[House Report 118-950]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 118-950
======================================================================
EDUCATION AND WORKFORCE FREEDOM ACT
_______
December 24, 2024.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Smith of Missouri, from the Committee on Ways and Means,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 8915]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 8915) to amend the Internal Revenue Code of 1986 to
expand the expenses treated as qualified higher education
expenses for purposes of 529 accounts to include additional
elementary and secondary school expenses and certain
postsecondary credentialing expenses, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................3
A. Purpose and Summary................................. 3
B. Background and Need for Legislation................. 4
C. Legislative History................................. 4
D. Designated Hearing.................................. 4
II. EXPLANATION OF THE BILL..........................................5
A. Expand the Expenses Treated as Qualified Higher
Education Expenses for Purposes of 529 Accounts To
Include Additional Elementary and Secondary School
Expenses and Certain Postsecondary Credentialing
Expenses (Secs. 2 and 3 of the Bill and Sec. 529 of
the Code).......................................... 5
III. VOTE OF THE COMMITTEE............................................9
IV. BUDGET EFFECTS OF THE BILL.......................................9
A. Committee Estimate of Budgetary Effects............. 9
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 10
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 10
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......11
A. Committee Oversight Findings and Recommendations.... 11
B. Statement of General Performance Goals and
Objectives......................................... 11
C. Applicability of House Rule XXI, Clause 5(b)........ 12
D. Information Relating to Unfunded Mandates........... 12
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 12
F. Duplication of Federal Programs..................... 12
G. Tax Complexity Analysis............................. 12
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........13
A. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 13
VII. DISSENTING VIEWS................................................23
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Education and Workforce Freedom Act''.
SEC. 2. ADDITIONAL ELEMENTARY, SECONDARY, AND HOME SCHOOL EXPENSES
TREATED AS QUALIFIED HIGHER EDUCATION EXPENSES FOR
PURPOSES OF 529 ACCOUNTS.
(a) In General.--Section 529(c)(7) of the Internal Revenue Code of
1986 is amended to read as follows:
``(7) Treatment of elementary and secondary tuition.--Any
reference in this section to the term `qualified higher
education expense' shall include a reference to the following
expenses in connection with enrollment or attendance at, or for
students enrolled at or attending, an elementary or secondary
public, private, or religious school:
``(A) Tuition.
``(B) Curriculum and curricular materials.
``(C) Books or other instructional materials.
``(D) Online educational materials.
``(E) Tuition for tutoring or educational classes
outside of the home, including at a tutoring facility,
but only if the tutor or instructor is not related to
the student and--
``(i) is licensed as a teacher in any State,
``(ii) has taught at an eligible educational
institution, or
``(iii) is a subject matter expert in the
relevant subject.
``(F) Fees for a nationally standardized norm-
referenced achievement test, an advanced placement
examination, or any examinations related to college or
university admission.
``(G) Fees for dual enrollment in an institution of
higher education.
``(H) Educational therapies for students with
disabilities provided by a licensed or accredited
practitioner or provider, including occupational,
behavioral, physical, and speech-language therapies.
Such term shall include expenses for the purposes described in
subparagraphs (A) through (H) in connection with a homeschool
(whether treated as a homeschool or a private school for
purposes of applicable State law).''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made after the date of the enactment of this Act.
SEC. 3. CERTAIN POSTSECONDARY CREDENTIALING EXPENSES TREATED AS
QUALIFIED HIGHER EDUCATION EXPENSES FOR PURPOSES OF
529 ACCOUNTS.
(a) In General.--Section 529(e)(3) of the Internal Revenue Code of
1986 is amended by adding at the end the following new subparagraph:
``(C) Certain postsecondary credentialing expenses.--
The term `qualified higher education expenses' includes
qualified postsecondary credentialing expenses (as
defined in subsection (f)).''.
(b) Qualified Postsecondary Credentialing Expenses.--Section 529 is
amended by redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new subsection:
``(f) Qualified Postsecondary Credentialing Expenses.--For purposes
of this section--
``(1) In general.--The term `qualified postsecondary
credentialing expenses' means--
``(A) tuition, fees, books, supplies, and equipment
required for the enrollment or attendance of a
designated beneficiary in a recognized postsecondary
credential program, or any other expense incurred in
connection with enrollment in or attendance at a
recognized postsecondary credential program if such
expense would, if incurred in connection with
enrollment or attendance at an eligible educational
institution, be covered under subsection (e)(3)(A),
``(B) fees for testing if such testing is required to
obtain or maintain a recognized postsecondary
credential, and
``(C) fees for continuing education if such education
is required to maintain a recognized postsecondary
credential.
``(2) Recognized postsecondary credential program.--For
purposes of this subparagraph, the term `recognized
postsecondary credential program' means any program to obtain a
recognized postsecondary credential if--
``(A) such program is included on a State list
prepared under section 122(d) of the Workforce
Innovation and Opportunity Act (29 U.S.C. 3152(d)),
``(B) such program is listed in the WEAMS Public
directory (or successor directory) maintained by the
Department of Veterans Affairs,
``(C) an examination (developed or administered by an
organization widely recognized as providing reputable
credentials in the occupation) is required to obtain or
maintain such credential and such organization
recognizes such program as providing training or
education which prepares individuals to take such
examination, or
``(D) such program is identified by the Secretary,
after consultation with the Secretary of Labor, as
being a reputable program for obtaining a recognized
postsecondary credential for purposes of this
subparagraph.
``(3) Recognized postsecondary credential.--The term
`recognized postsecondary credential' means--
``(A) any postsecondary employment credential that is
industry recognized, including--
``(i) any postsecondary employment credential
issued by a program that is accredited by the
Institute for Credentialing Excellence, the
National Commission on Certifying Agencies, or
the American National Standards Institute,
``(ii) any postsecondary employment
credential that is included in the
Credentialing Opportunities On-Line (COOL)
directory of credentialing programs (or
successor directory) maintained by the
Department of Defense or by any branch of the
Armed Services, and
``(iii) any postsecondary employment
credential identified for purposes of this
clause by the Secretary, after consultation
with the Secretary of Labor, as being industry
recognized,
``(B) any certificate of completion of an
apprenticeship that is registered and certified with
the Secretary of Labor under the National
Apprenticeship Act (29 U.S.C. 50),
``(C) any occupational or professional license issued
or recognized by a State or the Federal Government (and
any certification that satisfies a condition for
obtaining such a license), and
``(D) any recognized postsecondary credential as
defined in section 3(52) of the Workforce Innovation
and Opportunity Act (29 U.S.C. 3102).''.
