[Congressional Record Volume 153, Number 68 (Thursday, April 26, 2007)]
[Senate]
[Pages S5200-S5202]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD:
  S. 1230. A bill to amend the Internal Revenue Code of 1986 to provide 
a refundable credit for contributions to qualified tuition programs; to 
the Committee on Finance.
  Mr. DODD. Mr. President, I rise to introduce the College Saver's 
Credit Act, a bill designed to open the dream of higher education to 
many more Americans.
  Few choices in life have the economic consequence as the decision to 
enter college. Compare college-educated workers to their high-school-
educated peers: those with a college diploma will earn $1 million more 
over

[[Page S5201]]

the course of a lifetime than their peers without one. That million-
dollar difference lays bare the power in college access.
  And yet there are literally hundreds of thousands of young men and 
women who want to choose a college education, and cannot. These young 
men and women are prepared to enter into our college-educated middle 
class--prepared in intellect, prepared in maturity, prepared in 
ambition--and are shut out by the cost of tuition.
  This year, 400,000 high school seniors whose families have low or 
moderate incomes will be priced out of college. Of those, nearly 
200,000 will never attend college at all. They will lose their chance 
at higher education, and as a consequence, they will face almost twice 
the odds of unemployment.
  And unless we take action, the number of excluded Americans is only 
likely to increase. Over the past 10 years, the cost of attending a 4-
year public college has increased by more than $2,800, or 96 percent, 
and the cost of attending a four-year private college has increased by 
more than $9,000, or 71 percent. These costs continue to rise today.
  We must take steps to break down these barriers to access, starting 
by making it easier for families to save for higher education. The 
refundable College Saver's Credit created by this act would do just 
that--even as it boosts personal and national savings, at a time when 
these rates are setting new lows. It would provide a powerful 
complement to the other forms of financial aid available to students, 
which, I might add, we should also continue to work to strengthen.
  The College Saver's Credit would be available to low- and moderate-
income taxpayers who save in Section 529 college savings plans: 
specifically, to joint filers making up to $60,000, heads of households 
making up to $45,000, and all other taxpayers making up to $30,000, 
with all numbers indexed for inflation. In other words, the credit is 
designed to provide the greatest benefit to those who have the greatest 
difficulty affording college.
  Taxpayers could claim a 50 percent credit for Section 529 plan 
contributions, up to a maximum credit of $2,000. The College Saver's 
Credit would be fully refundable--meaning that even taxpayers who do 
not make enough money to have a high tax liability would be eligible to 
claim the credit's full value--provided that the refunded amount is put 
towards qualified higher educational expenses. Any refund would be 
deposited directly and automatically into the taxpayer's or taxpayer's 
beneficiary's designated 529 college savings plan, taking advantage of 
the IRS's new ``split refund'' option. Funds attributable to refunds 
from the College Saver's Credit could accumulate earnings tax-free 
(like the rest of the taxpayer's savings in a 529 plan), but may only 
be distributed to pay college costs--otherwise, they must be returned 
to the Treasury.
  In his budget this year, President Bush proposed expanding the 
Saver's Credit for retirement savings to section 529 college savings 
plans. Establishing the refundable College Saver's Credit would 
accomplish this goal in a way that provides the greatest value to those 
Americans who need it most.
  And in doing that, this bill accomplishes two worthy, and linked, 
goals: It encourages Americans to plan and prepare for the future; and 
it truly widens the doors to college.
  Savings and education: They are pillars of our prosperity--prosperity 
that will grow even as it is shared more widely.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1230

       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 ``College Saver's Credit Act 
     of 2007''.

     SEC. 2. COLLEGE SAVER'S CREDIT.

       (a) Allowance of Refundable Credit.--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 
     redesignating section 36 as section 37 and by inserting after 
     section 35 the following new section:

     ``SEC. 36. COLLEGE SAVER'S CREDIT.

