II 

109TH CONGRESS 

2D SESSION S. 2458 

To amend the Internal Revenue Code of 1986 to encourage college savings 

by providing a Federal income tax credit to match contributions to 

Coverdell education savings accounts, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 27, 2006 

Ms. STABENOW 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 encourage 

college savings by providing a Federal income tax credit 

to match contributions to Coverdell education savings 

accounts, and for other purposes. 

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 ‘‘Kick Start to College 

5 Act’’. 


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1 SEC. 2. TAX CREDIT MATCH OF CONTRIBUTIONS TO COVER2 DELL EDUCATION SAVINGS ACCOUNTS. 

3 (a) IN GENERAL.—Subpart C of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 (relating to refundable credits) is amended by redes6 ignating section 36 as section 37 and by inserting after 

7 section 35 the following new section: 

8 ‘‘SEC. 36. CREDIT MATCH OF CONTRIBUTIONS TO COVER9 DELL EDUCATION SAVINGS ACCOUNTS. 

10 ‘‘(a) IN GENERAL.—There shall be allowed as a cred11 it against the tax imposed by this subtitle an amount equal 

12 to the aggregate contributions of the taxpayer for the tax13 able year to a qualified higher education subaccount which 

14 is established for the benefit of any qualified beneficiary 

15 of the taxpayer. 

16 ‘‘(b) DOLLAR LIMITATION.— 

17 ‘‘(1) IN GENERAL.—The credit allowed to a tax18 payer by subsection (a) with respect to each quali19 fied beneficiary for the taxable year shall not exceed 

20 the applicable amount. 

21 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

22 paragraph (1)— 

23 ‘‘(A) IN GENERAL.—The applicable 

24 amount with respect to each qualified bene25 ficiary for any taxable year is the lesser of— 

26 ‘‘(i) $1,000, or 


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1 ‘‘(ii) $6,000, reduced (but not below 

2 zero) by the aggregate amount of the cred3 its allowed under this section with respect 

4 to the qualified beneficiary for all pre5 ceding taxable years. 

6 In the case of a qualified beneficiary who has 

7 attained the age of 7 before the close of the 

8 taxable year, clause (ii) shall be applied by sub9 stituting ‘$5,000’ for ‘$6,000’. The preceding 

10 sentence shall not apply to a qualified bene11 ficiary who attains the age of 7 before January 

12 1, 2007. 

13 ‘‘(B) REDUCTION BASED ON ADJUSTED

14 GROSS INCOME.—The applicable amount deter15 mined under subparagraph (A) for any taxable 

16 year shall be reduced (but not below zero) by 

17 the amount which bears the same ratio to the 

18 applicable amount as the— 

19 ‘‘(i) taxpayer’s modified adjusted 

20 gross income (as defined in section 

21 530(c)(2)) for such taxable year in excess 

22 of $95,000 ($190,000 in the case of a joint 

23 return), bears to 

24 ‘‘(ii) $15,000 ($30,000 in the case of 

25 a joint return). 


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1 ‘‘(c) QUALIFIED BENEFICIARY.—For purposes of 

2 this section, the term ‘qualified beneficiary’ means the des3 ignated beneficiary of the Coverdell education savings ac4 count who is a qualifying child of the taxpayer (within the 

5 meaning of section 32(c)(3), determined without regard 

6 to subclause (II) of subparagraph (B)(i) thereof). 

7 ‘‘(d) PAYMENT OF CREDIT.— 

8 ‘‘(1) IN GENERAL.—Notwithstanding any other 

9 provision of this title, any amount allowed as a cred10 it under subsection (a) (determined without regard 

11 to paragraph (2)) with respect to any contributions 

12 to a qualified higher education subaccount estab13 lished for the benefit of a qualified beneficiary shall 

14 be deposited by the Secretary into the qualified high15 er education subaccount. 

16 ‘‘(2) COORDINATION WITH DEPOSITS.—With re17 spect to any taxable year, the aggregate amount 

18 which would (but for this subsection) be allowed as 

19 a credit to the eligible taxpayer under this section 

20 with respect to each qualified beneficiary shall be re21 duced (but not below zero) by the aggregate amount 

22 deposited under paragraph (1) with respect to such 

23 beneficiary for such taxable year. 

