I 

114TH CONGRESS 

1ST SESSION H. R. 3432 

To provide the legal framework and income tax treatment necessary for 

the growth of innovative private financing options for students to fund 

postsecondary education, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 29, 2015 

Mr. YOUNG of Indiana (for himself and Mr. POLIS) introduced the following 

bill; which was referred to the Committee on Ways and Means, and in 

addition to the Committees on Education and the Workforce and Financial Services, for a period to be subsequently determined by the Speaker, 

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To provide the legal framework and income tax treatment 

necessary for the growth of innovative private financing 

options for students to fund postsecondary education, 

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 AND TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Investing in Student Success Act of 2015’’. 

6 (b) TABLE OF CONTENTS.— 


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Sec. 1. Short title and table of contents. 

TITLE I—TAX TREATMENT OF INCOME-SHARE AGREEMENTS 

Sec. 101. Definition of ‘‘income-share agreement’’. 

Sec. 102. Tax treatment of proceeds and payments of future income. 

Sec. 103. Terms and conditions of income-share agreement contracts. 

Sec. 104. Rulemaking; model disclosure forms. 

TITLE II—TREATMENT OF INCOME-SHARE AGREEMENTS UNDER 

STATE LAW 

Sec. 201. Purpose; lawfulness of contracts; preemption of State law. 

Sec. 202. Preemption of State law with respect to usury. 

Sec. 203. Definitions. 

TITLE III—QUALIFIED EDUCATION LOAN 

Sec. 301. Qualified Education loan. 

TITLE IV—FEDERAL INDIVIDUAL ASSISTANCE TREATMENT OF 

INCOME-SHARE AGREEMENTS 

Sec. 401. Proceeds not treated as income in calculation of financial need under 

the higher education act of 1965. 

TITLE V—INVESTMENT COMPANY TREATMENT 

Sec. 501. Businesses making income-share agreements excluded from investment company treatment. 

1 TITLE I—TAX TREATMENT OF 

2 INCOME-SHARE AGREEMENTS 

3 SEC. 101. DEFINITION OF ‘‘INCOME-SHARE AGREEMENT’’. 

4 For purposes of this title, the term ‘‘income-share 

5 agreement’’ means an agreement between an individual 

6 and any other person under which the individual commits 

7 to pay a specified percentage of the individual’s future in8 come, for a specified period of time, in exchange for pay9 ments to or on behalf of such individual for use only for 

10 costs associated with postsecondary education, as the reg11 ulations issued pursuant to section 104(a) shall provide 

12 and which shall include the costs of any items and exVerDate Sep 11 2014 22:36 Aug 10, 2015 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3432.IH H3432

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1 penses included as costs of attendance under section 472 

2 of the Higher Education Act of 1965 (20 U.S.C. 1087ll). 

3 SEC. 102. TAX TREATMENT OF PROCEEDS AND PAYMENTS 

4 OF FUTURE INCOME. 

5 (a) EXCLUSION FROM GROSS INCOME OF INCOME6 SHARE AGREEMENT PROCEEDS.—Payments made under 

7 an income-share agreement that complies with the require8 ments of section 103 to or on behalf of the individual who 

9 commits to pay a specified percentage of such individual’s 

10 future income to another person under such agreement, 

11 and any difference in value of the payments to or on behalf 

12 of such individual and the total amount paid by such indi13 vidual, shall not be includible in the gross income of such 

14 individual for purposes of the Internal Revenue Code of 

15 1986. 

16 (b) TREATMENT OF PAYMENTS OF FUTURE IN17 COME.—Payments of future income received by another 

18 person under an income-share agreement that complies 

19 with the requirements of section 103 shall be treated for 

20 purposes of the Internal Revenue Code of 1986— 

21 (1) first, with respect to so much of such pay22 ments as does not exceed the amount of the pay23 ments to which subsection (a) applies with respect to 

24 such agreement, as a repayment of investment in the 


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1 contract which reduces the holder’s basis in such 

2 agreement, and 

3 (2) second, as income on the contract which is 

4 includible in gross income. 