(c) Effective Date.--The amendments made by this section shall apply
to distributions made after the date of the enactment of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 8915, the ``Education and Workforce Freedom
Act,'' as ordered reported by the Committee on Ways and Means
on July 9, 2024, adds to present law new categories of expenses
that are treated as ``qualified higher education expenses'' and
that, as a result, are allowed favorable tax treatment under
Internal Revenue Code (``Code'') section 529. Section 2 of the
bill broadens the expenses related to elementary and secondary
schools that are treated as qualified higher education expenses
under section 529, and it provides that expenses in connection
with a homeschool are included. Section 3 of the bill treats
certain postsecondary credentialing expenses as qualified
higher education expenses.
B. Background and Need for Legislation
Qualified tuition programs, colloquially known as 529
plans, are valuable tools for millions of American families and
students to help save for educational expenses, most commonly
at the post-secondary four-year degree level. The Committee
believes usage and flexibility of 529 plans should be expanded
to help ease the educational cost burden and expand educational
opportunities for parents and students alike.
H.R. 8915 addresses this by expanding qualified expenses
for 529 plans at the elementary, secondary, and postsecondary
levels. Specifically, H.R. 8915 provides parents and students
with resources to receive the education that is best for them
by expanding 529 plans' qualified expenses to include tuition,
curriculum and curricular materials, books or other
instructional materials, online educational materials,
tutoring, certain fees, and educational therapies. H.R. 8915
also provides students and workers to choose the educational
opportunity that is best for them and helps address America's
growing skills shortage by expanding 529 plans' qualified
expenses to include postsecondary credentialing expenses,
testing fees related to postsecondary credentials, and fees for
continuing education required to maintain a postsecondary
credential.
C. Legislative History
Background
H.R. 8915 was introduced on July 2, 2024, and was referred
to the Committee on Ways and Means.
Committee Hearings
On September 14, 2023, the Committee held a hearing
entitled, ``Member Day.''
On October 25, 2023, the Committee held a hearing on,
``Educational Freedom and Opportunity for American Families,
Students, and Workers.''
Committee Action
The Committee on Ways and Means marked up H.R. 8915, the
``Education and Workforce Freedom Act,'' on July 9, 2024, and
ordered the bill, as amended, favorably reported (with a quorum
being present).
D. Designated Hearing
Pursuant to clause 3(c)(6) of rule XIII, the following
hearings were used to develop and consider H.R. 8915:
On September 14, 2023, the Committee held a hearing
entitled, ``Member Day.''
On October 25, 2023, the Committee held a hearing on,
``Educational Freedom and Opportunity for American Families,
Students, and Workers.''
II. EXPLANATION OF THE BILL
A. Expand the Expenses Treated as Qualified Higher Edu-
cation Expenses for Purposes of 529 Accounts To Include
Additional Elementary and Secondary School Expenses
and Certain Postsecondary Credentialing Expenses (Secs. 2
and 3 of the Bill and Sec. 529 of the Code)
PRESENT LAW
Qualified tuition programs generally
To describe programs that are known colloquially as 529
plans, the Code uses the term ``qualified tuition programs''
and distinguishes between two types of programs.\1\ One type of
program, sometimes referred to as a prepaid tuition program,
allows a person to purchase on behalf of a designated
beneficiary tuition credits or certificates that entitle the
beneficiary to the waiver or payment of the beneficiary's
qualified higher education expenses.\2\ Prepaid tuition
programs are established and maintained by State governments
(or their agencies or instrumentalities) and eligible
educational institutions.\3\ The other type of program,
sometimes referred to as a college savings plan, allows a
person to make contributions to an account that is established
for the purpose of satisfying the qualified higher education
expenses of the designated beneficiary of the account.\4\ A
college savings plan may be established and maintained by State
governments (or their agencies or instrumentalities), not by
educational institutions.\5\
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\1\Sec. 529(a), (b).
\2\Sec. 529(b)(1)(A)(i).
\3\Ibid. Section 529(e)(5) defines an eligible educational
institution as an institution that (1) is described in section 481 of
the Higher Education Act of 1965 (20 U.S.C. sec. 1088), as in effect on
August 5, 1997, and (2) is eligible to participate in a program under
title IV of such Act.
\4\Sec. 529(b)(1)(A)(ii).
\5\Ibid.
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A qualified tuition program generally is exempt from
Federal income taxation (but is subject to unrelated business
income tax).\6\ As a consequence, contributors to, and
beneficiaries of, these programs (whether prepaid tuition
programs or college savings plans) generally have no taxable
income inclusions from earnings on assets held in the programs.
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\6\Sec. 529(a).
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To be treated as a qualified tuition program that is
generally exempt from Federal income taxation, a program must
satisfy several requirements. The program must provide that
purchases of tuition credits or certificates or contributions
to a program must be made only in cash.\7\ The program must
provide separate accounting for each designated beneficiary.\8\
The program must provide that a contributor to, or a designated
beneficiary under, the program may direct the investment of any
contributions to the program (or earnings on those investments)
no more than twice a year.\9\ The program must not allow any
interest in the program to be used as a security for a
loan.\10\ The program must provide adequate safeguards to
prevent contributions on behalf of a designated beneficiary
that exceed the amount necessary to pay the beneficiary's
qualified higher education expenses.\11\
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\7\Sec. 529(b)(2).
\8\Sec. 529(b)(3).
\9\Sec. 529(b)(4).
\10\Sec. 529(b)(5).
\11\Sec. 529(b)(6).
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When there is a cash distribution under a qualified tuition
program, the portion of the distribution that is considered to
be earnings on contributions to the account is includible in
the gross income of the recipient of the distributions only to
the extent that the total amount of cash distributions during
the taxable year exceeds the amount of qualified higher
education expenses of the account beneficiary during that
year.\12\ The income tax that is imposed on a recipient of a
distribution that is included in the recipient's gross income
is, with certain exceptions, increased by 10 percent of the
amount of the inclusion.\13\
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\12\Sec. 529(c)(3)(A), (B)(ii). A payor of a distribution generally
is required to report to the IRS and the recipient of the distribution
on Form 1099-Q the amount of the distribution and the portions of the
distributions representing contributions and earnings.
\13\Sec. 529(c)(6).
