II 

113TH CONGRESS 

2D SESSION S. 2892 

To amend the Internal Revenue Code of 1986 to improve and expand 

Coverdell education savings accounts. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 18, 2014 

Mr. KIRK (for himself and Mr. VITTER) 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 improve 

and expand Coverdell education savings accounts. 

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 ‘‘401(Kids) Education 

5 Savings Account Act of 2014’’. 

6 SEC. 2. ELIMINATION OF INCOME-BASED REDUCTION IN 

7 PERMITTED CONTRIBUTIONS TO COVERDELL 

8 EDUCATION SAVINGS ACCOUNTS. 

9 Paragraph (1) of section 530(c) of the Internal Rev10 enue Code of 1986 is amended by striking ‘‘to an account 


emcdonald on DSK67QTVN1PROD with BILLS
2 

•S 2892 IS

1 under this section’’ and inserting ‘‘to an account under 

2 this section in a taxable year beginning before January 

3 1, 2015,’’. 

4 SEC. 3. INCREASE IN ANNUAL CONTRIBUTION LIMITATION 

5 FOR COVERDELL EDUCATION SAVINGS AC6 COUNTS. 

7 (a) IN GENERAL.—Clause (iii) of section 

8 530(b)(1)(A) of the Internal Revenue Code of 1986 is 

9 amended by striking ‘‘$2,000’’ and inserting ‘‘the dollar 

10 amount in effect under section 2503(b) (relating to exclu11 sion from gifts) for the taxable year’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to contributions made in taxable 

14 years beginning after December 31, 2014. 

15 SEC. 4. ALLOWANCE OF HOME SCHOOL EXPENSES AS 

16 QUALIFIED EDUCATION EXPENSES FOR PUR17 POSES OF A COVERDELL EDUCATION SAV18 INGS ACCOUNT. 

19 (a) IN GENERAL.—Paragraph (3) of section 530(b) 

20 of the Internal Revenue Code of 1986 is amended by add21 ing at the end the following new subparagraph: 

22 ‘‘(C) PRIVATE SCHOOL.—For purposes of 

23 this section, the term ‘private school’ includes 

24 any home school that meets the requirements of 

25 State law applicable to such home schools, 


emcdonald on DSK67QTVN1PROD with BILLS
3 

•S 2892 IS

1 whether or not such school is deemed a private 

2 school for purposes of State law.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2014. 

6 SEC. 5. QUALIFIED DISTRIBUTIONS FROM A COVERDELL 

7 EDUCATION SAVINGS ACCOUNT FOR FIRST 

8 HOME PURCHASES. 

9 (a) IN GENERAL.—Paragraph (1) of section 530(b) 

10 of the Internal Revenue Code of 1986 is amended by strik11 ing ‘‘qualified education expenses’’ and inserting ‘‘quali12 fied expenses’’. 

13 (b) QUALIFIED EXPENSES.—Subsection (b) of sec14 tion 530 of the Internal Revenue Code of 1986, as amend15 ed by this Act, is amended by redesignating paragraphs 

16 (2), (3), and (4) as paragraphs (4), (5), and (6), respec17 tively, and by inserting after paragraph (1) the following 

18 new paragraphs: 

19 ‘‘(2) QUALIFIED EXPENSES.—The term ‘quali20 fied expenses’ means— 

21 ‘‘(A) qualified first-time homebuyer ex22 penses, and 

23 ‘‘(B) qualified education expenses. 

24 ‘‘(3) QUALIFIED FIRST-TIME HOMEBUYER EX25 PENSES.— 


emcdonald on DSK67QTVN1PROD with BILLS
4 

•S 2892 IS

1 ‘‘(A) IN GENERAL.—The term ‘qualified 

2 first-time homebuyer expenses’ means, in the 

3 case of a designated beneficiary who is a first4 time homebuyer, the qualified acquisition costs 

5 with respect to a principal residence of such 

6 beneficiary. 

7 ‘‘(B) DEFINITIONS.—The terms ‘first-time 

8 homebuyer’, ‘qualified acquisition costs’, and 

9 ‘principal residence’ have the same meaning as 

10 when used in section 72(t)(8).’’. 

