[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 335 Reported in Senate (RS)]

                                                        Calendar No. 97
114th CONGRESS
  1st Session
                                 S. 335

                          [Report No. 114-56]

    To amend the Internal Revenue Code of 1986 to improve 529 plans.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 2, 2015

    Mr. Grassley (for himself, Mr. Casey, Mr. Burr, Mr. Warner, Mr. 
Roberts, Mr. Cardin, Mr. Scott, Ms. Ayotte, Mr. Isakson, Mr. McConnell, 
  Ms. Collins, Mr. Schumer, Mrs. Fischer, Mr. Gardner, Mr. Moran, Mr. 
     Wicker, Mr. King, Mr. Portman, Mr. Toomey, and Ms. Murkowski) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

                              May 21, 2015

                Reported by Mr. Hatch, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to improve 529 plans.

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

<DELETED>SECTION 1. COMPUTER TECHNOLOGY AND EQUIPMENT ALLOWED AS A 
              QUALIFIED HIGHER EDUCATION EXPENSE FOR SECTION 529 
              ACCOUNTS.</DELETED>

<DELETED>    (a) Made Permanent.--Clause (iii) of section 529(e)(3)(A) 
of the Internal Revenue Code of 1986 is amended by striking ``in 2009 
or 2010''.</DELETED>
<DELETED>    (b) Only for Use Primarily by the Beneficiary.--Clause 
(iii) of section 529(e)(3)(A) of such Code is amended by striking 
``used by the beneficiary and the beneficiary's family'' and inserting 
``used primarily by the beneficiary''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to expenses paid or incurred after December 31, 
2014.</DELETED>

<DELETED>SEC. 2. ELIMINATION OF DISTRIBUTION AGGREGATION 
              REQUIREMENTS.</DELETED>

<DELETED>    (a) In General.--Clause (ii) of section 529(c)(3)(D) of 
the Internal Revenue Code of 1986 is amended by inserting before the 
comma at the end the following: ``, except for purposes of calculating 
the earnings portion of any distribution.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply to distributions after December 31, 2014.</DELETED>

<DELETED>SEC. 3. CONTRIBUTION OF AMOUNTS PREVIOUSLY DISTRIBUTED IN CASE 
              OF WITHDRAWAL FROM SCHOOL.</DELETED>

<DELETED>    (a) In General.--Paragraph (3) of section 529(c) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subparagraph:</DELETED>
                <DELETED>    ``(E) Special rule for contributions 
                relating to withdrawal from school.--In the case of a 
                beneficiary who receives a refund of any qualified 
                higher education expenses from an eligible educational 
                institution in connection with withdrawal from 
                enrollment at such institution, subparagraph (A) shall 
                not apply to that portion of any distribution for the 
                taxable year which is recontributed to a qualified 
                tuition program of which such individual is a 
                beneficiary, but only to the extent such recontribution 
                is made not later than 60 days after the date of such 
                refund and does not exceed the refunded 
                amount.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply with respect to distributions after December 31, 
2014.</DELETED>

SECTION 1. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds the following:
            (1) When the Economic Growth and Tax Relief Reconciliation 
        Act of 2001 became law, the tax treatment of section 529 
        college savings plans was changed so that qualified 
        distributions were no longer taxed as income. The favorable tax 
        treatment of college savings plans was made permanent with the 
        passage of the Pension Protection Act of 2006.
            (2) Section 529 college savings plans empower middle-class 
        families to accumulate savings to offset the rising costs of 
        attending college.
            (3) The latest data from the College Savings Plan Network 
        shows that there are 11.83 million 529 accounts open throughout 
        all 50 states, which represent $244.5 billion in total assets. 
        The average 529 account size is $20,671.
            (4) States that sponsor 529 college savings plans have 
        taken steps to ensure these plans are a tool that all families 
        can use to save for college, including setting minimum 
        contributions as low as $25 per month to encourage 
        participation by families of all income levels.
            (5) The President's fiscal year 2016 Budget proposes 
        raising taxes by taxing certain future distributions made from 
        529 college savings plans.
            (6) The tax proposed by the President would discourage the 
        use of 529 college savings plans, requiring families and 
        students to take on more debt.
            (7) Purchase of a computer represents a significant higher 
        education expense and therefore should be eligible for 
        qualified distributions under 529 college savings plans.
    (b) Purpose.--It is the purpose of this Act to--
            (1) enact policies that strengthen 529 college savings 
        plans; and
            (2) make 529 plans more modern, consumer-friendly, and 
        responsive to the realities faced by students today.

SEC. 2. COMPUTER TECHNOLOGY AND EQUIPMENT PERMANENTLY ALLOWED AS A 
              QUALIFIED HIGHER EDUCATION EXPENSE FOR SECTION 529 
              ACCOUNTS.

    (a) In General.--Section 529(e)(3)(A)(iii) of the Internal Revenue 
Code of 1986 is amended to read as follows:
                            ``(iii) expenses for the purchase of 
                        computer or peripheral equipment (as defined in 
                        section 168(i)(2)(B)), computer software (as 
                        defined in section 197(e)(3)(B)), or Internet 
                        access and related services, if such equipment, 
                        software, or services are to be used primarily 
                        by the beneficiary during any of the years the 
                        beneficiary is enrolled at an eligible 
                        educational institution.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 3. ELIMINATION OF DISTRIBUTION AGGREGATION REQUIREMENTS.

    (a) In General.--Section 529(c)(3) of the Internal Revenue Code of 
1986 is amended by striking subparagraph (D).
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions after December 31, 2014.

SEC. 4. RECONTRIBUTION OF REFUNDED AMOUNTS.

    (a) In General.--Section 529(c)(3) of the Internal Revenue Code of 
1986, as amended by section 3, is amended by adding at the end the 
following new subparagraph:
                    ``(D) Special rule for contributions of refunded 
                amounts.--In the case of a beneficiary who receives a 
                refund of any qualified higher education expenses from 
                an eligible educational institution, subparagraph (A) 
                shall not apply to that portion of any distribution for 
                the taxable year which is recontributed to a qualified 
                tuition program of which such individual is a 
                beneficiary, but only to the extent such recontribution 
                is made not later than 60 days after the date of such 
                refund and does not exceed the refunded amount.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply with respect to refunds of qualified higher education 
        expenses after December 31, 2014.
            (2) Transition rule.--In the case of a refund of qualified 
        higher education expenses received after December 31, 2014, and 
        before the date of the enactment of this Act, section 
        529(c)(3)(D) of the Internal Revenue Code of 1986 (as added by 
        this section) shall be applied by substituting ``not later than 
        60 days after the date of the enactment of this subparagraph'' 
        for ``not later than 60 days after the date of such refund''.
                                                        Calendar No. 97

114th CONGRESS

  1st Session

                                 S. 335

                          [Report No. 114-56]

_______________________________________________________________________

                                 A BILL

    To amend the Internal Revenue Code of 1986 to improve 529 plans.

_______________________________________________________________________

                              May 21, 2015

                       Reported with an amendment