I 

113TH CONGRESS 

2D SESSION H. R. 4436 

To provide the legal framework necessary for the growth of innovative private 

financing options for students to fund postsecondary education, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 9, 2014 

Mr. PETRI 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 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. 

4 This Act may be cited as the ‘‘Investing in Student 

5 Success Act of 2014’’. 


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1 TITLE I—AUTHORIZATION OF 

2 INCOME SHARE AGREEMENTS 

3 SEC. 101. PURPOSE; LAWFULNESS OF INSTRUMENTS; PRE4 EMPTION OF STATE LAW. 

5 (a) PURPOSE.—It is the purpose of this title to au6 thorize individuals to enter into income share agreements 

7 for the purposes of obtaining funds in exchange for agree8 ing to pay to the holder of the contract a specified percent9 age of the individual’s future income. 

10 (b) LAWFULNESS OF CONTRACTS; PREEMPTION.— 

11 Any income share agreement that complies with the re12 quirements of section 102 shall be a valid, binding, and 

13 enforceable contract notwithstanding any State law lim14 iting or otherwise regulating assignments of future wages 

15 or other income. 

16 SEC. 102. TERMS AND CONDITIONS OF INCOME SHARE 

17 AGREEMENT CONTRACTS. 

18 (a) DEFINITION OF INCOME SHARE AGREEMENT.— 

19 For purposes of this title, the term ‘‘income share agree20 ment’’ means an agreement between an individual and any 

21 other person under which the individual commits to pay 

22 a specified percentage of the individual’s future income, 

23 for a specified period of time, in exchange for payments 

24 to or on behalf of such individual for postsecondary edu25 cation, workforce development, or other purposes. 


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1 (b) TERMS AND CONDITIONS OF AGREEMENTS.—An 

2 income share agreement complies with the requirements 

3 of this section if the contract complies with each of the 

4 following conditions: 

5 (1) SPECIFIED PERCENTAGE OF INCOME.—An 

6 income share agreement shall specify the percentage 

7 of future income which the individual will be obli8 gated to pay, except that the contract shall exempt, 

9 at a minimum, the first $10,000 (adjusted each year 

10 to reflect changes in the Consumer Price Index for 

11 All Urban Consumers published by the Bureau of 

12 Labor Statistics of the Department of Labor for the 

13 most recent 12-month period for which such data 

14 are available) of an individual’s income when deter15 mining the individual’s obligation for a given year. 

16 (2) DEFINITION OF INCOME.—An income share 

17 agreement shall specify the definition of income to 

18 be used for purposes of calculating an individual’s 

19 obligation under the contract. 

20 (3) AGGREGATE LIMITATION ON OBLIGATION.— 

21 No eligible individual may enter into any income 

22 share agreement if the total percentage of such indi23 vidual’s future income that the individual agrees to 

24 pay under that contract, and any other income share 


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1 agreements of such individual, exceeds 15 percent of 

2 such future income. 

3 (4) SPECIFIED DURATION; EXTENSION OF PE4 RIOD.—An income share agreement shall specify the 

5 maximum period of time during which the individual 

6 will be obligated to pay a portion of the individual’s 

7 future income, except that— 

8 (A) except as provided in subparagraph 

9 (B), such period may not exceed 360 months; 

10 and 

11 (B) such contract may provide that such 

12 period may be extended by the number of years 

13 during which the individual’s income is below 

14 the exemption amount specified in the agree15 ment under paragraph (1). 

16 (5) EARLY TERMINATION.—An income share 

17 agreement shall specify the terms and conditions by 

18 which the individual may extinguish the individual’s 

19 obligations under the contract before the end of the 

20 payment period specified in the agreement, based on 

21 the remaining term of such period. 

