II 

110TH CONGRESS 

1ST SESSION S. 1230 

To amend the Internal Revenue Code of 1986 to provide a refundable credit 

for contributions to qualified tuition programs. 

IN THE SENATE OF THE UNITED STATES 

APRIL 26, 2007 

Mr. DODD 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 

a refundable credit for contributions to qualified tuition 

programs. 

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 ‘‘College Saver’s Credit 

5 Act of 2007’’. 

6 SEC. 2. COLLEGE SAVER’S CREDIT. 

7 (a) ALLOWANCE OF REFUNDABLE CREDIT.—Sub8 part C of part IV of subchapter A of chapter 1 of the 

9 Internal Revenue Code of 1986 (relating to refundable 

10 credits) is amended by redesignating section 36 as section 


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1 37 and by inserting after section 35 the following new sec2 tion: 

3 ‘‘SEC. 36. COLLEGE SAVER’S CREDIT. 

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli5 gible individual, there shall be allowed as a credit against 

6 the tax imposed by this subtitle for the taxable year an 

7 amount equal to 50 percent of so much of the qualified 

8 college savings contributions made during the taxable year 

9 as do not exceed $2,000. 

10 ‘‘(b) LIMITATIONS.— 

11 ‘‘(1) LIMITATION BASED ON MODIFIED AD12 JUSTED GROSS INCOME.— 

13 ‘‘(A) IN GENERAL.—The amount which 

14 would (but for this paragraph) be taken into ac15 count under subsection (a) for the taxable year 

16 shall be reduced (but not below zero) by the 

17 amount determined under subparagraph (B). 

18 ‘‘(B) AMOUNT OF REDUCTION.—The 

19 amount determined under this subparagraph is 

20 the amount which bears the same ratio to the 

21 amount which would be so taken into account 

22 as— 

23 ‘‘(i) the excess of— 


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1 ‘‘(I) the taxpayer’s modified ad2 justed gross income for the taxable 

3 year, over 

4 ‘‘(II) the applicable amount, 

5 bears to 

6 ‘‘(ii) the phaseout amount. 

7 ‘‘(C) APPLICABLE AMOUNT; PHASEOUT

8 AMOUNT.—For purposes of subparagraph (B), 

9 the applicable amount and the phaseout amount 

10 shall be determined as follows: 

The applicable amount 

is: 

The phaseout amount 

is: 

In the case of a joint return ................................... $60,000 $10,000 

In the case of a head of household ......................... $45,000 $7,500 

In any other case .................................................... $30,000 $5,000 

11 ‘‘(D) MODIFIED ADJUSTED GROSS IN12 COME.—For purposes of this paragraph, the 

13 term ‘modified adjusted gross income’ means 

14 the adjusted gross income of the taxpayer for 

15 the taxable year increased by any amount ex16 cluded from gross income under section 911, 

17 931, or 933. 

18 ‘‘(E) INFLATION ADJUSTMENT.—In the 

19 case of any taxable year beginning in a calendar 

20 year after 2008, each of the applicable amounts 

21 in the second column of the table in subparaVerDate Aug 31 2005 01:41 Apr 28, 2007 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1230.IS S1230

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1 graph (C) shall be increased by an amount 

2 equal to— 

3 ‘‘(i) such dollar amount, multiplied by 

4 ‘‘(ii) the cost-of-living adjustment de5 termined under section 1(f)(3) for the cal6 endar year in which the taxable year be7 gins, determined by substituting ‘calendar 

8 year 2007’ for ‘calendar year 1992’ in sub9 paragraph (B) thereof. 

10 Any increase determined under the preceding 

11 sentence shall be rounded to the nearest mul12 tiple of $500. 

13 ‘‘(2) EARNED INCOME LIMITATION.—The 

14 amount of the credit allowable under subsection (a) 

15 to any taxpayer for any taxable year shall not exceed 

16 the earned income (as defined by section 32(c)(2)) 

17 of such taxpayer for such taxable year. 