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Qualified higher education expenses
Qualified higher education expenses include, among other
expenses, tuition, fees, books, supplies, and equipment
required for the enrollment or attendance of the account
beneficiary at an eligible educational institution (generally,
a postsecondary school); expenses for special needs services in
the case of a special needs beneficiary that are incurred in
connection with the beneficiary's enrollment or attendance at
an eligible educational institution; expenses for the purchase
of computer equipment and software to be used primarily by the
beneficiary when enrolled at an eligible educational
institution; and, in the case of a beneficiary who is at least
a half-time student, reasonable costs for room and board while
the beneficiary is attending an eligible educational
institution.\14\
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\14\Sec. 529(e)(3).
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For certain purposes of section 529 (such as the exclusion
from gross income for distributions from a qualified tuition
program to pay qualified higher education expenses) but not for
other purposes of section 529 (such as the requirement that a
qualified tuition program must provide safeguards to prevent
contributions on behalf of a beneficiary that exceed the amount
necessary to pay the beneficiary's qualified higher education
expenses), qualified higher education expenses also include
expenses for tuition in connection with enrollment or
attendance at an elementary or secondary public, private, or
religious school;\15\ amounts for books, supplies, and
equipment required for the participation of a beneficiary in an
apprenticeship program registered and certified with the
Secretary of Labor under section 1 of the National
Apprenticeship Act (29 U.S. Code section 50);\16\ and up to a
$10,000 lifetime maximum in payments of principal and interest
on a beneficiary's (or a beneficiary's sibling's) student
loan.\17\
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\15\Sec. 529(c)(7). There is a $10,000 limitation on the total
amount of nontaxable cash distributions that may be made in a taxable
year from all qualified tuition programs with respect to a beneficiary
to pay for that beneficiary's elementary or secondary school tuition.
Sec. 529(e)(3)(A).
\16\Sec. 529(c)(8).
\17\Sec. 529(c)(9).
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Certain rules for contributions and distributions
A contribution to a qualified tuition program is treated as
a completed gift for gift tax purposes (and, as a consequence,
may benefit from the gift tax annual exclusion).\18\ If an
individual's total contributions to a qualified tuition program
during a year exceed the gift tax annual exclusion amount in
that year, the individual may elect to take the total amount of
the contributions into account for purposes of the annual
exclusion ratably over the five-year period beginning with the
year of the excess contributions.\19\ An individual's interest
in a qualified tuition program generally is excluded from the
individual's gross estate for estate tax purposes.\20\
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\18\Sec. 529(c)(2)(A).
\19\Sec. 529(c)(2)(B).
\20\Sec. 529(c)(4)(A).
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A distribution from a qualified tuition program that
otherwise would be included in the income of the recipient of
the distribution (for example, the beneficiary of the account)
may be excluded under rules allowing, subject to limitations,
tax-free rollovers to, among other alternatives, an ABLE
account of the beneficiary or of a member of the family of the
beneficiary, a Roth IRA of the beneficiary, or the credit of
another beneficiary of a qualified tuition program who is a
member of the family of the beneficiary with respect to whom
the distribution was made.\21\
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\21\Sec. 529(c)(3)(C), (E).
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REASONS FOR CHANGE
The Committee believes that the Code should give taxpayers
the same incentive to save for education or skills-building
whether the education or skills-building consists of a
traditional four-year college or university, job-related
credentialing programs, or public or private schooling or
homeschooling at the elementary and secondary levels.
Specifically, as it relates to elementary and secondary
education, the Committee believes that the tax code should
provide parents with the ability to seek the education that
best suits their child. Present law, however, restricts
favorable tax treatment under section 529 chiefly to saving for
a traditional four-year college or university education.
EXPLANATION OF PROVISION
Additional elementary, secondary, and home school expenses
treated as qualified higher education expenses for all
purposes of section 529
The provision provides that the following expenses in
connection with the enrollment or attendance of a designated
beneficiary at an elementary or secondary public, private, or
religious school, or in connection with a homeschool, are
qualified higher education expenses: tuition (as under present
law), curriculum and curricular materials, books or other
instructional materials, online educational materials, tuition
for certain tutoring or educational classes outside of the
home, fees for certain tests, fees for dual enrollment in an
institution of higher education, and certain educational
therapies for students with disabilities.
Under the provision, these elementary and secondary school
expenses are considered qualified higher education expenses for
all purposes of section 529, including the requirement that a
qualified tuition program must provide safeguards to prevent
contributions on behalf of a beneficiary that exceed the amount
necessary to pay the beneficiary's qualified higher education
expenses.
Certain postsecondary credentialing expenses treated as qualified
higher education expenses for all purposes of section 529
The provision treats a broad category of postsecondary
credentialing expenses as qualified higher education expenses
for all purposes of section 529. These ``qualified
postsecondary credentialing expenses'' are tuition, fees,
books, supplies, and equipment required for the enrollment or
attendance of a designated beneficiary in a recognized
``postsecondary credential program,'' or any other expense in
connection with enrollment in or attendance at such a program
if such expenses would, if incurred in connection with
enrollment in or attendance at an eligible educational
institution, be considered qualified higher education expenses
before application of the proposal; fees for testing required
to obtain or maintain a recognized postsecondary credential;
and fees for continuing education if such education is required
to maintain a recognized postsecondary credential.
For this purpose, a ``recognized postsecondary credential
program'' means a program to obtain a recognized postsecondary
credential if (a) such program is included on a list prepared
under section 122(d) of the Workforce Innovation and
Opportunity Act; (b) such program is listed in the Web Enabled
Approval Management System (``WEAMS'') Public directory (or a
successor directory) maintained by the Department of Veterans
Affairs; (c) an examination (developed or administered by an
organization widely recognized as providing reputable
credentials in the occupation) is required to obtain or
maintain a postsecondary credential and the organization
recognizes the program as providing training or education that
prepares individuals to take the examination; or (d) such
program is identified by the Secretary of the Treasury, after
consultation with the Secretary of Labor, as being a reputable
program for obtaining a recognized postsecondary
credential.\22\
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\22\The WEAMS Public directory is a publicly-available, Internet-
based search tool for identifying educational institutions that offer
programs approved for veterans training.
