II

106TH CONGRESS

1ST SESSION S. 13

To amend the Internal Revenue Code of 1986 to provide additional tax

incentives for education.

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

Mr. SESSIONS (for himself, Mr. GRAHAM, Mr. MACK, Mr. ABRAHAM, Mr.

COCHRAN, and Mr. COVERDELL) 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 provide

additional 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.

4 This Act may be cited as the ‘‘Collegiate Learning

5 and Student Savings Act’’.

6 SEC. 2. ELIGIBLE EDUCATIONAL INSTITUTIONS PER7 MITTED TO MAINTAIN QUALIFIED TUITION

8 PROGRAMS.

9 (a) IN GENERAL.—Section 529(b)(1) of the Internal

10 Revenue Code of 1986 (defining qualified State tuition
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1 program) is amended by inserting ‘‘or by 1 or more eligible

2 educational institutions or a consortium that consists sole3 ly of eligible educational institutions’’ after ‘‘maintained

4 by a State or agency or instrumentality thereof ’’.

5 (b) PRIVATE QUALIFIED TUITION PROGRAMS LIM6 ITED TO BENEFIT PLANS.—Clause (ii) of section

7 529(b)(1)(A) of the Internal Revenue Code of 1986 is

8 amended by inserting ‘‘in the case of a program estab9 lished and maintained by a State or agency or instrumen10 tality thereof’’ before ‘‘may make’’.

11 (c) CONFORMING AMENDMENTS.—

12 (1) The text and headings of each of the sec13 tions 72(e)(9), 135(c)(2(C), 135(d)(1)(D), 529,

14 530(b)(2)(B), 4973(e), and 6693(a)(2)(C) of the In15 ternal Revenue Code of 1986 is amended by striking

16 ‘‘qualified State tuition’’ each place it appears and

17 inserting ‘‘qualified tuition’’.

18 (2)(A) The section heading of section 529 of

19 such Code is amended to read as follows:

20 ‘‘SEC. 529. QUALIFIED TUITION PROGRAMS.’’.

21 (B) The item relating to section 529 in the

22 table of sections for part VIII of subchapter F of

23 chapter 1 of such Code is amended by striking

24 ‘‘State’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1999.

4 SEC. 3. EXCLUSION FROM GROSS INCOME OF EDUCATION

5 DISTRIBUTIONS FROM QUALIFIED TUITION

6 PROGRAMS.

7 (a) IN GENERAL.—Section 529(c)(3)(B) of the Inter8 nal Revenue Code of 1986 (relating to distributions) is

9 amended to read as follows:

10 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED

11 HIGHER EDUCATION EXPENSES.—

12 ‘‘(i) IN GENERAL.—If a distributee

13 elects the application of this clause for any

14 taxable year—

15 ‘‘(I) no amount shall be includ16 ible in gross income under subpara17 graph (A) by reason of a distribution

18 which consists of providing a benefit

19 to the distributee which, if paid for by

20 the distributee, would constitute pay21 ment of a qualified higher education

22 expense, and

23 ‘‘(II) the amount which (but for

24 the election) would be includible in

25 gross income under subparagraph (A)
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1 by reason of any other distribution

2 shall not be so includible in an

3 amount which bears the same ratio to

4 the amount which would be so includ5 ible as such expenses bear to such ag6 gregate distributions.

7 ‘‘(ii) IN-KIND DISTRIBUTIONS.—Any

8 benefit furnished to a designated bene9 ficiary under a qualified State tuition pro10 gram shall be treated as a distribution to

11 the beneficiary for purposes of this para12 graph.

13 ‘‘(iii) DISALLOWANCE OF EXCLUDED

14 AMOUNTS AS CREDIT OR DEDUCTION.—No

15 deduction or credit shall be allowed to the

16 taxpayer under any other section of this

17 chapter for any qualified higher education

18 expenses to the extent taken into account

19 in determining the amount of the exclusion

20 under this subparagraph.’’.

21 (b) BENEFICIARY MAY CHANGE PROGRAM.—Section

22 529(c)(3)(C) of the Internal Revenue Code of 1986 (relat23 ing to change in beneficiaries) is amended—
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1 (1) in clause (i), by inserting ‘‘to another quali2 fied tuition program for the benefit of the des3 ignated beneficiary or’’ after ‘‘transferred’’, and

4 (2) in the heading, by inserting ‘‘OR PRO5 GRAMS’’ after ‘‘BENEFICIARIES.

6 (c) ADDITIONAL TAX ON AMOUNTS NOT USED FOR

7 HIGHER EDUCATION EXPENSES.—Section 529(c)(3) of

8 the Internal Revenue Code of 1986 (relating to distribu9 tions) is amended by adding at the end the following:

10 ‘‘(E) ADDITIONAL TAX ON AMOUNTS NOT

11 USED FOR HIGHER EDUCATION EXPENSES.—

12 The tax imposed by section 530(d)(4) shall

13 apply to payments and distributions from quali14 fied tuition programs in the same manner as

15 such tax applies to education individual retire16 ment accounts.’’.

17 (d) COORDINATION WITH EDUCATION CREDITS.—

18 Section 25A(e)(2) of the Internal Revenue Code of 1986

19 (relating to coordination with exclusions) is amended—

20 (1) by inserting ‘‘a qualified tuition program

21 or’’ before ‘‘an education individual retirement ac22 count’’, and

23 (2) by striking ‘‘section 530(d)(2)’’ and insert24 ing ‘‘section 529(c)(3)(B) or 530(d)(2)’’.

25 (e) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section

3 shall apply to distributions made after December 31,

4 1999, for education furnished in academic periods

5 beginning after such date.

6 (2) PRIVATE PROGRAMS.—In the case of a

7 qualified tuition program established and maintained

8 by an entity other than a State or agency or instru9 mentality thereof, the amendments made by sub10 sections (a), (c), and (d) shall apply to distributions

11 made after December 31, 2003, for education fur12 nished in academic periods beginning after such

13 date.

14 SEC. 4. QUALIFIED TUITION PROGRAMS INCLUDED IN SE15 CURITIES EXEMPTION.

16 (a) EXEMPTED SECURITIES.—Section 3(a)(4) of the

17 Securities Act of 1933 (15 U.S.C. 77c(a)(4)) is amended

18 by striking ‘‘individual;’’ and inserting ‘‘individual or any

19 security issued by a prepaid tuition program described in

20 section 529 of the Internal Revenue Code of 1986;’’.

21 (b) QUALIFIED TUITION PROGRAMS NOT INVEST22 MENT COMPANIES.—Section 3(c) of the Investment Com23 pany Act of 1940 (15 U.S.C. 80a–3(c)) is amended by

24 adding at the end the following:
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1 ‘‘(15) Any prepaid tuition program described in

2 section 529 of the Internal Revenue Code of 1986.’’.

Æ