18 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this 

19 section— 

20 ‘‘(1) IN GENERAL.—The term ‘eligible indi21 vidual’ means any individual if such individual has 

22 attained the age of 18 as of the close of the taxable 

23 year. 

24 ‘‘(2) DEPENDENTS NOT ELIGIBLE.—The term 

25 ‘eligible individual’ shall not include any individual 


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1 with respect to whom a deduction under section 151 

2 is allowed to another taxpayer for a taxable year be3 ginning in the calendar year in which such individ4 ual’s taxable year begins. 

5 ‘‘(d) QUALIFIED COLLEGE SAVINGS CONTRIBU6 TIONS.—The term ‘qualified college savings contributions’ 

7 means, with respect to any taxable year, the aggregate 

8 contributions made by the taxpayer to any account 

9 which— 

10 ‘‘(1) is described in section 529(b)(1)(A)(ii), 

11 ‘‘(2) is part of a qualified tuition program, and 

12 ‘‘(3) is established for the benefit of— 

13 ‘‘(A) the taxpayer, 

14 ‘‘(B) the taxpayer’s spouse, or 

15 ‘‘(C) any dependent of the taxpayer with 

16 respect to whom the taxpayer is allowed a de17 duction under section 151. 

18 ‘‘(e) TREATMENT OF CONTRIBUTIONS BY DEPEND19 ENT.—If a deduction under section 151 with respect to 

20 an individual is allowed to another taxpayer for a taxable 

21 year beginning in the calendar year in which such individ22 ual’s taxable year begins— 

23 ‘‘(1) no credit shall be allowed under subsection 

24 (a) to such individual for such individual’s taxable 

25 year, and 


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1 ‘‘(2) any qualified college savings contributions 

2 made by such individual during such taxable year 

3 shall be treated for purposes of this section as made 

4 by such other taxpayer.’’. 

5 (b) REFUNDABLE AMOUNT CREDITED TO QUALIFIED

6 TUITION PLAN.— 

7 (1) TRANSFER OF REFUND TO QUALIFIED TUI8 TION PLANS.—Section 6402 of the Internal Revenue 

9 Code of 1986 (relating to authority to make credits 

10 or refunds) is amended by adding at the end the fol11 lowing new subsection: 

12 ‘‘(l) SPECIAL RULE FOR OVERPAYMENTS ATTRIB13 UTABLE TO COLLEGE SAVER’S CREDIT.— 

14 ‘‘(1) IN GENERAL.—In the case of any overpay15 ment attributable to the credit allowed under section 

16 36, the Secretary shall transfer such amount to the 

17 qualified tuition program to which the taxpayer 

18 made a qualified college savings contribution. 

19 ‘‘(2) TRANSFERS TO MORE THAN 1 QUALIFIED

20 TUITION PROGRAM.—If the taxpayer made qualified 

21 college savings contributions to more than 1 quali22 fied tuition program, the Secretary shall transfer the 

23 overpayment described in paragraph (1) to each 

24 such qualified tuition program in an amount that 


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1 bears the same ratio to the amount of such overpay2 ment as— 

3 ‘‘(A) the amount of qualified college sav4 ings contributions made by such taxpayer to 

5 such qualified tuition program, bears to 

6 ‘‘(B) the amount of qualified college sav7 ings contribution made by such taxpayer to all 

8 qualified tuition programs. 

9 ‘‘(3) QUALIFIED COLLEGE SAVINGS CONTRIBU10 TION.—For purposes of this subsection, the term 

11 ‘qualified college savings contribution’ has the mean12 ing given such term by section 36(d).’’. 

13 (2) SEPARATE ACCOUNTING FOR REFUNDABLE

14 AMOUNTS.—Section 529 of such Code is amended by 

15 redesignating subsection (f) as subsection (g) and by 

16 inserting after subsection (e) the following new sub17 section: 

18 ‘‘(f) SPECIAL RULES FOR CONTRIBUTIONS ATTRIB19 UTABLE TO COLLEGE SAVER’S CREDIT.— 

20 ‘‘(1) IN GENERAL.—A program shall not be 

21 treated as a qualified tuition program unless it pro22 vides separate accounting for contributions trans23 ferred by the Secretary under section 6402(l) to an 

24 account in the program. 