       ``(a) Allowance of Credit.--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 50 percent of so much of the qualified college 
     savings contributions made during the taxable year as do not 
     exceed $2,000.
       ``(b) Limitations.--
       ``(1) Limitation based on modified adjusted gross income.--
       ``(A) In general.--The amount which would (but for this 
     paragraph) be taken into account under subsection (a) for the 
     taxable year shall be reduced (but not below zero) by the 
     amount determined under subparagraph (B).
       ``(B) Amount of reduction.--The amount determined under 
     this subparagraph is the amount which bears the same ratio to 
     the amount which would be so taken into account as--
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for the 
     taxable year, over
       ``(II) the applicable amount, bears to

       ``(ii) the phaseout amount.
       ``(C) Applicable amount; phaseout amount.--For purposes of 
     subparagraph (B), the applicable amount and the phaseout 
     amount shall be determined as follows:

 
                                                    The       The phase
                                                 applicable   out amount
                                                 amount is:      is:
 
In the case of a joint return.................      $60,000      $10,000
In the case of a head of household............      $45,000       $7,500
In any other case.............................      $30,000       $5,000
 

       ``(D) Modified adjusted gross income.--For purposes of this 
     paragraph, the term `modified adjusted gross income' means 
     the adjusted gross income of the taxpayer for the taxable 
     year increased by any amount excluded from gross income under 
     section 911, 931, or 933.
       ``(E) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 2008, each of the 
     applicable amounts in the second column of the table in 
     subparagraph (C) 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)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2007' 
     for `calendar year 1992' in subparagraph (B) thereof.

     Any increase determined under the preceding sentence shall be 
     rounded to the nearest multiple of $500.
       ``(2) Earned income limitation.--The amount of the credit 
     allowable under subsection (a) to any taxpayer for any 
     taxable year shall not exceed the earned income (as defined 
     by section 32(c)(2)) of such taxpayer for such taxable year.
       ``(c) Eligible Individual.--For purposes of this section--
       ``(1) In general.--The term `eligible individual' means any 
     individual if such individual has attained the age of 18 as 
     of the close of the taxable year.
       ``(2) Dependents not eligible.--The term `eligible 
     individual' shall not include any individual with respect to 
     whom a deduction under section 151 is allowed to another 
     taxpayer for a taxable year beginning in the calendar year in 
     which such individual's taxable year begins.
       ``(d) Qualified College Savings Contributions.--The term 
     `qualified college savings contributions' means, with respect 
     to any taxable year, the aggregate contributions made by the 
     taxpayer to any account which--
       ``(1) is described in section 529(b)(1)(A)(ii),
       ``(2) is part of a qualified tuition program, and
       ``(3) is established for the benefit of--
       ``(A) the taxpayer,
       ``(B) the taxpayer's spouse, or
       ``(C) any dependent of the taxpayer with respect to whom 
     the taxpayer is allowed a deduction under section 151.
       ``(e) Treatment of Contributions by Dependent.--If a 
     deduction under section 151 with respect to an individual is 
     allowed to another taxpayer for a taxable year beginning in 
     the calendar year in which such individual's taxable year 
     begins--
       ``(1) no credit shall be allowed under subsection (a) to 
     such individual for such individual's taxable year, and
       ``(2) any qualified college savings contributions made by 
     such individual during such taxable year shall be treated for 
     purposes of this section as made by such other taxpayer.''.
       (b) Refundable Amount Credited to Qualified Tuition Plan.--
       (1) Transfer of refund to qualified tuition plans.--Section 
     6402 of the Internal Revenue Code of 1986 (relating to 
     authority to make credits or refunds) is amended by adding at 
     the end the following new subsection:
       ``(l) Special Rule for Overpayments Attributable to College 
     Saver's Credit.--
       ``(1) In general.--In the case of any overpayment 
     attributable to the credit allowed under section 36, the 
     Secretary shall transfer such amount to the qualified tuition 
     program to which the taxpayer made a qualified college 
     savings contribution.
       ``(2) Transfers to more than 1 qualified tuition program.--
     If the taxpayer made qualified college savings contributions 
     to more than 1 qualified tuition program, the

