I

106TH CONGRESS

1ST SESSION H. R. 588

To amend the Internal Revenue Code of 1986 to permit private educational

institutions to maintain qualified tuition programs which are comparable

to qualified State tuition programs, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 4, 1999

Mr. ENGLISH introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to permit

private educational institutions to maintain qualified tuition programs which are comparable to qualified State

tuition programs, 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. ELIGIBLE EDUCATIONAL INSTITUTIONS PER4 MITTED TO MAINTAIN QUALIFIED TUITION

5 PROGRAMS; OTHER MODIFICATIONS OF

6 QUALIFIED TUITION PROGRAMS.

7 (a) ELIGIBLE EDUCATIONAL INSTITUTIONS PER8 MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—
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1 (1) IN GENERAL.—Paragraph (1) of section

2 529(b) of the Internal Revenue Code of 1986 (defin3 ing qualified State tuition program) is amended by

4 inserting ‘‘or by 1 or more eligible educational insti5 tutions’’ after ‘‘maintained by a State or agency or

6 instrumentality thereof’’.

7 (2) TECHNICAL AMENDMENTS.—

8 (A) Section 72(e)(9) of such Code is

9 amended—

10 (i) in the heading, by striking ‘‘QUALI11 FIED STATE TUITION PROGRAMS’’ and in12 serting ‘‘QUALIFIED TUITION PROGRAMS’’,

13 and

14 (ii) in the text, by striking ‘‘qualified

15 State tuition program’’ and inserting

16 ‘‘qualified tuition program’’.

17 (B) Subsections (c)(2)(C) and (d)(1)(D) of

18 section 135 of such Code are amended by strik19 ing ‘‘qualified State tuition program’’ and in20 serting ‘‘qualified tuition program’’.

21 (C) Section 529 of such Code is

22 amended—

23 (i) by striking ‘‘qualified State tuition

24 program’’ each place it appears and insert25 ing ‘‘qualified tuition program’’, and
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1 (ii) in subsection (c)(3)(D), by strik2 ing ‘‘qualified State tuition programs’’ and

3 inserting ‘‘qualified tuition programs’’.

4 (D) Section 530(b)(2)(B) of such Code is

5 amended—

6 (i) in the heading, by striking

7 ‘‘QUALIFIED STATE TUITION PROGRAMS’’

8 and inserting ‘‘QUALIFIED TUITION PRO9 GRAMS’’, and

10 (ii) in the text, by striking ‘‘qualified

11 State tuition program’’ and inserting

12 ‘‘qualified tuition program’’.

13 (E) Section 4973(e)(1)(B) of such Code is

14 amended by striking ‘‘qualified State tuition

15 program’’ and inserting ‘‘qualified tuition pro16 gram’’.

17 (F) Section 6693(a)(2)(C) of such Code is

18 amended by striking ‘‘qualified State tuition

19 programs’’ and inserting ‘‘qualified tuition pro20 grams’’.

21 (G)(i) The section heading of section 529

22 of such Code is amended to read as follows:

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

24 (ii) The item relating to section 529 of

25 such Code in the table of sections for part VIII
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1 of subchapter F of chapter 1 of such Code is

2 amended by striking ‘‘State’’.

3 (b) EXCLUSION FROM GROSS INCOME OF DISTRIBU4 TIONS ALLOCABLE TO QUALIFIED HIGHER EDUCATION

5 EXPENSES.—

6 (1) IN GENERAL.—Subparagraph (B) of section

7 529(c)(3) of such Code (relating to distributions) is

8 amended to read as follows:

9 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED

10 HIGHER EDUCATION EXPENSES.—If a distribu11 tee elects the application of this subparagraph

12 for any taxable year—

13 ‘‘(i) no amount shall be includible in

14 gross income by reason of a distribution

15 which consists of providing a benefit to the

16 distributee which, if paid for by the dis17 tributee, would constitute payment of a

18 qualified higher education expense, and

19 ‘‘(ii) the amount which (but for the

20 election) would be includible in gross in21 come by reason of any other distribution

22 shall not be so includible in an amount

23 which bears the same ratio to the amount

24 which would be so includible as the amount

25 of the qualified higher education expenses
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1 of the distributee bears to the amount of

2 the distribution.’’.

3 (2) DISTRIBUTIONS TREATED AS FIRST BEING

4 ATTRIBUTABLE TO INCOME.—Subparagraph (A) of

5 section 529(c)(3) of such Code is amended to read

6 as follows:

7 ‘‘(A) IN GENERAL.—Any distribution from

8 a qualified tuition program—

9 ‘‘(i) shall be includible in the gross in10 come of the distributee to the extent allo11 cable to income under the program, and

12 ‘‘(ii) shall not be includible in gross

13 income to the extent allocable to invest14 ment in the contract.

15 For purposes of the preceding sentence, rules

16 similar to the rules of section 72(e)(3) shall

17 apply.’’.

18 (c) CHANGE OF QUALIFIED TUITION PROGRAM.—

19 Clause (i) of section 529(c)(3)(C) of such Code is amended

20 by inserting ‘‘to another qualified tuition program for the

21 benefit of the designated beneficiary or’’ after ‘‘trans22 ferred’’.

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

24 this section shall take effect on January 1, 2000.

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