II

106TH CONGRESS

1ST SESSION S. 1054

To amend the Internal Revenue Code of 1986 to enhance various tax

incentives for education.

IN THE SENATE OF THE UNITED STATES

MAY 14, 1999

Ms. COLLINS introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to enhance

various tax incentives for education.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Savings for Scholars Act’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this title an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RE4 TIREMENT ACCOUNTS.

5 (a) MAXIMUM ANNUAL CONTRIBUTIONS.—

6 (1) IN GENERAL.—Section 530(b)(1)(A)(iii)

7 (defining education individual retirement account) is

8 amended by striking ‘‘$500’’ and inserting

9 ‘‘$2,000’’.

10 (2) CONFORMING AMENDMENT.—Section

11 4973(e)(1)(A) is amended by striking ‘‘$500’’ and

12 inserting ‘‘$2,000’’.

13 (b) TIME WHEN CONTRIBUTIONS DEEMED MADE.—

14 Section 530(b) (relating to definitions and special rules)

15 is amended by adding at the end the following new para16 graph:

17 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

18 MADE.—A taxpayer shall be deemed to have made a

19 contribution to an education individual retirement

20 account on the last day of the preceding taxable year

21 if the contribution is made on account of such tax22 able year and is made not later than the time pre23 scribed by law for filing the return for such taxable

24 year (not including extensions thereof).’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1998.

4 SEC. 3. MODIFICATIONS TO QUALIFIED STATE TUITION

5 PROGRAMS.

6 (a) BENEFICIARY MAY CHANGE PROGRAM.—Section

7 529(c)(3)(C) (relating to change in beneficiaries) is

8 amended—

9 (1) in clause (i), by striking ‘‘transferred to the

10 credit’’ and inserting ‘‘transferred—

11 ‘‘(I) to another qualified State

12 tuition program for the benefit of the

13 designated beneficiary, or

14 ‘‘(II) to the credit’’,

15 (2) by adding at the end the following new

16 clause:

17 ‘‘(iii) LIMITATION ON CERTAIN ROLL18 OVERS.—Clause (i)(I) shall only apply to

19 the first 3 transfers with respect to a des20 ignated beneficiary.’’, and

21 (3) in the heading, by inserting ‘‘OR PRO22 GRAMS’’ after ‘‘BENEFICIARIES.

23 (b) MEMBER OF FAMILY INCLUDES FIRST COUS24 IN.—Section 529(e)(2) (defining member of family) is

25 amended by striking ‘‘and’’ at the end of subparagraph
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1 (B), by striking the period at the end of subparagraph

2 (C) and by inserting ‘‘; and’’, and by adding at the end

3 the following new subparagraph:

4 ‘‘(D) any first cousin of such beneficiary.’’

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to distributions made after Decem7 ber 31, 1998, in taxable years ending after such date.

8 SEC. 4. MODIFICATIONS TO HOPE AND LIFETIME LEARN9 ING CREDITS.

10 (a) COORDINATION WITH EDUCATION IRAS.—Sub11 section (e) of section 25A (relating to Hope and Lifetime

12 Learning credits) is amended to read as follows:

13 ‘‘(e) COORDINATION WITH EXCLUSIONS.—The

14 amount of qualified tuition and related expenses otherwise

15 taken into account under subsection (a) with respect to

16 an individual for an academic period shall be reduced (be17 fore the application of subsections (b), (c), (d), and (g))

18 by any distribution from an education individual retire19 ment account for the benefit of such individual which is

20 allocable to such period, to the extent such distribution

21 is excludable from gross income under section 530(d)(2).’’

22 (b) EFFECTIVE DATE.—The amendment made by

23 this section shall apply to expenses paid after December

24 31, 1998, in taxable years ending after such date.

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