5 SEC. 103. TERMS AND CONDITIONS OF INCOME-SHARE 

6 AGREEMENT CONTRACTS. 

7 (a) TERMS AND CONDITIONS.—An income-share 

8 agreement complies with the requirements of this section 

9 only if the contract complies with each of the following 

10 conditions: 

11 (1) SPECIFIED PERCENTAGE OF INCOME.—The 

12 income-share agreement shall specify the percentage 

13 of future income that the individual subject to the 

14 agreement will be obligated to pay, except that the 

15 agreement shall provide that for any year covered by 

16 such agreement during which the individual has an 

17 income that is less than $18,000 (as such amount 

18 is adjusted pursuant to paragraph (8)) the indi19 vidual shall not be required to pay for such year any 

20 portion of the individual’s income. 

21 (2) DEFINITION OF INCOME.—The income22 share agreement shall specify the definition of in23 come to be used for purposes of calculating an indi24 vidual’s obligation to pay under the agreement. 


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1 (3) ANNUAL LIMITATION ON OBLIGATION.—The 

2 percentage of income required under the income3 share agreement to be paid by the individual subject 

4 to the agreement may not exceed a percentage such 

5 that, when multiplied by $15,000 (as such amount 

6 is adjusted pursuant to paragraph (8)), the product 

7 exceeds the aggregate amount of periodic payments 

8 of principal and interest that would be required to 

9 be paid during a 12-month period under a com10 parable loan that bears interest at a fixed annual 

11 rate of 20 percent. 

12 (4) AGGREGATE LIMITATION ON OBLIGATION.— 

13 The income-share agreement may not provide for the 

14 individual subject to the agreement to pay under the 

15 agreement an amount of the future income of such 

16 individual that, when added to any other amounts of 

17 future income that such individual has agreed to pay 

18 under any other income-share agreements to which 

19 such individual is subject, equals a sum that at any 

20 time exceeds 15 percent of the future income of such 

21 individual. 

22 (5) TIME-BASED LIMITATION ON OBLIGA23 TION.— 

24 (A) LIMITATION.—The income-share 

25 agreement may not provide for the individual 


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1 subject to the agreement to assume a commit2 ment to pay future income having a commit3 ment factor, that when added to the commit4 ment factors for any other income-share agree5 ments to which such individual is subject, 

6 equals a sum that exceeds the maximum com7 mitment factor. 

8 (B) COMMITMENT FACTOR.—As used in 

9 this paragraph, the term ‘‘commitment factor’’ 

10 means, with respect to an income-share agree11 ment, the product of— 

12 (i) the percentage (expressed as a dec13 imal) of such future income required to be 

14 paid during such period; and 

15 (ii) the remaining number of years 

16 under the agreement that future income is 

17 required to be paid at such percentage. 

18 (C) MAXIMUM COMMITMENT FACTOR.—As 

19 used in this paragraph, the term ‘‘maximum 

20 commitment factor’’ means, with respect to an 

21 income-share agreement, 2.25 (which figure is 

22 the product of 7.5 percent and the number of 

23 years in the longest allowable contract under 

24 paragraph (6)(A)). 


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1 (6) SPECIFIED DURATION; EXTENSION OF PE2 RIOD.— 

3 (A) DURATION.—The income-share agree4 ment shall specify the maximum period of time 

5 during which the individual will be obligated to 

6 pay a portion of the individual’s future income 

7 which may not, except as provided in subpara8 graph (B), exceed 360 months. 

9 (B) EXTENSION OF PERIOD.—The income10 share agreement may provide that such period 

11 may be extended by a number of years that is 

12 equal to the number of years during which the 

13 agreement is in force for which the individual’s 

14 annual income is below the dollar amount speci15 fied in paragraph (3)(A) (as such amount is ad16 justed pursuant to paragraph (8)). 

17 (7) EARLY TERMINATION.—The income-share 

18 agreement shall specify the terms and conditions by 

19 which the individual subject to the agreement may 

20 extinguish the individual’s obligations under the 

21 agreement before the end of the payment period 

22 specified in the agreement and any application ex23 tension provided for in the agreement pursuant to 

24 paragraph (6)(B). 


