49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–25 

AMENDING THE INTERNAL REVENUE CODE OF 1986 TO 

IMPROVE 529 PLANS 

FEBRUARY 20, 2015.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. RYAN of Wisconsin, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 529] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 529) to amend the Internal Revenue Code of 1986 to improve 529 plans, having considered the same, report favorably 

thereon with an amendment and recommend 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 ............................................. 3 

C. Legislative History ............................................................................ 3 

II. EXPLANATION OF THE BILL ................................................................... 4 

A. Section 529 Programs (secs. 2, 3 and 4 of the bill and sec. 

529 of the Code) .............................................................................. 4 

III. VOTES OF THE COMMITTEE .................................................................... 7 

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 .................................................................. 9 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 9 

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 


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C. Information Relating to Unfunded Mandates ................................ 11 

D. Applicability of House Rule XXI 5(b) .............................................. 11 

E. Tax Complexity Analysis .................................................................. 11 

F. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 12 

G. Duplication of Federal Programs ..................................................... 12 

H. Disclosure of Directed Rule Makings .............................................. 12 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 12 

VII. ADDITIONAL VIEWS ................................................................................... 20 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. FINDINGS AND PURPOSE. 

(a) FINDINGS.—Congress finds the following: 

(1) When the Economic Growth and Tax Relief Reconciliation Act of 2001 became law, the tax treatment of section 529 college savings plans was changed 

so that qualified distributions were no longer taxed as income. The favorable 

tax treatment of college savings plans was made permanent with the passage 

of the Pension Protection Act of 2006. 

(2) Section 529 college savings plans empower middle-class families to accumulate savings to offset the rising costs of attending college. 

(3) The latest data from the College Savings Plan Network shows that there 

are 11.83 million 529 accounts open throughout all 50 states, which represent 

$244.5 billion in total assets. The average 529 account size is $20,671. 

(4) States that sponsor 529 college savings plans have taken steps to ensure 

these plans are a tool that all families can use to save for college, including setting minimum contributions as low as $25 per month to encourage participation 

by families of all income levels. 

(5) The President’s fiscal year 2016 Budget proposes raising taxes by taxing 

certain future distributions made from 529 college savings plans. 

(6) The tax proposed by the President would discourage the use of 529 college 

savings plans, requiring families and students to take on more debt. 

(7) Purchase of a computer represents a significant higher education expense 

and therefore should be eligible for qualified distributions under 529 college 

savings plans. 

(b) PURPOSE.—It is the purpose of this Act to— 

(1) enact policies that strengthen 529 college savings plans, and 

(2) make 529 plans more modern, consumer-friendly, and responsive to the 

realities faced by students today. 

SEC. 2. COMPUTER TECHNOLOGY AND EQUIPMENT PERMANENTLY ALLOWED AS A QUALIFIED HIGHER EDUCATION EXPENSE FOR SECTION 529 ACCOUNTS. 

(a) IN GENERAL.—Section 529(e)(3)(A)(iii) of the Internal Revenue Code of 1986 is 

amended to read as follows: 

‘‘(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.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable 

years beginning after December 31, 2014. 

SEC. 3. ELIMINATION OF DISTRIBUTION AGGREGATION REQUIREMENTS. 

(a) IN GENERAL.—Section 529(c)(3) of the Internal Revenue Code of 1986 is 

amended by striking subparagraph (D). 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to distributions after December 31, 2014. 

SEC. 4. RECONTRIBUTION OF REFUNDED AMOUNTS. 

(a) IN GENERAL.—Section 529(c)(3) of the Internal Revenue Code of 1986, as 

amended by section 3, is amended by adding at the end the following new subparagraph: 

‘‘(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 


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not later than 60 days after the date of such refund and does not exceed 

the refunded amount.’’. 

(b) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendment made by this section shall apply with respect to refunds of qualified higher education expenses after December 31, 2014. 