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A ``recognized postsecondary credential'' means any
postsecondary employment credential that is industry
recognized, any certificate of completion of an apprenticeship
that is registered and certified with the Secretary of Labor
under the National Apprenticeship Act, any occupational or
professional license issued or recognized by a State or the
Federal government, and any recognized postsecondary credential
as defined under section 3 of the Workforce Innovation and
Opportunity Act (29 U.S. Code section 3102).\23\
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\23\Under the proposal, a postsecondary employment credential that
is industry recognized includes (i) any postsecondary employment
credential issued by a program that is accredited by the Institute for
Credentialing Excellence, the National Commission on Certifying
Agencies, or the American National Standards Institute, (ii) any
postsecondary employment credential that is included in the
Credentialing Opportunities On-Line (``COOL'') directory of
credentialing programs (or successor directory) maintained by the
Department of Defense or by any branch of the Armed Services, and (iii)
any postsecondary employment credential identified for purposes of this
clause by the Secretary of the Treasury, after consultation with the
Secretary of Labor, as being industry recognized.
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EFFECTIVE DATE
The provision is effective for distributions made after the
date of enactment.
III. VOTE OF THE COMMITTEE
In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 8915, the ``Education and Workforce
Freedom Act,'' on July 9, 2024.
The vote on the amendment offered by Mr. Doggett to the
amendment in the nature of a substitute to H.R. 8915, which
would provide that any distribution from a 529 with respect to
homeschool expenses is subject to Federal income tax if the
distribute, or anyone who can claim the distribute as a
dependent on their Federal income tax return, has adjusted
gross income in excess of $1,000,000 for the taxable year in
which the distribution occurred was not agreed to by a roll
call vote of 14 yeas to 22 nays (with a quorum being present).
The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... ...... X ......... Mr. Neal............. X ...... .........
Mr. Buchanan....................... ...... ...... ......... Mr. Doggett.......... X ...... .........
Mr. Smith (NE)..................... ...... X ......... Mr. Thompson......... X ...... .........
Mr. Kelly.......................... ...... X ......... Mr. Larson........... X ...... .........
Mr. Schweikert..................... ...... X ......... Mr. Blumenauer....... X ...... .........
Mr. LaHood......................... ...... ...... ......... Mr. Pascrell......... X ...... .........
Dr. Wenstrup....................... ...... X ......... Mr. Davis............ ...... ...... .........
Mr. Arrington...................... ...... X ......... Ms. Sanchez.......... ...... ...... .........
Dr. Ferguson....................... ...... X ......... Ms. Sewell........... X ...... .........
Mr. Estes.......................... ...... X ......... Ms. DelBene.......... X ...... .........
Mr. Smucker........................ ...... X ......... Ms. Chu.............. X ...... .........
Mr. Hern........................... ...... X ......... Ms. Moore............ ...... ...... .........
Ms. Miller......................... ...... ...... ......... Mr. Kildee........... X ...... .........
Dr. Murphy......................... ...... X ......... Mr. Beyer............ X ...... .........
Mr. Kustoff........................ ...... X ......... Mr. Evans............ ...... ...... .........
Mr. Fitzpatrick.................... ...... X ......... Mr. Schneider........ X ...... .........
Mr. Steube......................... ...... X ......... Mr. Panetta.......... X ...... .........
Ms. Tenney......................... ...... X ......... Mr. Gomez............ X ...... .........
Mrs. Fischbach..................... ...... X .........
Mr. Moore.......................... ...... X .........
Mrs. Steel......................... ...... X .........
Ms. Van Duyne...................... ...... X .........
Mr. Feenstra....................... ...... X .........
Ms. Malliotakis.................... ...... X .........
Mr. Carey.......................... ...... X .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 8915 as
reported. The estimate prepared by the Joint Committee on
Taxation (``JCT'') is included below.
The proposal is estimated to have the following effect on
Federal fiscal year budget receipts:
FISCAL YEARS
[Millions of dollars]
----------------------------------------------------------------------------------------------------------------
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2025-29 2025-34
----------------------------------------------------------------------------------------------------------------
-9 -13 -17 -17 -18 -19 -20 -20 -21 -22 -74 -177
----------------------------------------------------------------------------------------------------------------
NOTE: Details may not add to totals due to rounding.
B. Statement Regarding New Budget Authority
and Tax Expenditures Budget Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee states that sections 2 and 3 of the bill increase an
existing tax expenditure by treating additional expenses as
qualified higher education expenses for purposes of section 529
of the Internal Revenue Code. The table in Part IV.A includes
five- and ten-year estimates of the effects of these sections
on Federal fiscal year budget receipts.
C. Cost Estimate Prepared by the
Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
H.R. 8915 would expand the allowable use of savings plans
authorized under section 529 of the Internal Revenue Code.
Income earned in 529 plans is not subject to taxation, and
distributions are not included in recipients' taxable income if
the money is used for qualified education expenses, including
tuition at elementary, secondary, or postsecondary
institutions, or for educational supplies and program fees for
postsecondary and apprenticeship programs. H.R. 8915 would
allow tax-free distributions from 529 plans to cover additional
elementary, secondary, and homeschool expenses, including costs
for supplies, tutoring, and testing. The bill also would allow
tax-free distributions to cover tuition, supplies, and fees for
programs that offer postsecondary credentials.
The Congressional Budget Act of 1974, as amended,
stipulates that revenue estimates provided by the staff of the
Joint Committee on Taxation (JCT) will be the official
estimates for all tax legislation considered by the Congress.
As such, CBO incorporates those estimates into its cost
estimates of the effects of legislation. The estimates for the
revenue provisions of H.R. 8915 were provided by JCT.\1\
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\1\See Joint Committee on Taxation, Description of H.R. 8915, the
``Education and Workforce Freedom Act'' JCX-29-24 (July 5, 2024),
www.jct.gov/publications/2024/jcx-29-24.
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The estimated budgetary effect of H.R. 8915 is shown in
Table 1. The costs of the legislation fall within budget
function 800 (general government).
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 8915
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By fiscal year, millions of dollars--
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2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024-2029 2024-2034
--------------------------------------------------------------------------------------------------------------------------------------------------------
DECREASES IN REVENUES
Estimated Revenues.......................... 0 -9 -13 -17 -17 -18 -19 -20 -20 -21 -22 -74 -177
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
Components may not sum to totals because of rounding.
CBO estimates that implementing H.R. 8915 also would increase the Internal Revenue Service's administrative costs by less than $500,000 over the 2024-
2029 period; any related spending would be subject to the availability of appropriated funds.
