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[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1059 Introduced in Senate (IS)]

107th CONGRESS
  1st Session
                                S. 1059

  To amend the Internal Revenue Code of 1986 to provide that certain 
postsecondary educational benefits provided by an employer to children 
  of employees shall be excludable from gross income as a scholarship.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 19, 2001

   Mr. Bayh 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 that certain 
postsecondary educational benefits provided by an employer to children 
  of employees shall be excludable from gross income as a scholarship.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CERTAIN POSTSECONDARY EDUCATIONAL BENEFITS PROVIDED BY AN 
              EMPLOYER TO CHILDREN OF EMPLOYEES EXCLUDABLE FROM GROSS 
              INCOME AS A SCHOLARSHIP.

    (a) In General.--Section 117 of the Internal Revenue Code of 1986 
(relating to qualified scholarships) is amended by adding at the end 
the following:
    ``(e) Employer-Provided Post-Secondary Educational Benefits 
Provided to Children of Employees.--
            ``(1) In general.--In determining whether any amount is a 
        qualified scholarship for purposes of subsection (a), the fact 
        that such amount is provided in connection with an employment 
        relationship shall be disregarded if--
                    ``(A) such amount is provided by the employer to a 
                child (as defined in section 151(c)(3)) of an employee 
                of such employer,
                    ``(B) such amount is provided pursuant to a plan 
                which meets the nondiscrimination requirements of 
                subsection (d)(3), and
                    ``(C) amounts provided under such plan are in 
                addition to any other compensation payable to employees 
                and such plan does not provide employees with a choice 
                between such amounts and any other benefit.
        For purposes of subparagraph (C), the business practices of the 
        employer (as well as such plan) shall be taken into account.
            ``(2) Dollar limitations.--
                    ``(A) Per child.--The amount excluded from the 
                gross income of the employee by reason of paragraph (1) 
                for a taxable year with respect to amounts provided to 
                each child of such employee shall not exceed $2,000.
                    ``(B) Aggregate limit.--The amount excluded from 
                the gross income of the employee by reason of paragraph 
                (1) for a taxable year (after the application of 
                subparagraph (A)) shall not exceed the excess of the 
                dollar amount contained in section 127(a)(2) over the 
                amount excluded from the employee's gross income under 
                section 127 for such year.
            ``(3) Principal shareholders and owners.--Paragraph (1) 
        shall not apply to any amount provided to any child of any 
        individual if such individual (or such individual's spouse) 
        owns (on any day of the year) more than 5 percent of the stock 
        or of the capital or profits interest in the employer.
            ``(4) Special rules of application.--In the case of an 
        amount which is treated as a qualified scholarship by reason of 
        this subsection--
                    ``(A) subsection (a) shall be applied without 
                regard to the requirement that the recipient be a 
                candidate for a degree, and
                    ``(B) subsection (b)(2)(A) shall be applied by 
                substituting `section 529(e)(5)' for `section 
                170(b)(1)(A)(ii)'.
            ``(5) Definition; certain other rules to apply.--
                    ``(A) Employee.--For purposes of this subsection, 
                the term `employee' has the same meaning given such 
                term in section 127.
                    ``(B) Certain other rules to apply.--Rules similar 
                to the rules of paragraphs (4), (5), and (7) of section 
                127(c) shall apply for purposes of this subsection.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of enactment of this Act.
                                 <all>
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