(2) TRANSITION RULE.—In the case of a refund of qualified higher education 

expenses received after December 31, 2014, and before the date of the enactment of this Act, section 529(c)(3)(D) of the Internal Revenue Code of 1986 (as 

added by this section) shall be applied by substituting ‘‘not later than 60 days 

after the date of the enactment of this subparagraph’’ for ‘‘not later than 60 

days after the date of such refund’’. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

H.R. 529, reported by the Committee on Ways and Means, modernizes and improves the treatment of college savings programs 

under section 529 of the Internal Revenue Code of 1986 (‘‘529 

plans’’). It treats computer equipment and technology expenses as 

qualified higher education expenses, and removes the aggregation 

requirement for distributions. The bill also protects from tax and 

penalties amounts taken as distributions, paid as tuition, and then 

refunded, provided such amounts are re-contributed to the 529 plan 

within 60 days. 

B. BACKGROUND AND NEED FOR LEGISLATION

The Committee believes that 529 plans are an important vehicle 

for encouraging middle-income families to save for higher education, and that these plans should be modernized, improved, and 

simplified for such families. 

C. LEGISLATIVE HISTORY

BACKGROUND

H.R. 529 was introduced on January 26, 2015, and was referred 

to the Committee on Ways and Means. 

COMMITTEE ACTION

The Committee on Ways and Means marked up H.R. 529, a bill 

to amend the Internal Revenue Code of 1986 to improve 529 plans 

on February 12, 2015, and ordered the bill, as amended, favorably 

reported (with a quorum being present). 

COMMITTEE HEARINGS

The tax treatment of 529 plans was discussed at a full Committee hearing on the President’s Fiscal Year 2016 Budget Proposal with Secretary of the Treasury Jacob J. Lew (February 3, 

2015). 


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1 Except where otherwise specified, all section references are to the Internal Revenue Code 

of 1986, as amended (the ‘‘Code’’). 2For purposes of this description, the term ‘‘account’’ is used interchangeably to refer to a prepaid tuition benefit contract or a tuition savings account established pursuant to a qualified tuition program. 3Section 529 refers to contributors and designated beneficiaries, but does not define or otherwise refer to the term ‘‘account owner,’’ which is a commonly used term among qualified tuition 

programs. 

II. EXPLANATION OF THE BILL 

A. SECTION 529 PROGRAMS (SECS. 2, 3 AND 4 OF THE BILL AND SEC. 

529 OF THE CODE) 

PRESENT LAW

SECTION 529 QUALIFIED TUITION PROGRAMS

In general 

A qualified tuition program is a program established and maintained by a State or agency or instrumentality thereof, or by one 

or more eligible educational institutions, which satisfies certain requirements and under which a person may purchase tuition credits 

or certificates on behalf of a designated beneficiary that entitle the 

beneficiary to the waiver or payment of qualified higher education 

expenses of the beneficiary (a ‘‘prepaid tuition program’’). Section 

529 1 provides specified income tax and transfer tax rules for the 

treatment of accounts and contracts established under qualified 

tuition programs.2 In the case of a program established and maintained by a State or agency or instrumentality thereof, a qualified 

tuition program also includes a program under which a person may 

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, provided it satisfies certain 

specified requirements (a ‘‘savings account program’’). Under both 

types of qualified tuition programs, a contributor establishes an account for the benefit of a particular designated beneficiary to provide for that beneficiary’s higher education expenses. 