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1 ‘‘(2) SPECIAL RULES FOR DISTRIBUTION.—In 

2 the case of a distribution under a qualified tuition 

3 program which includes any amount transferred by 

4 the Secretary under section 6402(l) (including any 

5 earnings attributable to such amount) and which is 

6 includible in gross income, the tax imposed by this 

7 chapter on the person receiving such distribution 

8 shall be increased by 100 percent of the amount so 

9 includible. 

10 ‘‘(3) ORDERING RULES.—For purposes of ap11 plying this subsection to any distribution from a 

12 qualified tuition program— 

13 ‘‘(A) IN GENERAL.—Except as provided in 

14 subparagraph (B), such distribution shall be 

15 treated as made— 

16 ‘‘(i) first from amounts contributed 

17 under the program, and 

18 ‘‘(ii) second from amounts transferred 

19 by the Secretary under section 6402(l). 

20 ‘‘(B) EXCEPTION FOR DISTRIBUTIONS FOR

21 QUALIFIED HIGHER EDUCATION EXPENSES.—In 

22 the case of a distribution described in sub23 section (c)(3), such distribution shall be treated 

24 as made— 


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1 ‘‘(i) first from amounts transferred by 

2 the Secretary under section 6402(l), and 

3 ‘‘(ii) second from other amounts con4 tributed under the program.’’. 

5 (c) CONFORMING AMENDMENTS.— 

6 (1) Section 1324(b)(2) of title 31, United 

7 States Code, is amended by inserting before the pe8 riod at the end ‘‘, or enacted by the College Saver’s 

9 Credit Act of 2007’’. 

10 (2) The table of sections for subpart C of part 

11 IV of subchapter A of chapter 1 of the Internal Rev12 enue Code of 1986 is amended by striking the item 

13 relating to section 36 and inserting the following: 

‘‘Sec. 36. College saver’s credit. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2007. 

17 SEC. 3. DISTRIBUTION OF FINANCIAL EDUCATION MATE18 RIALS TO INDIVIDUALS INVESTING IN QUALI19 FIED TUITION PROGRAMS. 

20 (a) IN GENERAL.—Subsection (b) of section 529 of 

21 the Internal Revenue Code of 1986 is amended by adding 

22 at the end the following new paragraph: 

23 ‘‘(7) FINANCIAL EDUCATION MATERIALS.—A 

24 program shall not be treated as a qualified tuition 


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1 program unless it requires that financial education 

2 materials are distributed to individuals participating 

3 in the program.’’. 

4 (b) GUIDANCE.—Subsection (g) of section 529 of 

5 such Code, as redesignated by this Act, is amended by in6 serting ‘‘and regulations providing guidance on the types 

7 of financial education material required to be provided 

8 under subsection (b)(7)’’ before the period at the end. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall take effect 1 year after the date of the 

11 enactment of this Act. 

12 SEC. 4. STUDY ON PARTICIPATION IN QUALIFIED TUITION 

13 PROGRAMS. 

14 (a) IN GENERAL.—The Secretary of the Treasury 

15 shall conduct a study on the participation of individuals 

16 in qualified tuition programs under section 529 of the In17 ternal Revenue Code of 1986. 

18 (b) MATTER STUDIED.—The study conducted under 

19 subsection (a) shall consider— 

20 (1) the income and age of individuals partici21 pating in qualified tuition programs, and 

22 (2) the amount of fees charged under each 

23 qualified tuition program established or maintained 

24 by a State (or agency or instrumentality thereof). 


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1 (c) REPORT.—Not later than 1 year after the date 

2 of the enactment of this Act, the Secretary of the Treasury 

3 shall submit to Congress a report on the study conducted 

4 under subsection (a). 

Æ 


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