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1 (8) ADJUSTMENT FOR INFLATION.—A dollar 

2 amount adjusted in accordance with this paragraph 

3 shall be adjusted each year to reflect changes in the 

4 Consumer Price Index for All Urban Consumers 

5 published by the Bureau of Labor Statistics of the 

6 Department of Labor for the most recent 12-month 

7 period for which such data are available. 

8 (b) REQUIRED DISCLOSURES.—An income-share 

9 agreement does not comply with the requirements of this 

10 section unless the individual who is committing under the 

11 agreement to pay future income is provided, before enter12 ing into such agreement, a written document that clearly 

13 and simply discloses— 

14 (1) that the agreement is not a debt instru15 ment, and that the amount the individual will be re16 quired to pay under the agreement— 

17 (A) may be more or less than the amount 

18 provided to the individual pursuant to the 

19 agreement; and 

20 (B) will vary in proportion to the individ21 ual’s future income; 

22 (2) that the obligations of the individual under 

23 the agreement are not dischargeable under bank24 ruptcy law, except in a case that would impose an 


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1 undue hardship on the debtor and the debtor’s de2 pendents; 

3 (3) whether the obligations of the individual 

4 under the agreement may be extinguished by accel5 erating payments, and, if so, under what terms; 

6 (4) the duration of the individual’s obligations 

7 under the agreement (absent such accelerating pay8 ments), including any circumstances under which 

9 the duration of the agreement would be extended; 

10 (5) the percentage of income the individual is 

11 committing to pay under the agreement and the 

12 minimum amount of annual income that, pursuant 

13 to subsection (b)(1), triggers the individual’s obliga14 tion under the agreement to make payments for 

15 such year; 

16 (6) the definition of income to be used for pur17 poses of calculating the individual’s obligation under 

18 the agreement; and 

19 (7) a comparison of— 

20 (A) the amounts an individual would be re21 quired to pay under the income-share agree22 ment at a range of annual income levels, which 

23 income levels shall correspond to the levels the 

24 individual might reasonably be expected to 

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1 vided under the agreement, as determined in 

2 accordance with guidance issued by the Sec3 retary of the Treasury; to 

4 (B) the amounts required to be paid under 

5 a comparable loan that bears interest at a fixed 

6 annual rate of 10 percent. 

7 (c) NON-INTERFERENCE.—An income-share agree8 ment represents an obligation by the individual pay the 

9 specific percentage of future income, but shall not be con10 strued to give the contract holder any rights over an indi11 vidual’s actions. 

12 (d) COMPARABLE LOAN.—For purposes of this sec13 tion, the term ‘‘comparable loan’’ means, with respect to 

14 an income-share agreement, a loan that— 

15 (1) has the same original principal amount as 

16 the total amount of the payment or payments made 

17 under the income-share agreement to or on behalf 

18 the individual subject to the agreement; 

19 (2) has the same term to maturity as the dura20 tion of the income-share agreement; and 

21 (3) is fully amortized over such term with 

22 monthly payments of principal and interest. 

23 SEC. 104. RULEMAKING; MODEL DISCLOSURE FORMS. 

24 (a) IN GENERAL.—The Secretary of the Treasury, in 

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1 retary considers appropriate, may issue such regulations 

2 as may be necessary to carry out this title. 

3 (b) MODEL DISCLOSURE FORMS.— 

4 (1) IN GENERAL.—Not later than the end of 

5 the 180-day period beginning upon the date of the 

6 enactment of this Act, the Secretary of the Treas7 ury, after consultation with such other agency heads 

8 as the Secretary considers appropriate, shall promul9 gate a model disclosure form for the disclosures re10 quired under section 103(b). 

11 (2) SAFE HARBOR.—Any person who uses the 

12 model disclosure form promulgated pursuant to 

13 paragraph (1) and includes accurate information re14 quired under section 103(b) to be disclosed shall be 

15 deemed to have satisfied the requirements of section 

16 103(b). 