In general, prepaid tuition contracts and tuition savings accounts 

established under a qualified tuition program involve prepayments 

or contributions made by one or more individuals for the benefit of 

a designated beneficiary. Decisions with respect to the contract or 

account are typically made by an individual who is not the designated beneficiary. Qualified tuition accounts or contracts generally require the designation of a person (generally referred to as 

an ‘‘account owner’’) 3 whom the program administrator (oftentimes 

a third party administrator retained by the State or by the educational institution that established the program) may look to for 

decisions, recordkeeping, and reporting with respect to the account 

established for a designated beneficiary. The person or persons who 

make the contributions to the account need not be the same person 

who is regarded as the account owner for purposes of administering 

the account. Under many qualified tuition programs, the account 

owner generally has control over the account or contract, including 

the ability to change designated beneficiaries and to withdraw 

funds at any time and for any purpose. Thus, in practice, qualified 

tuition accounts or contracts generally involve a contributor, a designated beneficiary, an account owner (who oftentimes is not the 


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4Sec. 529(c)(3)(B)(i) and (ii)(I). 

5 Under section 72, a distribution is includible in income to the extent that the distribution 

represents earnings on the contribution to the program, determined on a pro rata basis. 

contributor or the designated beneficiary), and an administrator of 

the account or contract. 

QUALIFIED HIGHER EDUCATION EXPENSES

For purposes of receiving a distribution from a qualified tuition 

program that qualifies for favorable tax treatment under the Code, 

qualified higher education expenses means tuition, fees, books, supplies, and equipment required for the enrollment or attendance of 

a designated beneficiary at an eligible educational institution, and 

expenses for special needs services in the case of a special needs 

beneficiary that are incurred in connection with such enrollment or 

attendance. Qualified higher education expenses generally also include room and board for students who are enrolled at least halftime. For taxable years 2009 and 2010 only, qualified higher education expenses included the purchase of any computer technology 

or equipment, or Internet access or related services, if such technology or services were to be used by the beneficiary or the beneficiary’s family during any of the years a beneficiary was enrolled 

at an eligible institution. 

CONTRIBUTIONS TO QUALIFIED TUITION PROGRAMS

Contributions to a qualified tuition program must be made in 

cash. Section 529 does not impose a specific dollar limit on the 

amount of contributions, account balances, or prepaid tuition benefits relating to a qualified tuition account; however, the program is 

required to have adequate safeguards to prevent contributions in 

excess of amounts necessary to provide for the beneficiary’s qualified higher education expenses. Contributions generally are treated 

as a completed gift eligible for the gift tax annual exclusion. Contributions are not tax deductible for Federal income tax purposes, 

although they may be deductible for State income tax purposes. 

Amounts in the account accumulate on a tax-free basis (i.e., income 

on accounts in the plan is not subject to current income tax). 

A qualified tuition program may not permit any contributor to, 

or designated beneficiary under, the program to direct (directly or 

indirectly) the investment of any contributions (or earnings thereon) more than two times in any calendar year, and must provide 

separate accounting for each designated beneficiary. A qualified 

tuition program may not allow any interest in an account or contract (or any portion thereof) to be used as security for a loan. 

DISTRIBUTIONS FROM QUALIFIED TUITION PROGRAMS

Distributions from a qualified tuition program are excludable 

from the distributee’s gross income to the extent that the total distribution does not exceed the qualified higher education expenses 

incurred for the beneficiary.4

If distribution from a qualified tuition program exceeds the qualified higher education expenses incurred for the beneficiary, the 

amount includible in gross income is determined, first, by applying 

the annuity rules of section 72 5 to determine the amount which 

would be includible in gross income if none of the amount distribVerDate Sep 11 2014 05:40 Feb 21, 2015 Jkt 049006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR025.XXX HR025

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6Sec. 529(c)(3)(A) and (B)(ii). 

7 Notice 2001–81, 2001–2 C.B. 617, December 10, 2001. 

8 Ibid. 

uted was for qualified higher education expenses and, then, reducing that amount by an amount which bears the same ratio to that 

amount as the qualified higher education expenses bear to the 

amount of the distribution.6

For example, assume a taxpayer had $5,000 in a qualified tuition 

program account, $4,000 of which was the amount contributed. 

Also assume the taxpayer withdraws $1,000 from the account and 

$500 is used for qualified higher education expenses. First, the taxpayer applies the annuity rules of section 72 which results in $200 

being included in income under section 72 assuming none of the 

distribution is used for qualified higher education expenses. Then 

the taxpayer reduces the $200 by one-half because 50 percent of 

the distribution was used for qualified higher education expenses. 

