A bill to amend the Internal Revenue Code of 1986 to provide a refundable credit for contributions to qualified tuition programs.

Summary: College Saver's Credit Act of 2007 - Amends the Internal Revenue Code to: (1) allow certain middle-income individual taxpayers age 18 or older a refundable tax credit for 50% of their contributions to a qualified tuition program (tax-exempt college savings plan), up to an annual limit of $2,000; and (2) require the distribution of financial education materials to participants in a qualified tuition program.

Requires the Secretary of the Treasury to study and report to Congress on the participation of individuals in qualified tuition programs.

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
                                                 applicable    phaseout
                                                 amount is:   amount 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 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).