11 (c) CONFORMING AMENDMENTS.— 

12 (1) Paragraph (4)(A)(ii) of section 530(b) of 

13 the Internal Revenue Code of 1986, as redesignated 

14 by subsection (b), is amended by striking ‘‘as de15 fined in paragraph (3)’’ and inserting ‘‘as defined in 

16 paragraph (5)’’. 

17 (2) Subparagraphs (A), (B), and (D) of section 

18 530(d)(1) of such Code are each amended by strik19 ing ‘‘qualified education expenses’’ each place it ap20 pears and inserting ‘‘qualified expenses’’. 

21 (3) The heading of paragraph (2) of section 

22 530(d) of such Code is amended by striking ‘‘EDU23 CATION EXPENSES’’ and inserting ‘‘EXPENSES’’. 


emcdonald on DSK67QTVN1PROD with BILLS
5 

•S 2892 IS

1 (4) The heading of paragraph (4) of section 

2 530(d) of such Code is amended by striking ‘‘EDU3 CATIONAL EXPENSES’’ and inserting ‘‘EXPENSES’’. 

4 (5) Subclause (I) of section 529(c)(3)(B)(vi) of 

5 such Code is amended by striking ‘‘to which clauses 

6 (i) and (ii) and section 530(d)(2)(A) apply’’ and in7 serting ‘‘for qualified higher education expenses to 

8 which clauses (i) and (ii) apply and for qualified 

9 education expenses to which section 530(d)(2)(A) 

10 applies’’. 

11 (6) Clause (vi) of section 529(c)(3)(B) of such 

12 Code is amended by striking ‘‘and section 

13 530(d)(2)(A).’’ and inserting ‘‘and the amount of 

14 the exclusion with respect to qualified education ex15 penses under section 530(d)(2)(A).’’. 

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

17 this section shall apply to distributions made in taxable 

18 years beginning after December 31, 2014. 

19 SEC. 6. QUALIFIED ROLLOVER CONTRIBUTIONS FROM 

20 COVERDELL EDUCATION SAVINGS ACCOUNTS 

21 TO ROTH IRAS. 

22 (a) IN GENERAL.—Paragraph (5) of section 530(d) 

23 of the Internal Revenue Code of 1986 is amended by in24 serting ‘‘, or into a Roth IRA of the beneficiary’’ after 

25 ‘‘as of such date’’. 


emcdonald on DSK67QTVN1PROD with BILLS
6 

•S 2892 IS

1 (b) CONFORMING AMENDMENT; TECHNICAL COR2 RECTION.—Paragraph (1) of section 408A(e) of the Inter3 nal Revenue Code of 1986 is amended to read as follows: 

4 ‘‘(1) IN GENERAL.—The term ‘qualified rollover 

5 contribution’ means a rollover contribution to a Roth 

6 IRA from another such account, from an eligible re7 tirement plan (as defined in section 402(c)(8)(B)), 

8 or from a Coverdell education savings account (as 

9 defined in section 530(b)(1)), but only if— 

10 ‘‘(A) such rollover contribution meets the 

11 requirements of section 408(d)(3), 

12 ‘‘(B) in the case of a rollover contribution 

13 from an eligible retirement plan described in 

14 clause (iii), (iv), (v), or (vi) of section 

15 402(c)(8)(B), such contribution meets the re16 quirements of section 402(c), 403(b)(8), or 

17 457(e)(16), whichever is applicable, and 

18 ‘‘(C) in the case of a rollover contribution 

19 from a Coverdell education savings account, 

20 such contribution meets the requirements of 

21 section 530(d)(5). 

22 For purposes of section 408(d)(3)(B), there shall be 

23 disregarded any qualified rollover contribution from 

24 an individual retirement plan (other than a Roth 

25 IRA) to a Roth IRA.’’. 


emcdonald on DSK67QTVN1PROD with BILLS
7 

•S 2892 IS

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

2 this section shall apply to rollover contributions made in 

3 taxable years beginning after December 31, 2014. 

Æ 


emcdonald on DSK67QTVN1PROD with BILLS