Thus, $100 is includible in gross income. This amount is subject to 

an additional 10-percent tax (unless an exception applies). 

The Code provides that, except as provided by the Secretary of 

the Treasury (‘‘Secretary’’), for purposes of this calculation, the taxpayer’s account value, income, and investment amount, are generally measured as of December 31st of the taxable year in which 

the distribution was made. The Secretary has issued guidance providing that the earnings portion of a distribution is to be computed 

on the date of each distribution.7

In the case of an individual who is the designated beneficiary for 

more than one qualified tuition program, all such accounts are aggregated for purposes of calculating the earnings in the account 

under section 72. The Secretary has provided in guidance that this 

aggregation is required only in the case of accounts contained within the same 529 program, having the same account owner and the 

same designated beneficiary.8

REASONS FOR CHANGE

The Committee recognizes that computer technology is an essential part of higher education, and thus believes that funds used to 

purchase such technology should be considered a qualified educational expense for purposes of section 529. Additionally, the Committee believes that certain rules requiring aggregation of section 

529 accounts are difficult to administer, adding a burden to 529 administrators. Finally, the Committee believes that 529 programs 

should be able to allow students who have received a refund of tuition that had been paid with the proceeds of a 529 account to recontribute such refund back into the account without being taxed 

and penalized. 

EXPLANATION OF PROVISION

The provision makes three modifications to section 529. 

First, the provision provides that qualified higher education expenses include 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 the 

equipment, software, or services are to be used primarily by the 


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beneficiary during any of the years the beneficiary is enrolled at an 

eligible education institution. 

Second, the provision repeals the rules providing that section 529 

accounts must be aggregated for purposes of calculating the 

amount of a distribution that is included in a taxpayer’s income. 

Thus, in the case of a designated beneficiary who has received multiple distributions from a qualified tuition program in the taxable 

year, the portion of a distribution that represents earnings is now 

to be computed on a distribution-by-distribution basis, rather than 

an aggregate basis, such that the computation applies to each distribution from an account. The following example illustrates the operation of this provision: Assume that two designated savings accounts have been established by the same account owner within 

the same qualified tuition program for the same designated beneficiary. Account A contains $20,000, all of which consists of contributed amounts (i.e., it has no earnings). Account B contains $30,000, 

$20,000 of which constitutes an investment in the account, and 

$10,000 attributable to earnings on that investment. Assume a taxpayer were to receive a $10,000 distribution from Account A, with 

none of the proceeds being spent on qualified higher education expenses. Under present law, both of the designated beneficiary’s accounts would be aggregated for purposes of computing earnings. 

Thus, $2,000 of the $10,000 distribution from Account A ($10,000 

* $10,000/$50,000) would be included in the designated beneficiary’s income. Under the provision, the accounts would not be aggregated for purposes of determining earnings on the account. 

Thus, because Account A has no earnings, no amount of the distribution would be included in the designated beneficiary’s income 

for the taxable year. 

Third, the provision creates a new rule that provides, in the case 

of a designated beneficiary who received a refund of any higher 

education expenses, any distribution that was used to pay such refunded expenses shall not be subject to tax if the designated beneficiary recontributes the refunded amount to the qualified tuition 

program within 60 days of receiving the refund, only to the extent 

that such recontribution is not in excess of the refund. A transition 

rule allows for recontributions of amounts refunded after December 

31, 2014 and before the date of enactment to be made not later 

than 60 days after the enactment of this provision. 