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     Secretary shall transfer the overpayment described in 
     paragraph (1) to each such qualified tuition program in an 
     amount that bears the same ratio to the amount of such 
     overpayment as--
       ``(A) the amount of qualified college savings contributions 
     made by such taxpayer to such qualified tuition program, 
     bears to
       ``(B) the amount of qualified college savings contribution 
     made by such taxpayer to all qualified tuition programs.
       ``(3) Qualified college savings contribution.--For purposes 
     of this subsection, the term `qualified college savings 
     contribution' has the meaning given such term by section 
     36(d).''.
       (2) Separate accounting for refundable amounts.--Section 
     529 of such Code is amended by redesignating subsection (f) 
     as subsection (g) and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Special Rules for Contributions Attributable to 
     College Saver's Credit.--
       ``(1) In general.--A program shall not be treated as a 
     qualified tuition program unless it provides separate 
     accounting for contributions transferred by the Secretary 
     under section 6402(l) to an account in the program.
       ``(2) Special rules for distribution.--In the case of a 
     distribution under a qualified tuition program which includes 
     any amount transferred by the Secretary under section 6402(l) 
     (including any earnings attributable to such amount) and 
     which is includible in gross income, the tax imposed by this 
     chapter on the person receiving such distribution shall be 
     increased by 100 percent of the amount so includible.
       ``(3) Ordering rules.--For purposes of applying this 
     subsection to any distribution from a qualified tuition 
     program--
       ``(A) In general.--Except as provided in subparagraph (B), 
     such distribution shall be treated as made--
       ``(i) first from amounts contributed under the program, and
       ``(ii) second from amounts transferred by the Secretary 
     under section 6402(l).
       ``(B) Exception for distributions for qualified higher 
     education expenses.--In the case of a distribution described 
     in subsection (c)(3), such distribution shall be treated as 
     made--
       ``(i) first from amounts transferred by the Secretary under 
     section 6402(l), and
       ``(ii) second from other amounts contributed under the 
     program.''.
       (c) Conforming Amendments.--
       (1) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting before the period at the end ``, or 
     enacted by the College Saver's Credit Act of 2007''.
       (2) 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 striking the item relating to section 36 
     and inserting the following:

``Sec. 36. College saver's credit.
``Sec. 37. Overpayments of tax.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 3. DISTRIBUTION OF FINANCIAL EDUCATION MATERIALS TO 
                   INDIVIDUALS INVESTING IN QUALIFIED TUITION 
                   PROGRAMS.

       (a) In General.--Subsection (b) of section 529 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new paragraph:
       ``(7) Financial education materials.--A program shall not 
     be treated as a qualified tuition program unless it requires 
     that financial education materials are distributed to 
     individuals participating in the program.''.
       (b) Guidance.--Subsection (g) of section 529 of such Code, 
     as redesignated by this Act, is amended by inserting ``and 
     regulations providing guidance on the types of financial 
     education material required to be provided under subsection 
     (b)(7)'' before the period at the end.
       (c) Effective Date.--The amendments made by this section 
     shall take effect 1 year after the date of the enactment of 
     this Act.

     SEC. 4. STUDY ON PARTICIPATION IN QUALIFIED TUITION PROGRAMS.

       (a) In General.--The Secretary of the Treasury shall 
     conduct a study on the participation of individuals in 
     qualified tuition programs under section 529 of the Internal 
     Revenue Code of 1986.
       (b) Matter Studied.--The study conducted under subsection 
     (a) shall consider--
       (1) the income and age of individuals participating in 
     qualified tuition programs, and
       (2) the amount of fees charged under each qualified tuition 
     program established or maintained by a State (or agency or 
     instrumentality thereof).
       (c) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary of the Treasury shall 
     submit to Congress a report on the study conducted under 
     subsection (a).
                                 ______