17 TITLE II—TREATMENT OF IN18 COME-SHARE AGREEMENTS 

19 UNDER STATE LAW 

20 SEC. 201. PURPOSE; LAWFULNESS OF CONTRACTS; PRE21 EMPTION OF STATE LAW. 

22 (a) PURPOSE.—It is the purpose of this title to au23 thorize individuals to enter into income-share agreements 

24 for the purposes of obtaining funds for postsecondary edu25 cation in exchange for agreeing to pay to the holder of 


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1 the contract a specified percentage of the individual’s fu2 ture income for a specified period of time. 

3 (b) LAWFULNESS OF CONTRACTS; PREEMPTION OF

4 STATE LAW.—Any income-share agreement that complies 

5 with the requirements of section 103 shall be a valid, bind6 ing, and enforceable contract notwithstanding any State 

7 law limiting or otherwise regulating assignments of future 

8 wages or other income. 

9 SEC. 202. PREEMPTION OF STATE LAW WITH RESPECT TO 

10 USURY. 

11 An income-share agreement that complies with the 

12 requirements of section 103 shall not be subject to State 

13 usury laws. 

14 SEC. 203. DEFINITIONS. 

15 As used in this title: 

16 (1) STATE.—The term ‘‘State’’ includes, in ad17 dition to the several States of the Union, the Com18 monwealth of Puerto Rico, the District of Columbia, 

19 Guam, American Samoa, the Virgin Islands, the 

20 government of the Northern Mariana Islands, and 

21 the Trust Territory of the Pacific Islands. 

22 (2) STATE LAW.—The term ‘‘State law’’ means 

23 any law, decision, rule, regulation, or other action 

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1 mentality of a State or political subdivision of a 

2 State, except that a law of the United States appli3 cable only to the District of Columbia shall be treat4 ed as a State law (rather than a law of the United 

5 States). 

6 TITLE III—QUALIFIED 

7 EDUCATION LOAN 

8 SEC. 301. QUALIFIED EDUCATION LOAN. 

9 (a) IN GENERAL.—Paragraph (1) of section 221(d) 

10 of the Internal Revenue Code of 1986 is amended by add11 ing at the end the following: ‘‘Such term includes any in12 come-share agreement (as such term is defined in section 

13 101 of the Investing in Student Success Act of 2015) that 

14 complies with the requirements of section 103 of such Act, 

15 except that payments made by the taxpayer during the 

16 taxable year to meet an income-share agreement obligation 

17 shall not be taken into account under subsection (a).’’. 

18 (b) INFORMATION REPORTING NOT REQUIRED.— 

19 Subsection (e) of section 6050S of such Code is amended 

20 by inserting ‘‘(without regard to the last sentence there21 of)’’ after ‘‘section 221(d)(1)’’. 


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1 TITLE IV—FEDERAL INDIVIDUAL 

2 ASSISTANCE TREATMENT OF 

3 INCOME-SHARE AGREEMENTS 

4 SEC. 401. PROCEEDS NOT TREATED AS INCOME IN CAL5 CULATION OF FINANCIAL NEED UNDER THE 

6 HIGHER EDUCATION ACT OF 1965. 

7 No portion of any amounts received by an individual 

8 for entering into an income-share agreement (as such term 

9 is defined in section 101 of this Act) that complies with 

10 the requirements of section 103 of this Act shall be in11 cluded as income or assets in the computation of expected 

12 family contribution for any program funded in whole or 

13 in part under the Higher Education Act of 1965 (20 

14 U.S.C. 1001 et seq.). 

15 TITLE V—INVESTMENT 

16 COMPANY TREATMENT 

17 SEC. 501. BUSINESSES MAKING INCOME-SHARE AGREE18 MENTS EXCLUDED FROM INVESTMENT COM19 PANY TREATMENT. 

20 Section 3(c) of the Investment Company Act of 1940 

21 (15 U.S.C. 80a–3(c)) is amended— 

22 (1) in paragraph (4), by inserting after ‘‘indus23 trial banking,’’ the following: ‘‘income-share agree24 ments (as such term is defined in section 101 of the 

25 Investing in Student Success Act of 2015),’’; and 


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1 (2) in paragraph (5), by inserting ‘‘, including 

2 income-share agreements’’ after ‘‘services’’ each 

3 place such term appears. 

Æ 


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