EFFECTIVE DATE

The provision allowing computer technology to be considered a 

higher education expense is effective for taxable years beginning 

after December 31, 2014. The provision removing the aggregation 

requirement in the case of multiple distributions is effective for distributions made after December 31, 2014. The provision allowing a 

recontribution of refunded tuition amounts is effective for tuition 

refunded after December 31, 2014. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its conVerDate Sep 11 2014 05:40 Feb 21, 2015 Jkt 049006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR025.XXX HR025

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sideration of H.R. 529, a bill to amend the Internal Revenue Code 

of 1986 to improve 529 plans on February 12, 2015. 

The amendment by Mr. Davis to the amendment in the nature 

of a substitute, in which, under the amendment, 529 programs 

would be required to provide certain information regarding contributions and distributions required by the Secretary to be made 

public in aggregate form, was not agreed to by a roll call vote of 

21 nays to 13 yeas (with a quorum being present). The vote was 

as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Ryan ................................ ........... ✔ ............. Mr. Levin ............................... ✔ ........... ...........

IMr. Johnson ........................... ........... ✔ ............. Mr. Rangel ............................ ✔ ........... ...........

Mr. Brady ............................... ........... ✔ ............. Mr. McDermott ...................... ✔ ........... ...........

Mr. Nunes .............................. ........... ✔ ............. Mr. Lewis ............................... ✔ ........... ...........

Mr. Tiberi ............................... ........... ✔ ............. Mr. Neal ................................ ✔ ........... ...........

Mr. Reichert ........................... ........... ✔ ............. Mr. Becerra ........................... ✔ ........... ...........

Mr. Boustany .......................... ........... ✔ ............. Mr. Doggett ........................... ✔ ........... ...........

Mr. Roskam ............................ ........... ✔ ............. Mr. Thompson ....................... ✔ ........... ...........

Mr. Price ................................ ........... ........... ............. Mr. Larson ............................. ........... ........... ...........

Mr. Buchanan ........................ ........... ✔ ............. Mr. Blumenauer .................... ✔ ........... ...........

Mr. Smith (NE) ....................... ........... ✔ ............. Mr. Kind ................................ ✔ ........... ...........

Mr. Schock ............................. ........... ✔ ............. Mr. Pascrell ........................... ✔ ........... ...........

Ms. Jenkins ............................ ........... ✔ ............. Mr. Crowley ........................... ✔ ........... ...........

Mr. Paulsen ............................ ........... ✔ ............. Mr. Davis ............................... ✔ ........... ...........

Mr. Marchant ......................... ........... ........... ............. Ms. Sanchez .......................... ........... ........... ...........

Ms. Black ............................... ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Reed ................................ ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Young .............................. ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Kelly ................................. ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Renacci ............................ ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Meehan ............................ ........... ........... ............. ............................................... ........... ........... ...........

Ms. Noem ............................... ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Holding ............................ ........... ✔ ............. ............................................... ........... ........... ...........

Mr. Smith (MO) ...................... ........... ✔ ............. ............................................... ........... ........... ...........

The amendment by Mr. Davis to the amendment in the nature 

of a substitute, in which, under the amendment, taxpayers with adjusted gross incomes of more than $3 million would not be eligible 

to make contributions to 529 accounts, was not agreed to by a roll 

call vote of 23 nays to 14 yeas (with a quorum being present). The 

vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Ryan ............................... ........... ✔ ............. Mr. Levin .............................. ✔ ........... .............

Mr. Johnson ........................... ........... ✔ ............. Mr. Rangel ........................... ✔ ........... .............

Mr. Brady .............................. ........... ✔ ............. Mr. McDermott ..................... ✔ ........... .............

Mr. Nunes ............................. ........... ✔ ............. Mr. Lewis .............................. ✔ ........... .............

Mr. Tiberi .............................. ........... ✔ ............. Mr. Neal ............................... ✔ ........... .............

Mr. Reichert .......................... ........... ✔ ............. Mr. Becerra .......................... ✔ ........... .............

Mr. Boustany ......................... ........... ✔ ............. Mr. Doggett .......................... ✔ ........... .............

Mr. Roskam ........................... ........... ✔ ............. Mr. Thompson ...................... ✔ ........... .............