For this estimate, CBO and JCT assume that the bill will be
enacted in fiscal year 2024. JCT estimates that enacting the
bill would decrease revenues by $177 million over the 2024-2034
period. That reduction would stem from an increase in income
excluded from taxation in 529 plans.
CBO estimates that implementing the bill would increase
federal costs by less than $500,000 over the 2024-2029 period
for the Internal Revenue Service to make those changes; any
related spending would be subject to the availability of
appropriated funds.
The CBO staff contact for this estimate is Kathleen Burke.
The estimate was reviewed by John McClelland, Director of Tax
Analysis.
Phillip L. Swagel,
Director, Congressional Budget Office.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE
RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
C. Applicability of House Rule XXI, Clause 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
provide such a Federal income tax rate increase.
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
F. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
G. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses. The staff of the Joint Committee on Taxation has
determined that there are no provisions that are of widespread
applicability to individuals or small businesses.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS
REPORTED
A. Changes in Existing Law Proposed by the Bill, as Reported
Pursuant to clause 3(e) of rule XIII of the Rules of the
House of Representatives, changes in existing law proposed by
the bill are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter F--EXEMPT ORGANIZATIONS
* * * * * * *
PART VIII--CERTAIN SAVINGS ENTITIES
* * * * * * *
SEC. 529. QUALIFIED TUITION PROGRAMS.
(a) General rule.--A qualified tuition program shall be
exempt from taxation under this subtitle. Notwithstanding the
preceding sentence, such program shall be subject to the taxes
imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable organizations).
(b) Qualified tuition program.--For purposes of this
section--
(1) In general.--The term ``qualified tuition
program'' means a program established and maintained by
a State or agency or instrumentality thereof or by 1 or
more eligible educational institutions--
(A) under which a person--
(i) may purchase tuition credits or
certificates on behalf of a designated
beneficiary which entitle the
beneficiary to the waiver or payment of
qualified higher education expenses of
the beneficiary, or
(ii) in the case of a program
established and maintained by a State
or agency or instrumentality thereof,
may make contributions to an account
which is established for the purpose of
meeting the qualified higher education
expenses of the designated beneficiary
of the account, and
(B) which meets the other requirements of
this subsection.
Except to the extent provided in regulations, a program
established and maintained by 1 or more eligible
educational institutions shall not be treated as a
qualified tuition program unless such program provides
that amounts are held in a qualified trust and such
program has received a ruling or determination that
such program meets the applicable requirements for a
qualified tuition program. For purposes of the
preceding sentence, the term ``qualified trust'' means
a trust which is created or organized in the United
States for the exclusive benefit of designated
beneficiaries and with respect to which the
requirements of paragraphs (2) and (5) of section
408(a) are met.
(2) Cash contributions.--A program shall not be
treated as a qualified tuition program unless it
provides that purchases or contributions may only be
made in cash.
(3) Separate accounting.--A program shall not be
treated as a qualified tuition program unless it
provides separate accounting for each designated
beneficiary.
(4) Limited investment direction.--A program shall
not be treated as a qualified tuition program unless it
provides that any contributor to, or designated
beneficiary under, such program may, directly or
indirectly, direct the investment of any contributions
to the program (or any earnings thereon) no more than 2
times in any calendar year.
(5) No pledging of interest as security.--A program
shall not be treated as a qualified tuition program if
it allows any interest in the program or any portion
thereof to be used as security for a loan.
(6) Prohibition on excess contributions.--A program
shall not be treated as a qualified tuition program
unless it provides adequate safeguards to prevent
contributions on behalf of a designated beneficiary in
excess of those necessary to provide for the qualified
higher education expenses of the beneficiary.
(c) Tax treatment of designated beneficiaries and
contributors.--
(1) In general.--Except as otherwise provided in this
subsection, no amount shall be includible in gross
income of--
(A) a designated beneficiary under a
qualified tuition program, or
(B) a contributor to such program on behalf
of a designated beneficiary,
with respect to any distribution or earnings under such
program.
(2) Gift tax treatment of contributions.--For
purposes of chapters 12 and 13--
(A) In general.--Any contribution to a
qualified tuition program on behalf of any
designated beneficiary--
(i) shall be treated as a completed
gift to such beneficiary which is not a
future interest in property, and
(ii) shall not be treated as a
qualified transfer under section
2503(e).
(B) Treatment of excess contributions.--If
the aggregate amount of contributions described
in subparagraph (A) during the calendar year by
a donor exceeds the limitation for such year
under section 2503(b), such aggregate amount
shall, at the election of the donor, be taken
into account for purposes of such section
ratably over the 5-year period beginning with
such calendar year.
(3) Distributions.--
(A) In general.--Any distribution under a
qualified tuition program shall be includible
in the gross income of the distributee in the
manner as provided under section 72 to the
extent not excluded from gross income under any
other provision of this chapter.
(B) Distributions for qualified higher
education expenses.--For purposes of this
paragraph--
(i) In-kind distributions.--No amount
shall be includible in gross income
under subparagraph (A) by reason of a
distribution which consists of
providing a benefit to the distributee
which, if paid for by the distributee,
would constitute payment of a qualified
higher education expense.
(ii) Cash distributions.--In the case
of distributions not described in
clause (i), if--
(I) such distributions do not
exceed the qualified higher
education expenses (reduced by
expenses described in clause
(i)), no amount shall be
includible in gross income, and
(II) in any other case, the
amount otherwise includible in
gross income shall be reduced
by an amount which bears the
same ratio to such amount as
such expenses bear to such
distributions.
(iii) Exception for institutional
programs.--In the case of any taxable
year beginning before January 1, 2004,
clauses (i) and (ii) shall not apply
with respect to any distribution during
such taxable year under a qualified
tuition program established and
maintained by 1 or more eligible
educational institutions.
(iv) Treatment as distributions.--Any
benefit furnished to a designated
beneficiary under a qualified tuition
program shall be treated as a
distribution to the beneficiary for
purposes of this paragraph.
(v) Coordination with American
Opportunity and Lifetime Learning
credits.--The total amount of qualified
higher education expenses with respect
to an individual for the taxable year
shall be reduced--
(I) as provided in section
25A(g)(2), and
(II) by the amount of such
expenses which were taken into
account in determining the
credit allowed to the taxpayer
or any other person under
section 25A.