22 (c) REQUIRED DISCLOSURES.—An income share 

23 agreement does not comply with the requirements of this 

24 section unless the individual who is committing to pay fu25 ture income is provided, before entry into such agreement, 


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1 a disclosure document that clearly and simply discloses 

2 that— 

3 (1) the agreement is not a debt instrument, and 

4 that the amount the individual will be required to 

5 pay under the agreement— 

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

7 provided to the individual; and 

8 (B) will vary in proportion to the individ9 ual’s future income; 

10 (2) the obligations of the individual under the 

11 agreement are not dischargeable under bankruptcy 

12 law; 

13 (3) whether the obligations of the individual 

14 under the agreement may be extinguished by accel15 erating payments, and, if so, under what terms; 

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

17 under the agreement (absent such accelerating pay18 ments), including any circumstances under which 

19 the contract would be extended; 

20 (5) the percentage of income the individual is 

21 committing to pay and the amount of income that 

22 is exempt from the calculation of the individual’s ob23 ligation; and 

24 (6) the definition of income to be used for pur25 poses of calculating the individual’s obligation. 


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1 (d) NON-INTERFERENCE.—An income share agree2 ment shall not be construed to give the contract holder 

3 any rights over an individual’s actions—it simply rep4 resents an obligation by the individual pay the specific per5 centage of future income. 

6 SEC. 103. DEFINITIONS. 

7 As used in this title: 

8 (1) STATE.—The term ‘‘State’’ includes, in ad9 dition to the several States of the Union, the Com10 monwealth of Puerto Rico, the District of Columbia, 

11 Guam, American Samoa, the Virgin Islands, the 

12 government of the Northern Mariana Islands, and 

13 the Trust Territory of the Pacific Islands. 

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

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

16 having the effect of a law of any State or any polit17 ical subdivision of a State, or any agency or instru18 mentality of a State or political subdivision of a 

19 State, except that a law of the United States appli20 cable only to the District of Columbia shall be treat21 ed as a State law (rather than a law of the United 

22 States). 


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1 SEC. 104. PREEMPTION OF STATE LAW WITH RESPECT TO 

2 USURY. 

3 Income share agreements shall not be subject to 

4 State usury laws. 

5 TITLE II—TAX TREATMENT OF 

6 INCOME SHARE AGREEMENTS 

7 SEC. 201. TAX TREATMENT OF INCOME SHARE AGREE8 MENTS. 

9 (a) EXCLUSION FROM GROSS INCOME OF INCOME

10 SHARE AGREEMENT PROCEEDS.—Payments made under 

11 an income share agreement to or on behalf of the indi12 vidual who commits to pay a specified percentage of such 

13 individual’s future income to another person under such 

14 agreement shall not be includible in the gross income of 

15 such individual for purposes of the Internal Revenue Code 

16 of 1986. 

17 (b) TREATMENT OF PAYMENTS OF FUTURE IN18 COME.—Payments of future income received by another 

19 person under an income share agreement shall be treated 

20 for 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 

25 contract which reduces the holder’s basis in such 

26 agreement, and 


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1 (2) second, as interest which is includible in 

2 gross income. 

3 (c) INCOME SHARE AGREEMENT.—For purposes of 

4 this title, the term ‘‘income share agreement’’ has the 

5 meaning given such term under title I. 

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 defined in section 102 of the 

13 Investing in Student Success Act of 2014), except that 

14 payments made by the taxpayer during the taxable year 

15 to meet an income share agreement obligation shall not 

16 be taken into account under subsection (a).’’. 

17 (b) INFORMATION REPORTING NOT REQUIRED.— 

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

19 by inserting ‘‘(without regard to the last sentence there20 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. AMOUNTS RECEIVED NOT TREATED AS INCOME 

5 IN CALCULATION OF FINANCIAL NEED 

6 UNDER THE HIGHER EDUCATION ACT OF 

7 1965. 

8 No portion of any amounts received by an individual 

9 for entering into an income share agreement (as such term 

10 is defined in title I) shall be included as income or assets 

11 in the computation of expected family contribution for any 

12 program funded in whole or in part under the Higher 

13 Education Act of 1965. 

14 TITLE V—INVESTMENT 

15 COMPANY TREATMENT 

16 SEC. 501. BUSINESSES MAKING INCOME SHARE AGREE17 MENTS EXCLUDED FROM INVESTMENT COM18 PANY TREATMENT. 

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

20 (15 U.S.C. 80a–3(c)) is amended— 

21 (1) in paragraph (4), by inserting after ‘‘indus22 trial banking,’’ the following: ‘‘income share agree23 ments (as defined under section 102 of the Investing 

24 in Student Success Act of 2014),’’; 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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