Mr. Price ............................... ........... ........... ............. Mr. Larson ............................ ✔ ........... .............

Mr. Buchanan ....................... ........... ✔ ............. Mr. Blumenauer ................... ✔ ........... .............

Mr. Smith (NE) ...................... ........... ✔ ............. Mr. Kind ............................... ✔ ........... .............

Mr. Schock ............................ ........... ✔ ............. Mr. Pascrell .......................... ✔ ........... .............

Ms. Jenkins ........................... ........... ✔ ............. Mr. Crowley .......................... ✔ ........... .............

Mr. Paulsen ........................... ........... ✔ ............. Mr. Davis .............................. ✔ ........... .............

Mr. Marchant ........................ ........... ✔ ............. Ms. Sanchez ......................... ✔ ........... .............

Ms. Black .............................. ........... ✔ ............. .............................................. ........... ........... .............

Mr. Reed ............................... ........... ✔ ............. .............................................. ........... ........... .............

Mr. Young ............................. ........... ✔ ............. .............................................. ........... ........... .............

Mr. Kelly ................................ ........... ✔ ............. .............................................. ........... ........... .............

Mr. Renacci ........................... ........... ✔ ............. .............................................. ........... ........... .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Meehan ........................... ........... ✔ ............. .............................................. ........... ........... .............

Mr. Noem .............................. ........... ✔ ............. .............................................. ........... ........... .............

Mr. Holding ........................... ........... ✔ ............. .............................................. ........... ........... .............

Mr. Smith (MO) ..................... ........... ✔ ............. .............................................. ........... ........... .............

The bill, H.R. 529, was ordered favorably reported as amended 

to the House of Representatives by a voice vote (with a quorum 

being present). 

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. 529, as reported. 

The bill, as reported, is estimated to have the following effect on 

Federal budget receipts for fiscal years 2015–2025: 

Fiscal years, in millions of dollars— 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015–20 2015–25 

¥1 ¥2 ¥2 ¥3 ¥3 ¥4 ¥5 ¥6 ¥7 ¥8 ¥10 ¥15 ¥51 

Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect 

(before incorporating macroeconomic effects) in any fiscal year is 

less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is 

not ‘‘major legislation’’ for purposes of requiring that the estimate 

include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. 

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 further states that the revenue-reducing tax provisions involve increased tax expenditures. (See amounts in table in Part IV.A., 

above.) 

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. 


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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, February 19, 2015. 

Hon. PAUL RYAN, 

Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 529, a bill to amend the 

Internal Revenue Code of 1986 to improve 529 plans. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Logan Timmerhoff. 

Sincerely, 

ROBERT A. SUNSHINE

(For Douglas W. Elmendorf). 

Enclosure. 

H.R. 529—A bill to amend the Internal Revenue Code of 1986 to improve 529 plans 

H.R. 529 would modify the tax treatment of college savings plans 

authorized under section 529 of the Internal Revenue Code. Under 

current law, income earned on amounts in those accounts accumulates on a tax-free basis, and the distribution of such income is not 

included in the taxable income of the recipient to the extent that 

it is used to pay certain higher education expenses. H.R. 529 would 

expand the qualifying expenses to include certain computer and related expenses. The bill would also modify the computation of the 

taxable portion of a distribution when the contributor has established multiple accounts for the student. In addition, H.R. 529 

would allow beneficiaries to pay no tax in the event that they receive a refund from the educational institution (for example, after 

withdrawing from enrollment) and contribute the refunded amount 

back to the savings plan within 60 days. 

The staff of the Joint Committee on Taxation (JCT) estimates 

that enacting H.R. 529 would reduce revenues, thus increasing federal deficits, by $51 million over the 2015–2025 period. 

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct 

spending and revenues. Enacting H.R. 529 would result in revenue 

losses in each year beginning in 2015. The estimated increases in 

the deficit are shown in the following table. 