(vi) Coordination with Coverdell
education savings accounts.--If, with
respect to an individual for any
taxable year--
(I) the aggregate
distributions to which clauses
(i) and (ii) and section
530(d)(2)(A) apply, exceed
(II) the total amount of
qualified higher education
expenses otherwise taken into
account under clauses (i) and
(ii) (after the application of
clause (v)) for such year,
the taxpayer shall allocate such expenses
among such distributions for purposes of
determining the amount of the exclusion under
clauses (i) and (ii) and section 530(d)(2)(A).
(C) Change in beneficiaries or programs.--
(i) Rollovers.--Subparagraph (A)
shall not apply to that portion of any
distribution which, within 60 days of
such distribution, is transferred--
(I) to another qualified
tuition program for the benefit
of the designated beneficiary,
(II) to the credit of another
designated beneficiary under a
qualified tuition program who
is a member of the family of
the designated beneficiary with
respect to which the
distribution was made, or
(III) before January 1, 2026,
to an ABLE account (as defined
in section 529A(e)(6)) of the
designated beneficiary or a
member of the family of the
designated beneficiary.
Subclause (III) shall not apply to so much of
a distribution which, when added to all other
contributions made to the ABLE account for the
taxable year, exceeds the limitation under
section 529A(b)(2)(B)(i).
(ii) Change in designated
beneficiaries.--Any change in the
designated beneficiary of an interest
in a qualified tuition program shall
not be treated as a distribution for
purposes of subparagraph (A) if the new
beneficiary is a member of the family
of the old beneficiary.
(iii) Limitation on certain
rollovers.--Clause (i)(I) shall not
apply to any transfer if such transfer
occurs within 12 months from the date
of a previous transfer to any qualified
tuition program for the benefit of the
designated beneficiary.
(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.
(E) Special rollover to roth iras from long-
term qualified tuition programs.--
(i) In general.--In the case of a
distribution from a qualified tuition
program of a designated beneficiary
which has been maintained for the 15-
year period ending on the date of such
distribution, subparagraph (A) shall
not apply to so much the portion of
such distribution which--
(I) does not exceed the
aggregate amount contributed to
the program (and earnings
attributable thereto) before
the 5-year period ending on the
date of the distribution, and
(II) is paid in a direct
trustee-to-trustee transfer to
a Roth IRA maintained for the
benefit of such designated
beneficiary.
(ii) Limitations.--
(I) Annual limitation.--Clause (i)
shall only apply to so much of any
distribution as does not exceed the
amount applicable to the designated
beneficiary under section 408A(c)(2)
for the taxable year (reduced by the
amount of aggregate contributions made
during the taxable year to all
individual retirement plans maintained
for the benefit of the designated
beneficiary).
(II) Aggregate limitation.--This
subparagraph shall not apply to any
distribution described in clause (i) to
the extent that the aggregate amount of
such distributions with respect to the
designated beneficiary for such taxable
year and all prior taxable years
exceeds $35,000.
(4) Estate tax treatment.--
(A) In general.--No amount shall be
includible in the gross estate of any
individual for purposes of chapter 11 by reason
of an interest in a qualified tuition program.
(B) Amounts includible in estate of
designated beneficiary in certain cases.--
Subparagraph (A) shall not apply to amounts
distributed on account of the death of a
beneficiary.
(C) Amounts includible in estate of donor
making excess contributions.--In the case of a
donor who makes the election described in
paragraph (2)(B) and who dies before the close
of the 5-year period referred to in such
paragraph, notwithstanding subparagraph (A),
the gross estate of the donor shall include the
portion of such contributions properly
allocable to periods after the date of death of
the donor.
(5) Other gift tax rules.--For purposes of chapters
12 and 13--
(A) Treatment of distributions.--Except as
provided in subparagraph (B), in no event shall
a distribution from a qualified tuition program
be treated as a taxable gift.
(B) Treatment of designation of new
beneficiary.--The taxes imposed by chapters 12
and 13 shall apply to a transfer by reason of a
change in the designated beneficiary under the
program (or a rollover to the account of a new
beneficiary) unless the new beneficiary is--
(i) assigned to the same generation
as (or a higher generation than) the
old beneficiary (determined in
accordance with section 2651), and
(ii) a member of the family of the
old beneficiary.
(6) Additional tax.--The tax imposed by section
530(d)(4) shall apply to any payment or distribution
from a qualified tuition program in the same manner as
such tax applies to a payment or distribution from a
Coverdell education savings account. This paragraph
shall not apply to any payment or distribution in any
taxable year beginning before January 1, 2004, which is
includible in gross income but used for qualified
higher education expenses of the designated
beneficiary.
[(7) Treatment of elementary and secondary tuition.--
Any reference in this subsection to the term
``qualified higher education expense'' shall include a
reference to expenses for tuition in connection with
enrollment or attendance at an elementary or secondary
public, private, or religious school.]
(7) Treatment of elementary and secondary tuition.--
Any reference in this section to the term ``qualified
higher education expense'' shall include a reference to
the following expenses in connection with enrollment or
attendance at, or for students enrolled at or
attending, an elementary or secondary public, private,
or religious school:
(A) Tuition.
(B) Curriculum and curricular materials.
(C) Books or other instructional materials.
(D) Online educational materials.
(E) Tuition for tutoring or educational
classes outside of the home, including at a
tutoring facility, but only if the tutor or
instructor is not related to the student and--
(i) is licensed as a teacher in any
State,
(ii) has taught at an eligible
educational institution, or
(iii) is a subject matter expert in
the relevant subject.
(F) Fees for a nationally standardized norm-
referenced achievement test, an advanced
placement examination, or any examinations
related to college or university admission.
(G) Fees for dual enrollment in an
institution of higher education.
(H) Educational therapies for students with
disabilities provided by a licensed or
accredited practitioner or provider, including
occupational, behavioral, physical, and speech-
language therapies.
Such term shall include expenses for the purposes
described in subparagraphs (A) through (H) in
connection with a homeschool (whether treated as a
homeschool or a private school for purposes of
applicable State law).
(8) Treatment of certain expenses associated with
registered apprenticeship programs.--Any reference in
this subsection to the term ``qualified higher
education expense'' shall include a reference to
expenses for fees, books, supplies, and equipment
required for the participation of a designated
beneficiary in an apprenticeship program registered and
certified with the Secretary of Labor under section 1
of the National Apprenticeship Act (29 U.S.C. 50).