24 ‘‘(3) REQUIRED INFORMATION.—With respect 

25 to each qualified beneficiary, no credit shall be alVerDate Aug 31 2005 03:53 Mar 28, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2458.IS S2458

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1 lowed under this section to a taxpayer who does not 

2 include on the return of tax for the taxable year— 

3 ‘‘(A) the identification number for any 

4 Coverdell education savings account of the 

5 qualified beneficiary, 

6 ‘‘(B) such information regarding the ad7 ministrator of such account as the Secretary 

8 may prescribe, and 

9 ‘‘(C) the amount paid by the taxpayer dur10 ing the taxable year to any qualified higher 

11 education subaccount established within the 

12 Coverdell education savings accounts for the 

13 benefit of such qualified beneficiary. 

14 ‘‘(e) MARITAL STATUS; CERTAIN MARRIED INDIVID15 UALS LIVING APART.—Rules similar to the rules of para16 graphs (2), (3), and (4) of section 21(e) shall apply for 

17 purposes of this section. 

18 ‘‘(f) REGULATIONS.—The Secretary may prescribe 

19 such regulations and other guidance as may be necessary 

20 or appropriate to carry out this section.’’. 

21 (b) MODIFICATIONS TO COVERDELL EDUCATION

22 SAVINGS ACCOUNT PROVISIONS.—Section 530 of the In23 ternal Revenue Code of 1986 (relating to Coverdell edu24 cation savings accounts) is amended by adding at the end 

25 the following new subsection: 


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1 ‘‘(i) QUALIFIED HIGHER-EDUCATION SUB2 ACCOUNTS.— 

3 ‘‘(1) IN GENERAL.—The trustee of a Coverdell 

4 education savings account may elect to allow individ5 uals to elect to establish, and make contributions to, 

6 a qualified higher education subaccount within the 

7 account. 

8 ‘‘(2) TREATMENT OF SUBACCOUNT.— 

9 ‘‘(A) IN GENERAL.—Amounts in the sub10 account shall be treated in the same manner as 

11 amounts in the Coverdell education savings ac12 count, except that such amounts shall be held 

13 exclusively for the purpose of paying qualified 

14 higher education expenses (as defined in section 

15 529(e)(3)), including amounts described in sub16 section (b)(2)(B). 

17 ‘‘(B) APPLICATION OF LIMIT.—For pur18 poses of applying the limit under subsection 

19 (b)(1)(A)(iii)— 

20 ‘‘(i) contributions to a qualified higher 

21 education subaccount and other contribu22 tions to the Coverdell education savings ac23 count shall be aggregated, and 


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1 ‘‘(ii) payments to the subaccount by 

2 the Secretary under section 36(d)(1) shall 

3 not be taken into account. 

4 ‘‘(C) TREATMENT OF DISTRIBUTIONS.— 

5 For purposes of subsection (d)— 

6 ‘‘(i) IN GENERAL.—In determining 

7 whether distributions from a qualified 

8 higher education subaccount exceed the 

9 qualified education expenses of the des10 ignated beneficiary, only expenses de11 scribed in subparagraph (A) shall be taken 

12 into account. 

13 ‘‘(ii) ROLLOVERS.—Any amount paid 

14 or distributed out of a qualified higher 

15 education subaccount shall be treated as a 

16 rollover contribution under subsection 

17 (d)(5) only if it is paid to another such 

18 subaccount within the required time pe19 riod. 

20 ‘‘(iii) DISTRIBUTIONS NOT USED FOR

21 QUALIFIED EXPENSES.—If any amount 

22 paid or distributed out of a qualified high23 er education subaccount which is allocable 

24 to a payment to the subaccount by the 

25 Secretary under section 36(d)(1) (and 


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1 earnings thereon) exceeds the qualified 

2 education expenses of the designated bene3 ficiary (determined after application of 

4 clause (i))— 

5 ‘‘(I) such amount shall not be in6 cludible in gross income, but 

7 ‘‘(II) the tax imposed by this 

8 chapter for the taxable year of the 

9 taxpayer who receives the payment or 

10 distribution shall be increased by 100 

11 percent of the amount of the excess. 

12 For purposes of the preceding sentence, 

13 payments or distributions shall be treated 

14 as having been made first from payments 

15 under section 36(d)(1) (and earnings 

16 thereon). This clause shall not apply to 

17 payments or distributions described in 

18 clause (i) or (ii) of subsection (d)(4)(B).’’. 

19 (c) CONFORMING AMENDMENTS.— 

20 (1) Paragraph (2) of section 1324(b) of title 

21 31, United States Code, is amended by inserting be22 fore the period ‘‘, or from section 36 of such Code’’. 

23 (2) The table of sections for subpart C of part 

24 IV of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by striking the last item and in2 serting the following new items: 

‘‘Sec. 36. Credit match of contributions to Coverdell education savings accounts. 

‘‘Sec. 37. Overpayments of tax.’’. 

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2006. 

Æ 


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