I

107TH CONGRESS

1ST SESSION H. R. 84

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

for education.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 3, 2001

Mr. ENGLISH (for himself and Mr. PAUL) 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 provide

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 ‘‘Higher Education

5 Affordability and Availability Act’’.

6 SEC. 2. EXCLUSION FROM GROSS INCOME OF EDUCATION

7 DISTRIBUTIONS FROM QUALIFIED TUITION

8 PROGRAMS; COVERAGE OF PRIVATE PRO9 GRAMS.

10 (a) EXCLUSION.—
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1 (1) IN GENERAL.—Subparagraph (B) of section

2 529(c)(3) of the Internal Revenue Code of 1986 (re3 lating to distributions) is amended to read as fol4 lows:

5 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED

6 HIGHER EDUCATION EXPENSES.—If a dis7 tributee elects the application of this subpara8 graph for any taxable year—

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

10 gross income by reason of a distribution

11 which consists of providing a benefit to the

12 distributee which, if paid for by the dis13 tributee, would constitute payment of a

14 qualified higher education expense, and

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

16 election) would be includible in gross in17 come by reason of any other distribution

18 shall not be so includible in an amount

19 which bears the same ratio to the amount

20 which would be so includible as the amount

21 of the qualified higher education expenses

22 of the distributee bears to the amount of

23 the distribution.’’

24 (2) ADDITIONAL TAX ON AMOUNTS NOT USED

25 FOR HIGHER EDUCATION EXPENSES.—Section 529
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1 of such Code is amended by adding at the end the

2 following new subsection:

3 ‘‘(f) ADDITIONAL TAX FOR DISTRIBUTIONS NOT

4 USED FOR EDUCATIONAL EXPENSES.—

5 ‘‘(1) IN GENERAL.—The tax imposed by section

6 530(d)(4) shall apply to payments and distributions

7 from qualified tuition programs in the same manner

8 as such tax applies to education individual retire9 ment accounts.

10 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE11 FORE DUE DATE OF RETURN.—Paragraph (1) shall

12 not apply to the distribution to a contributor of any

13 contribution paid during a taxable year to a quali14 fied tuition program to the extent that such con15 tribution exceeds the limitation in section 4973(e) if

16 such distribution (and the net income with respect

17 to such excess contribution) meets requirements

18 comparable to the requirements of clauses (i) and

19 (ii) of section 530(d)(4)(C).’’

20 (3) COORDINATION WITH EDUCATION CRED21 ITS.—Section 25A(e)(2) of such Code is amended by

22 inserting ‘‘529(c)(3)(B) or’’ before ‘‘530(d)(2)’’.

23 (4) CONFORMING AMENDMENT.—Paragraph (2)

24 of section 26(b) of such Code is amended by redesig25 nating subparagraphs (E) through (Q) as subpara-
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1 graphs (F) through (R), respectively, and by insert2 ing after subparagraph (D) the following new sub3 paragraph:

4 ‘‘(E) section 529(f) (relating to additional

5 tax on certain distributions from qualified tui6 tion programs),’’.

7 (5) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to distributions after

9 December 31, 2000, for education furnished in aca10 demic periods beginning after such date.

11 (b) ELIGIBLE EDUCATIONAL INSTITUTIONS PER12 MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—

13 (1) IN GENERAL.—Paragraph (1) of section

14 529(b) of such Code (defining qualified State tuition

15 program) is amended by inserting ‘‘or by one or

16 more eligible educational institutions’’ after ‘‘main17 tained by a State or agency or instrumentality there18 of’’.

19 (2) CONFORMING AMENDMENTS.—

20 (A) The text and headings of sections 529

21 and 530 of such Code are amended by striking

22 ‘‘qualified State tuition program’’ each place it

23 appears and inserting ‘‘qualified tuition pro24 gram’’.
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1 (B)(i) The section heading of section 529

2 of such Code is amended to read as follows:

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

4 (ii) The item relating to section 529 of

5 such Code in the table of sections for part VIII

6 of subchapter F of chapter 1 is amended by

7 striking ‘‘State’’.

8 (3) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to taxable years begin10 ning after December 31, 2000.

11 (c) CHANGE OF QUALIFIED TUITION PROGRAM OR

12 OF DESIGNATED BENEFICIARY.—

13 (1) IN GENERAL.—Clause (i) of section

14 529(c)(3)(C) of such Code is amended by inserting

15 ‘‘to another qualified tuition program for the benefit

16 of the designated beneficiary or’’ after ‘‘trans17 ferred’’.

18 (2) INCLUSION OF SIBLINGS AS MEMBER OF

19 FAMILY.—Paragraph (2) of section 529(e) of such

20 Code is amended by striking ‘‘subparagraph (B).’’

21 and inserting ‘‘subparagraph (B),

22 except that such term shall include any sibling

23 (whether by the whole or half blood) of the des24 ignated beneficiary.’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to taxable years begin3 ning after December 31, 2000.

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