(9) Treatment of qualified education loan
repayments.--
(A) In general.--Any reference in this
subsection to the term ``qualified higher
education expense'' shall include a reference
to amounts paid as principal or interest on any
qualified education loan (as defined in section
221(d)) of the designated beneficiary or a
sibling of the designated beneficiary.
(B) Limitation.--The amount of distributions
treated as a qualified higher education expense
under this paragraph with respect to the loans
of any individual shall not exceed $10,000
(reduced by the amount of distributions so
treated for all prior taxable years).
(C) Special rules for siblings of the
designated beneficiary.--
(i) Separate accounting.--For
purposes of subparagraph (B) and
subsection (d), amounts treated as a
qualified higher education expense with
respect to the loans of a sibling of
the designated beneficiary shall be
taken into account with respect to such
sibling and not with respect to such
designated beneficiary.
(ii) Sibling defined.--For purposes
of this paragraph, the term ``sibling''
means an individual who bears a
relationship to the designated
beneficiary which is described in
section 152(d)(2)(B).
(d) Reports.--
(1) In general.--Each officer or employee having
control of the qualified tuition program or their
designee shall make such reports regarding such program
to the Secretary and to designated beneficiaries with
respect to contributions, distributions, and such other
matters as the Secretary may require. The reports
required by this paragraph 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 the
Secretary.
(2) Rollover distributions.--In the case of any
distribution described in subsection (c)(3)(E), the
officer or employee having control of the qualified
tuition program (or their designee) shall provide a
report to the trustee of the Roth IRA to which the
distribution is made. Such report shall be filed at
such time and in such manner as the Secretary may
require and shall include information with respect to
the contributions, distributions, and earnings of the
qualified tuition program as of the date of the
distribution described in subsection (c)(3)(A),
together with such other matters as the Secretary may
require.
(e) Other definitions and special rules.--For purposes of
this section--
(1) Designated beneficiary.--The term ``designated
beneficiary'' means--
(A) the individual designated at the
commencement of participation in the qualified
tuition program as the beneficiary of amounts
paid (or to be paid) to the program,
(B) in the case of a change in beneficiaries
described in subsection (c)(3)(C), the
individual who is the new beneficiary, and
(C) in the case of an interest in a qualified
tuition program purchased by a State or local
government (or agency or instrumentality
thereof) or an organization described in
section 501(c)(3) and exempt from taxation
under section 501(a) as part of a scholarship
program operated by such government or
organization, the individual receiving such
interest as a scholarship.
(2) Member of family.--The term ``member of the
family'' means, with respect to any designated
beneficiary--
(A) the spouse of such beneficiary;
(B) an individual who bears a relationship to
such beneficiary which is described in
subparagraphs (A) through (G) of section
152(d)(2);
(C) the spouse of any individual described in
subparagraph (B); and
(D) any first cousin of such beneficiary.
(3) Qualified higher education expenses.--
(A) In general.--The term ``qualified higher
education expenses'' means--
(i) tuition, fees, books, supplies,
and equipment required for the
enrollment or attendance of a
designated beneficiary at an eligible
educational institution,
(ii) expenses for special needs
services in the case of a special needs
beneficiary which are incurred in
connection with such enrollment or
attendance, and
(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.
Clause (iii) shall not include expenses for
computer software designed for sports, games,
or hobbies unless the software is predominantly
educational in nature. The amount of cash
distributions from all qualified tuition
programs described in subsection (b)(1)(A)(ii)
with respect to a beneficiary during any
taxable year shall, in the aggregate, include
not more than $10,000 in expenses described in
subsection (c)(7) incurred during the taxable
year.
(B) Room and board included for students who
are at least half-time.--
(i) In general.--In the case of an
individual who is an eligible student
(as defined in section 25A(b)(3)) for
any academic period, such term shall
also include reasonable costs for such
period (as determined under the
qualified tuition program) incurred by
the designated beneficiary for room and
board while attending such institution.
For purposes of subsection (b)(6), a
designated beneficiary shall be treated
as meeting the requirements of this
clause.
(ii) Limitation.--The amount treated
as qualified higher education expenses
by reason of clause (i) shall not
exceed--
(I) the allowance (applicable
to the student) for room and
board included in the cost of
attendance (as defined in
section 472 of the Higher
Education Act of 1965 (20
U.S.C. 1087ll), as in effect on
the date of the enactment of
the Economic Growth and Tax
Relief Reconciliation Act of
2001) as determined by the
eligible educational
institution for such period, or
(II) if greater, the actual
invoice amount the student
residing in housing owned or
operated by the eligible
educational institution is
charged by such institution for
room and board costs for such
period.
(C) Certain postsecondary credentialing
expenses.--The term ``qualified higher
education expenses'' includes qualified
postsecondary credentialing expenses (as
defined in subsection (f)).
(4) Application of section 514.--An interest in a
qualified tuition program shall not be treated as debt
for purposes of section 514.
(5) Eligible educational institution.--The term
``eligible educational institution'' means an
institution--
(A) which is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C. 1088),
as in effect on the date of the enactment of
this paragraph, and
(B) which is eligible to participate in a
program under title IV of such Act.
(f) Qualified Postsecondary Credentialing Expenses.--For
purposes of this section--
(1) In general.--The term ``qualified postsecondary
credentialing expenses'' means--
(A) tuition, fees, books, supplies, and
equipment required for the enrollment or
attendance of a designated beneficiary in a
recognized postsecondary credential program, or
any other expense incurred in connection with
enrollment in or attendance at a recognized
postsecondary credential program if such
expense would, if incurred in connection with
enrollment or attendance at an eligible
educational institution, be covered under
subsection (e)(3)(A),
(B) fees for testing if such testing is
required to obtain or maintain a recognized
postsecondary credential, and
(C) fees for continuing education if such
education is required to maintain a recognized
postsecondary credential.
(2) Recognized postsecondary credential program.--For
purposes of this subparagraph, the term ``recognized
postsecondary credential program'' means any program to
obtain a recognized postsecondary credential if--
(A) such program is included on a State list
prepared under section 122(d) of the Workforce
Innovation and Opportunity Act (29 U.S.C.
3152(d)),
(B) such program is listed in the WEAMS
Public directory (or successor directory)
maintained by the Department of Veterans
Affairs,
(C) an examination (developed or administered
by an organization widely recognized as
providing reputable credentials in the
occupation) is required to obtain or maintain
such credential and such organization
recognizes such program as providing training
or education which prepares individuals to take
such examination, or
(D) such program is identified by the
Secretary, after consultation with the
Secretary of Labor, as being a reputable
program for obtaining a recognized
postsecondary credential for purposes of this
subparagraph.
