[Congressional Record Volume 160, Number 134 (Thursday, September 18, 2014)]
[Senate]
[Pages S5788-S5789]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL:
  S. 2882. A bill to amend the Internal Revenue Code of 1986 to allow 
certain individuals a credit against income tax for contributions to 
529 plans, and for other purposes; to the Committee on Finance.
  Mr. McCONNELL. Mr. President, today I am proud to offer legislation 
that will make it easier for American families to pay for their child's 
higher education. This legislation is the Enhanced 529-Setting Aside 
for a Valuable Education, or Enhanced 529-SAVE, Act. This measure will 
make the 529 college savings plans more accessible to lower and middle-
income families.
  A 529 plan is a tax-advantaged savings plan that is designed to 
encourage Americans to save for future college costs. 529 plans can be 
sponsored by states, state agencies, or educational institutions and 
they are authorized by Section 529 of the Internal Revenue

[[Page S5789]]

Code. I championed efforts to ensure that 529 plans would be 100 
percent tax-free at the Federal level. In 2001, I authored the Setting 
Aside for Valuable Education, or SAVE, Act, which was included in a tax 
package that became law. In 2006, I helped make the tax benefits under 
these accounts permanent.
  The Enhanced 529-SAVE Act will make 529 plans more accessible by 
encouraging employers to contribute to an employee's 529 plan. My bill 
would exclude up to $600 of an employer's contribution from an 
employee's gross income. This will help families and individuals save 
more for higher education expenses.
  The Enhanced 529-SAVE Act will also create an incentive for lower-
income families and individuals to save money for college by allowing 
the individual that contributes to the 529 plan to qualify for the 
Saver's Credit, which is an income-based, non-refundable tax credit up 
to $4,000.
  The Enhanced 529-SAVE Act is similar to H.R. 529, introduced in the 
House of Representatives by Congresswoman Lynn Jenkins of Kansas. I 
want to commend her for her leadership on this important issue. I urge 
my colleagues to consider and pass the Enhanced 529-SAVE Act, and I 
look forward to its eventual passage.
  Mr. President, 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. 2882

       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 ``Enhanced 529 - Setting Aside 
     for a Valuable Education Act'' or the ``Enhanced 529 - 
     S.A.V.E. Act''.

     SEC. 2. CREDIT FOR CONTRIBUTIONS TO 529 PLANS.

       (a) In General.--Paragraph (1) of section 25B(d) of the 
     Internal Revenue Code of 1986 is amended by striking ``and'' 
     at the end of subparagraph (B)(ii), by striking the period at 
     the end of subparagraph (C) and inserting ``, and'', and by 
     adding at the end the following new subparagraph:
       ``(D) the amount of the contributions to qualified tuition 
     programs described in paragraph (2) made by the eligible 
     individual.''.
       (b) Contributions to Qualified Tuition Programs.--
     Subsection (d) of section 25B of the Internal Revenue Code of 
     1986 is amended by redesignating paragraph (2) as paragraph 
     (3) and by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Contributions to qualified tuition programs.--
       ``(A) In general.--The term `contributions to qualified 
     tuition programs' means any purchase or contribution 
     described in paragraph (1)(A) of section 529(b) to a 
     qualified tuition program (as defined in such section) if--
       ``(i) the eligible individual has the power to authorize 
     distributions and otherwise administer the account, and
       ``(ii) the designated beneficiary of such purchase or 
     contribution is the eligible individual, the eligible 
     individual's spouse, or an individual with respect to whom 
     the eligible individual is allowed a deduction under section 
     151.
       ``(B) Limitation based on compensation.--The amount treated 
     as a qualified savings contribution by reason of subparagraph 
     (A) for any taxable year shall not exceed the sum of--
       ``(i) the compensation (as defined in section 219(f)(1)) 
     includible in the eligible individual's gross income for the 
     taxable year, and
       ``(ii) the amount excluded from the eligible individual's 
     gross income under section 112 (relating to combat pay) for 
     such year.
       ``(C) Determination of adjusted gross income.--Solely for 
     purposes of determining the applicable percentage under 
     subsection (b) which applies with respect to the amount 
     treated as contributions to qualified tuition programs, 
     adjusted gross income (determined without regard to this 
     subparagraph) shall be increased by the excess (if any) of--
       ``(i) the social security benefits received during the 
     taxable year (within the meaning of section 86), over
       ``(ii) the amount included in gross income for such year 
     under section 86.''.
       (c) Conforming Amendments.--
       (1) Section 25B of the Internal Revenue Code of 1986 is 
     amended by striking ``qualified retirement savings'' each 
     place it appears and inserting ``qualified savings''.
       (2) The heading of subsection (d) of section 25B of such 
     Code is amended by striking ``Retirement''.
       (3) Subparagraph (A) of section 25B(d)(3) of such Code, as 
     redesignated by subsection (a), is amended--
       (A) by striking ``paragraph (1)'' the first place it 
     appears and inserting ``paragraph (1) or (2)'', and
       (B) by striking ``paragraph (1)'' the second place it 
     appears and inserting ``paragraph (1), or (2), as the case 
     may be,''.
       (4) The heading for section 25B of such Code is amended by 
     striking ``and ira contributions'' and inserting ``, ira 
     contributions, and qualified tuition program contributions''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 of such Code is amended by striking 
     the item relating to section 25B and inserting the following 
     new item:

