[Congressional Record Volume 143, Number 150 (Friday, October 31, 1997)]
[Senate]
[Page S11553]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

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        THE EDUCATION SAVINGS ACT FOR PUBLIC AND PRIVATE SCHOOLS

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                        LOTT AMENDMENT NO. 1542

  (Ordered to lie on the table.)
  Mr. LOTT submitted an amendment intended to be proposed by him to the 
bill (H.R. 2646) 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; as follows:

       Strike all after ``1. SHORT'' and insert ``TITLE.
       This act may be cited as the ``Education Savings Act for 
     Public and Private Schools''.

     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) of the Internal Revenue 
     Code of 1986 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)) but only with respect 
     to amounts in the account which are attributable to 
     contributions for any taxable year ending before January 1, 
     2003, and earnings on such contributions.

     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) of such Code 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 tuition, fees, tutoring, 
     special needs services, books, supplies, computer equipment 
     (including related software and services) and other 
     equipment, transportation, and supplementary expenses 
     required for the enrollment or attendance of the designated 
     beneficiary of the trust at a public, private, or religious 
     school.
       ``(B) Special rule for homeschooling.--Such term shall 
     include expenses described in subparagraph (A) required for 
     education provided for 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 (through 
     grade 12), as determined under State law.''.
       (3) Conforming amendments.--Subsections (b)(1) and (d)(2) 
     of section 530 of such Code are each amended by striking 
     ``higher'' each place it appears in the text and heading 
     thereof.
       (b) Temporary Increase in Maximum Annual Contributions.--
       (1) In general.--Section 530(b)(1)(A)(iii) of the Internal 
     Revenue Code of 1986 is amended by striking ``$500'' and 
     inserting ``the contribution limit for such taxable year''.
       (2) Contribution limit.--Section 530(b) of such Code is 
     amended by adding at the end the following new paragraph:
       ``(4) Contribution limit.--The term `contribution limit' 
     means $2,500 ($500 in the case of any taxable year ending 
     after December 31, 2002).''.
       (3) Conforming amendments.--
       (A) Section 530(d)(4)(C) of such Code is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
       (B) Section 4973(e)(1)(A) of such Code is amended by 
     striking ``$500'' and inserting ``the contribution limit (as 
     defined in section 530(b)(4)) for such taxable year''.
       (c) Waiver of Age Limitations for Children With Special 
     Needs.--Paragraph (1) of section 530(b) of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following flush sentence: ``The age limitations in the 
     preceding sentence shall not apply to any designated 
     beneficiary with special needs (as determined under 
     regulations prescribed by the Secretary).''.
       (d) Corporations Permitted To Contribute to Accounts.--
     Paragraph (1) of section 530(c) of the Internal Revenue Code 
     of 1986 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; References.--
       (1) Effective date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 213 of the Taxpayer Relief Act of 1997.
       (2) References.--Any reference in this section to any 
     section of the Internal Revenue Code of 1986 shall be a 
     reference to such section as added by the Taxpayer Relief Act 
     of 1997.

     SEC. 8. OVERRULING OF SCHMIDT BAKING COMPANY CASE.

       (a) In General.--The Internal Revenue Code of 1986 shall be 
     applied without regard to the result reached in the case of 
     Schmidt Baking Company, Inc. v. Commissioner of Internal 
     Revenue, 107 T.C. 271 (1996).
       (b) Regulations.-- The Secretary of the Treasury or the 
     Secretary's delegate shall prescribe regulations to reflect 
     subsection (a).
       (c) Effective Date.--
       (1) In general.--Subsections (a) and (b) shall apply to 
     taxable years beginning after October 8, 1997.
       (2) Special rule for taxable years including october 8, 
     1997.--In the case of any taxable year which includes October 
     8, 1997, the amount of the deduction of any taxpayer for 
     vacation, severance, or sick pay shall be reduced by an 
     amount equal to 60 percent of the excess (if any) of--
       (A) the amount of such deduction determined without regard 
     to this section, over
       (B) the amount of such deduction which would be determined 
     if subsections (a) and (b) applied to such taxable year.
       (3) Change in method of accounting.--In the case of any 
     taxpayer required by this section to change its method of 
     accounting for its first taxable year beginning after October 
     8, 1997--
       (A) such change shall be treated as initiated by the 
     taxpayer.
       (B) such change shall be treated as made with the consent 
     of the Secretary of the Treasury, and
       (C) the net amount of the adjustments required to be taken 
     into account by the taxpayer under section 481 of the 
     Internal Revenue Code of 1986 shall be taken into account in 
     a prorata manner during the 10-taxable year period beginning 
     with such first taxable year.

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