(3) Recognized postsecondary credential.--The term
``recognized postsecondary credential'' means--
(A) any postsecondary employment credential
that is industry recognized, including--
(i) any postsecondary employment
credential issued by a program that is
accredited by the Institute for
Credentialing Excellence, the National
Commission on Certifying Agencies, or
the American National Standards
Institute,
(ii) any postsecondary employment
credential that is included in the
Credentialing Opportunities On-Line
(COOL) directory of credentialing
programs (or successor directory)
maintained by the Department of Defense
or by any branch of the Armed Services,
and
(iii) any postsecondary employment
credential identified for purposes of
this clause by the Secretary, after
consultation with the Secretary of
Labor, as being industry recognized,
(B) any certificate of completion of an
apprenticeship that is registered and certified
with the Secretary of Labor under the National
Apprenticeship Act (29 U.S.C. 50),
(C) any occupational or professional license
issued or recognized by a State or the Federal
Government (and any certification that
satisfies a condition for obtaining such a
license), and
(D) any recognized postsecondary credential
as defined in section 3(52) of the Workforce
Innovation and Opportunity Act (29 U.S.C.
3102).
[(f)] (g) Regulations.--Notwithstanding any other provision
of this section, the Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of
this section and to prevent abuse of such purposes, including
regulations under chapters 11, 12, and 13 of this title.
* * * * * * *
VII. DISSENTING VIEWS
Committee Democrats oppose H.R. 8915, which, among other
changes, expands 529 plans to homeschool expenses.
Currently, taxpayers can use tax-advantaged savings
accounts such as 529 accounts (qualified tuition programs) to
pay for a variety of educational expenses. These savings
accounts generally allow taxpayers to contribute after-tax
dollars, which grow tax free within the account, and whose
gains are exempted from tax upon withdrawal if the proceeds are
used for a qualifying purpose (such as tuition). Thus, the tax-
free growth of the accounts is a significant federal subsidy
for the tuition (and related expenses) paid for with the fund's
proceeds.
Accordingly, 529 plans represent a significant Federal
subsidy for those who have the means to save, which are
predominantly high-income and wealthy individuals. Committee
Democrats believe that, to the extent our tax code is leveraged
to fund educational opportunities, we should be prioritizing
those tax provisions that help economically disadvantaged
taxpayers, such as the American Opportunity Tax Credit.
Instead, Republicans have chosen to expand 529 plans,
continuing a pattern of providing benefits to those who need
them the least.
H.R. 8915 amends Section 529 to include home school
expenses as qualifying expenses. Committee Democrats are
concerned that there is no accountability for the funds spent
by individuals claiming to use the 529 funds for home school
expenses, increasing the likelihood that such funds may be used
fraudulently.
The expansion of 529 accounts to include home school
expenses has the effect of spending scarce Federal dollars on
individuals who have the means and wherewithal to keep their
children out of public schools, rather than using those dollars
to support public education. Rather than take up this bill,
Congress should prioritize funding and support for public
schools, which serve all students, and not siphon those funds
to unaccountable homeschools.
Sincerely,
Richard E. Neal,
Ranking Member.
DISSENTING VIEWS
529s began as a way to help upper-income families pay for
the soaring cost of higher education. Like many of those
families with professional incomes, my wife and I, together
with their parents, have made 529 contributions for our
grandchildren with the goal of enabling them to obtain all of
their education for which they're willing to work for, debt-
free. But most Americans do not have the disposable income to
set aside thousands of dollars in order to take advantage of
this government tax subsidy. The question that we have here
today is a frequent one before this committee: should we do
more to help those who already have, or should we help those
who have not but want the same opportunities for their children
and their grandchildren that I want for my family?
The same members of this committee who repeatedly insist
that we cannot afford new investments for our public schools
are the same ones demanding that this bill provide more
subsidies for prosperous families. Through the 2017 Trump tax
scam, Republicans exploited 529s, originally designed for
higher education, to subsidize a parallel education system by
including pre-college private academy tuition.
Now each year, an estimated $1 billion in otherwise taxable
revenue is directed to private schools and out of our public
school system. Half of all the money that is in 529 accounts
was held by households with an annual income each year in
excess of $437,000. Data obtained yesterday from the Joint
Committee on Taxation by my colleague Mr. Davis shows that two-
thirds of distributions from 529 accounts are attributable to
families earning over $200,00 per year. However, just fifteen
percent of payments from 529 accounts are attributable to those
earning $100,000 or less.
This is not surprising when you consider the fact that many
Americans who want their children to be able to go to college
or use a 529 are paying off their own student loans and they
don't have a considerable amount of discretionary income to put
into a 529. All over this country our schools are suffering,
particularly in a state with a sorry history of funding for its
public schools, like Texas, which is suffering from inadequate
school budgets. Students need additional and greater Pell
grants to cover the cost of a college education. That is where
I think we should be focusing our attention.
The New York Times conducted a study a couple of years ago
that pointed out what's really behind the movement for 529s. It
found that people with hundreds of thousands of dollars to
spare can create 529 accounts that will end up holding millions
of dollars. These are the so-called ``Dynasty 529s.'' Wealthy
individuals can front-load large 529 deposits in such a way
that the accounts can pay for several college education decades
from now and still have money left over for other family
members pursuing higher education in future generations. It's
all legal, and by jumping through a few modest hoops, it is
generally tax free on a per-saver, per-student basis. It is the
wealthy who have the best opportunity to extract the largest
breaks from the federal government when it comes to saving and
paying for college.
Today's bill is just expanding that a little further,
covering more, and allowing for more of this kind of treatment
of those who have but not those who want to provide a first
time, first-generation student with an opportunity.
Finally, it's important to look at the credentialing
section of this bill. You'd think it's all about getting a
plumber or a contractor licensed, but the way it is written, a
corporate lawyer who wants to take a Mediterranean cruise and
get a little continuing legal education along the way or a
physician who wants to ski in Aspen and get a little continuing
medical education can finance that all out of this tax-
advantaged account the way Republicans are proposing to set it
up. This is not about helping the little guy. This is not about
helping the families that are struggling to advance in our
society. It is about widening the gap between those who have
and those who have not.
Lloyd Doggett,
Member of Congress.
[all]