JCT has determined that the bill contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act. 

The CBO staff contact for this estimate is Logan Timmerhoff. 

The estimate was approved by David Weiner, Assistant Director for 

Tax Analysis. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 529, AS ORDERED REPORTED BY THE 

HOUSE COMMITTEE ON WAYS AND MEANS ON FEBRUARY 12, 2015 

By fiscal year, in millions of dollars— 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015– 

2020 

2015– 

2025 

NET INCREASE IN THE DEFICIT 

Statutory Pay-As-You-Go Impact .... 1 2 2 3 3 4 5 6 7 8 10 15 51 

Source: Staff of the Joint Committee on Taxation. 

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 (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the provisions of H.R. 529 that the Committee concluded that it is 

appropriate to report the bill, as amended, favorably to the House 

of Representatives with the recommendation that the bill do pass. 

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 contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. 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. 

D. APPLICABILITY OF HOUSE RULE XXI 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 involve any Federal income tax rate 

increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

The following statement is made pursuant to clause 3(h)(1) of 

rule XIII of the Rules of the House of Representatives. Section 

4022(b) of the Internal Revenue Service Restructuring and Reform 

Act of 1998 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 comVerDate Sep 11 2014 05:40 Feb 21, 2015 Jkt 049006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6602 E:\HR\OC\HR025.XXX HR025

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plexity 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. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of 

the rule. 

F. 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. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), 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 (Public Law 95–220, as amended by Public Law 98– 

169). 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VI. 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 italic, 

existing law in which no change is proposed is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 


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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. 


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(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 CONTRIB- UTORS.— 

(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. 


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(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 HOPE 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, or 

(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. 


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(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. 

ø(D) OPERATING RULES.—For purposes of applying section 72— 

ø(i) to the extent provided by the Secretary, all 

qualified tuition programs of which an individual is a 

designated beneficiary shall be treated as one program, 

ø(ii) except to the extent provided by the Secretary, 

all distributions during a taxable year shall be treated 

as one distribution, and 

ø(iii) except to the extent provided by the Secretary, 

the value of the contract, income on the contract, and 

investment in the contract shall be computed as of the 

close of the calendar year in which the taxable year 

begins.¿ 

(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. 

(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— 


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(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 an 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. 

(d) REPORTS.—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 

subsection 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. 

(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.— 


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(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 

ø(iii) expenses paid or incurred in 2009 or 2010 for 

the purchase of any computer technology or equipment 

(as defined in section 170(e)(6)(F)(i)) or Internet access 

and related services, if such technology, equipment, or 

services are to be used by the beneficiary and the 

beneficiary’s family during any of the years the beneficiary is enrolled at an eligible educational institution.¿ 

(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. 

(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. 


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(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) 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. 

* * * * * * * 


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VII. ADDITIONAL VIEWS 

We are supportive of the technical changes made by H.R. 529 

that would reinstate the technology expenses permitted in 2009 

and 2010 and allow any college refunds to be reinvested back into 

one’s account within 60 days. However, we continue to be concerned about the Committee passing bills without any offset and 

the lack of concrete data on 529 accounts. 

The Joint Committee on Taxation estimated this bill to cost $51 

million over 10 years. At the markup, we offered an amendment 

that would have paid for the cost of this bill. Under the amendment, 529 programs would have been available to taxpayers with 

adjusted gross incomes of $3 million or less. The Republicans voted 

against this amendment. 

We also offered an amendment that would have required Treasury to provide a report on 529 plans, including contributions, distributions, and other relevant data. The Republicans voted against 

this amendment. 

At the end of the day, we should keep in mind that, according 

to a December 2012 GAO report, 529 accounts are used by only 

three percent (3%) of American families. While this Committee 

does not have full jurisdiction over education, we should take seriously our responsibility to join in addressing the college affordability crisis gripping our country. 

SANDER M. LEVIN, 

Ranking Member. 

Æ 


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