``Sec. 25B. Elective deferrals, IRA contributions, and qualified 
              tuition program contributions by certain individuals.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to contributions made after December 31, 2014, in 
     taxable years ending after such date.

     SEC. 3. EXCLUSION FROM GROSS INCOME FOR EMPLOYER 
                   CONTRIBUTIONS TO QUALIFIED TUITION PROGRAMS.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 is amended by inserting 
     after section 127 the following new section:

     ``SEC. 127A. EMPLOYER CONTRIBUTIONS TO QUALIFIED TUITION 
                   PROGRAMS.

       ``(a) In General.--Gross income of an employee does not 
     include amounts paid by the employer as contributions to a 
     qualified tuition program held by the employee or spouse of 
     the employee if the contributions are made pursuant to a 
     program which is described in subsection (c).
       ``(b) Maximum Exclusion.--The amount excluded from the 
     gross income of an employee under this section for the 
     taxable year shall not exceed $600.
       ``(c) Qualified Tuition Assistance Program.--For purposes 
     of this section, a qualified tuition assistance program is a 
     separate written plan of an employer for the benefit of such 
     employer's employees--
       ``(1) under which the employer makes matching contributions 
     to qualified tuition programs of--
       ``(A) such employees,
       ``(B) their spouses, or
       ``(C) any individual with respect to whom such an employee 
     or spouse--
       ``(i) is allowed a deduction under section 151, and
       ``(ii) has the power to authorize distributions and 
     otherwise administer such individual's account under the 
     qualified tuition program, and
       ``(2) which meets requirements similar to the requirements 
     of paragraphs (2), (3), (4), (5), and (6) of section 127(b).
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified tuition program.--The term `qualified 
     tuition program' means a qualified tuition program as defined 
     in section 529(b).
       ``(2) Employee and employer.--The terms `employee' and 
     `employer' shall have the meaning given such terms by 
     paragraphs (2) and (3), respectively, of section 127(c).
       ``(3) Applicable rules.--Rules similar to the rules of 
     paragraphs (4), (5), (6), and (7) of section 127(c) shall 
     apply.
       ``(e) Inflation Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning in a calendar year after 2015, the $600 amount 
     contained in subsection (b)(1) shall be increased by an 
     amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) 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 2014' 
     for `calendar year 1992' in subparagraph (B) thereof.

     Any increase determined under the preceding sentence shall be 
     rounded to the nearest multiple of $50.
       ``(f) Cross Reference.--For reporting and recordkeeping 
     requirements, see section 6039D.''.
       (b) Exclusion From Employment Taxes.--
       (1) Sections 3121(a)(18), 3306(b)(13), and 3401(a)(18) of 
     such Code are each amended by inserting ``, 127A'' after 
     ``127'' each place it appears.
       (2) Section 3231(e)(6) of such Code is amended by striking 
     ``section 127'' and inserting ``section 127 or 127A''.
       (c) Reporting and Recordkeeping Requirements.--Section 
     6039D(d)(1) of such Code is amended by inserting ``, 127A'' 
     after ``127''.
       (d) Other Conforming Amendments.--
       (1) Sections 125(f), 414(n)(3)(C), and 414(t)(2) of such 
     Code are each amended by inserting ``, 127A'' after ``127'' 
     each place it appears.
       (2) Section 132(j)(8) of such Code is amended by striking 
     ``section 127'' and inserting ``section 127 or 127A''.
       (3) Section 1397(a)(2)(A) of such Code is amended by 
     inserting at the end the following new clause:
       ``(iii) Any amount paid or incurred by an employer which is 
     excludable from the gross income of an employee under section 
     127A, but only to the extent paid or incurred to a person not 
     related to the employer.''.
       (4) Section 209(a)(15) of the Social Security Act (42 
     U.S.C. 409(a)(15)) is amended by striking ``or 129'' and 
     inserting ``, 127A, or 129''.
       (e) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 of such Code is amended by 
     inserting after the item relating to section 127 the 
     following new item:

``Sec. 127A. Employer contributions to qualified tuition programs.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.
                                 ______