Education Savings Account and School Excellence Act of 1999

SECTION 1. SHORT TITLE; AMENDMENT TO 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Education Savings 
Account and School Excellence Act of 1999''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.

    (a) Tax-Free Expenditures for Elementary and Secondary School 
Expenses.--
            (1) In general.--Section 530(b)(2) (defining qualified 
        higher education expenses) is amended to read as follows:
            ``(2) Qualified education expenses.--
                    ``(A) In general.--The term `qualified education 
                expenses' means--
                            ``(i) qualified higher education expenses 
                        (as defined in section 529(e)(3)); and
                            ``(ii) qualified elementary and secondary 
                        education expenses (as defined in paragraph 
                        (4)).
                Such expenses shall be reduced as provided in section 
                25A(g)(2).
                    ``(B) Qualified state tuition programs.--Such term 
                shall include amounts paid or incurred to purchase 
                tuition credits or certificates, or to make 
                contributions to an account, under a qualified State 
                tuition program (as defined in section 529(b)) for the 
                benefit of the beneficiary of the account.''.
            (2) Qualified elementary and secondary education 
        expenses.--Section 530(b) (relating to definitions and special 
        rules) is amended by adding at the end the following new 
        paragraph:
            ``(4) Qualified elementary and secondary education 
        expenses.--
                    ``(A) In general.--The term `qualified elementary 
                and secondary education expenses' means--
                            ``(i) expenses for tuition, fees, academic 
                        tutoring, special needs services, books, 
                        supplies, computer equipment (including related 
                        software and services), and other equipment 
                        which are incurred in connection with the 
                        enrollment or attendance of the designated 
                        beneficiary of the trust as an elementary or 
                        secondary school student at a public, private, 
                        or religious school; or
                            ``(ii) expenses for room and board, 
                        uniforms, transportation, and supplementary 
                        items and services (including extended day 
                        programs) which are required or provided by a 
public, private, or religious school in connection with such enrollment 
or attendance.
                    ``(B) Special rule for homeschooling.--Such term 
                shall include expenses described in subparagraph (A)(i) 
                in connection with education provided by homeschooling 
                if the requirements of any applicable State or local 
                law are met with respect to such education.
                    ``(C) School.--The term `school' means any school 
                which provides elementary education or secondary 
                education (kindergarten through grade 12), as 
                determined under State law.''.
            (3) Special rules for applying exclusion to elementary and 
        secondary expenses.--Section 530(d)(2) (relating to 
        distributions for qualified higher education expenses) is 
        amended by adding at the end the following new subparagraph:
                    ``(E) Special rules for elementary and secondary 
                expenses.--
                            ``(i) In general.--The aggregate amount of 
                        qualified elementary and secondary education 
                        expenses taken into account for purposes of 
                        this paragraph with respect to any education 
                        individual retirement account for all taxable 
                        years shall not exceed the sum of the aggregate 
                        contributions to such account for taxable years 
                        beginning after December 31, 1998, and before 
                        January 1, 2003, and earnings on such 
                        contributions.
                            ``(ii) Special operating rules.--For 
                        purposes of clause (i)--
                                    ``(I) the trustee of an education 
                                individual retirement account shall 
                                keep separate accounts with respect to 
                                contributions and earnings described in 
                                clause (i); and
                                    ``(II) if there are distributions 
                                in excess of qualified elementary and 
                                secondary education expenses for any 
                                taxable year, such excess distributions 
                                shall be allocated first to 
                                contributions and earnings not 
                                described in clause (i).''.
            (4) Conforming amendments.--Subsections (b)(1) and (d)(2) 
        of section 530 are each amended by striking ``higher'' each 
        place it appears in the text and heading thereof.
    (b) Maximum Annual Contributions.--
            (1) In general.--Section 530(b)(1)(A)(iii) (defining 
        education individual retirement account) is amended by striking 
        ``$500'' and inserting ``the contribution limit for such 
        taxable year''.
            (2) Contribution limit.--Section 530(b) (relating to 
        definitions and special rules), as amended by subsection 
        (a)(2), is amended by adding at the end the following new 
        paragraph:
            ``(5) Contribution limit.--The term `contribution limit' 
        means $500 ($2,000 in the case of any taxable year beginning 
        after December 31, 1998, and ending before January 1, 2003).''.
            (3) Conforming amendment.--Section 4973(e)(1)(A) is amended 
        by striking ``$500'' and inserting ``the contribution limit (as 
        defined in section 530(b)(5)) for such taxable year''.
    (c) Waiver of Age Limitations for Children With Special Needs.--
Section 530(b)(1) (defining education individual retirement account) is 
amended by adding at the end the following flush sentence:
        ``The age limitations in the preceding sentence shall not apply 
        to any designated beneficiary with special needs (as determined 
        under regulations prescribed by the Secretary).''.
    (d) Corporations Permitted To Contribute to Accounts.--Section 
530(c)(1) (relating to reduction in permitted contributions based on 
adjusted gross income) is amended by striking ``The maximum amount 
which a contributor'' and inserting ``In the case of a contributor who 
is an individual, the maximum amount the contributor''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

Summary: Education Savings Account and School Excellence Act of 1999 - Amends the Internal Revenue Code, with respect to education individual retirement accounts (IRAs), to: (1) permit distributions for qualified elementary and secondary education expenses, including home schooling expenses. And (2) increase the annual contribution limit from $500 to $2,000. Waives the beneficiary age limitation (18) for contributions on behalf of special needs beneficiaries. Permits corporations to contribute to education IRAs.