``; or'', and by inserting after 
paragraph (5) the following new paragraph:
            ``(6) such plan is maintained solely for the purposes of 
        establishing, and making contributions to, lifelong learning 
        accounts (as defined in section 36D of the Internal Revenue 
        Code of 1986) on behalf of employees.''.
    (g) Conforming Amendments.--
            (1) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 36C 
        the following new item:

``Sec. 36D. Contributions to lifelong learning accounts.''.
            (2) Section 6211(b)(4)(A) of such Code is amended by 
        inserting ``36D,'' after ``36C,''.
            (3) Section 1324(b)(2) of title 31, United States Code, is 
        amended by inserting ``36D,'' after ``36C,''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 3. CREDIT FOR EMPLOYER CONTRIBUTIONS TO LIFELONG LEARNING ACCOUNTS 
              AND ADMINISTRATIVE EXPENSES OF CERTAIN SMALL EMPLOYERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45S. LIFELONG LEARNING ACCOUNTS CREDIT.

    ``(a) In General.--For purposes of section 38, the lifelong 
learning accounts credit is the sum of--
            ``(1) the lifelong learning account contributions credit, 
        and
            ``(2) in the case of an eligible employer, the small 
        employer lifelong learning account administrative costs credit.
    ``(b) Lifelong Learning Account Contributions Credit.--
            ``(1) In general.--For purposes of this section, the term 
        `lifelong learning account contributions credit' means the 
        amount equal to 25 percent of the aggregate amount paid or 
        incurred by the taxpayer during the taxable year as 
        contributions to lifelong learning accounts (as defined in 
        section 36D) of employees of the taxpayer.
            ``(2) Dollar limitation.--The amount of the contributions 
        taken into account under paragraph (1) with respect to any 
        employee for any taxable year shall not exceed $2,500.
    ``(c) Small Employer Lifelong Learning Account Administrative Costs 
Credit.--
            ``(1) In general.--For purposes of this section, the term 
        `small employer lifelong learning account administrative costs 
        credit' means, in the case of an eligible employer, the amount 
        equal to 50 percent of the aggregate amount paid or incurred by 
        the taxpayer during the taxable year as administrative expenses 
        in carrying out a program to make payments to the lifelong 
        learning accounts (as defined in section 36D) of employees of 
        the taxpayer.
            ``(2) Dollar limitation.--The amount of the credit 
        determined under this subsection for any taxable year shall not 
        exceed--
                    ``(A) $500 for the first credit year and each of 
                the 2 taxable years immediately following the first 
                credit year, and
                    ``(B) zero for any other taxable year.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Eligible employer.--The term `eligible 
                employer' has the meaning given such term by section 
                408(p)(2)(C)(i).
                    ``(B) First credit year.--The term `first credit 
                year' means the first taxable year for which the 
                taxpayer claims a credit under this section.
            ``(4) Special rules.--For purposes of this subsection, 
        rules similar to the rules of paragraphs (1), (2), and (3) of 
        section 45E(e) shall apply.''.
    (b) Credit Part of General Business Credit.--Section 38(b) of such 
Code is amended by striking ``plus'' at the end of paragraph (35), by 
striking the period at the end of paragraph (36) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(37) the lifelong learning accounts credit determined 
        under section 45S.''.
    (c) Deduction for Unused Credit.--Section 196(c) of such Code is 
amended by striking ``and'' at the end of paragraph (13), by striking 
the period at the end of paragraph (14) and inserting ``, and'', and by 
adding at the end the following new paragraph:
            ``(15) the lifelong learning accounts credit determined 
        under section 45S.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45S. Lifelong learning accounts credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
                                 <all>