II 

Calendar No. 97 

114TH CONGRESS 

1ST SESSION S. 335 

[Report No. 114–56] 

To amend the Internal Revenue Code of 1986 to improve 529 plans. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 2, 2015 

Mr. GRASSLEY (for himself, Mr. CASEY, Mr. BURR, Mr. WARNER, Mr. ROBERTS, Mr. CARDIN, Mr. SCOTT, Ms. AYOTTE, Mr. ISAKSON, Mr. MCCONNELL, Ms. COLLINS, Mr. SCHUMER, Mrs. FISCHER, Mr. GARDNER, Mr. 

MORAN, Mr. WICKER, Mr. KING, Mr. PORTMAN, Mr. TOOMEY, and Ms. 

MURKOWSKI) introduced the following bill; which was read twice and referred to the Committee on Finance 

MAY 21, 2015 

Reported by Mr. HATCH, with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

A BILL 

To amend the Internal Revenue Code of 1986 to improve 

529 plans. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. COMPUTER TECHNOLOGY AND EQUIPMENT AL2 LOWED AS A QUALIFIED HIGHER EDUCATION 

3 EXPENSE FOR SECTION 529 ACCOUNTS. 

4 (a) MADE PERMANENT.—Clause (iii) of section 

5 529(e)(3)(A) of the Internal Revenue Code of 1986 is 

6 amended by striking ‘‘in 2009 or 2010’’. 

7 (b) ONLY FOR USE PRIMARILY BY THE BENE8 FICIARY.—Clause (iii) of section 529(e)(3)(A) of such 

9 Code is amended by striking ‘‘used by the beneficiary and 

10 the beneficiary’s family’’ and inserting ‘‘used primarily by 

11 the beneficiary’’. 

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

13 this section shall apply to expenses paid or incurred after 

14 December 31, 2014. 

15 SEC. 2. ELIMINATION OF DISTRIBUTION AGGREGATION RE16 QUIREMENTS. 

17 (a) IN GENERAL.—Clause (ii) of section 

18 529(c)(3)(D) of the Internal Revenue Code of 1986 is 

19 amended by inserting before the comma at the end the 

20 following: ‘‘, except for purposes of calculating the earn21 ings portion of any distribution.’’. 

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

23 this section shall apply to distributions after December 31, 

24 2014. 


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1 SEC. 3. CONTRIBUTION OF AMOUNTS PREVIOUSLY DIS2 TRIBUTED IN CASE OF WITHDRAWAL FROM 

3 SCHOOL. 

4 (a) IN GENERAL.—Paragraph (3) of section 529(c) 

5 of the Internal Revenue Code of 1986 is amended by add6 ing at the end the following new subparagraph: 

7 ‘‘(E) SPECIAL RULE FOR CONTRIBUTIONS

8 RELATING TO WITHDRAWAL FROM SCHOOL.—In 

9 the case of a beneficiary who receives a refund 

10 of any qualified higher education expenses from 

11 an eligible educational institution in connection 

12 with withdrawal from enrollment at such insti13 tution, subparagraph (A) shall not apply to that 

14 portion of any distribution for the taxable year 

15 which is recontributed to a qualified tuition pro16 gram of which such individual is a beneficiary, 

17 but only to the extent such recontribution is 

18 made not later than 60 days after the date of 

19 such refund and does not exceed the refunded 

20 amount.’’. 

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

22 this section shall apply with respect to distributions after 

23 December 31, 2014. 

24 SECTION 1. FINDINGS AND PURPOSE. 

25 (a) FINDINGS.—Congress finds the following: 


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1 (1) When the Economic Growth and Tax Relief 

2 Reconciliation Act of 2001 became law, the tax treat3 ment of section 529 college savings plans was changed 

4 so that qualified distributions were no longer taxed as 

5 income. The favorable tax treatment of college savings 

6 plans was made permanent with the passage of the 

7 Pension Protection Act of 2006. 

8 (2) Section 529 college savings plans empower 

9 middle-class families to accumulate savings to offset 

10 the rising costs of attending college. 

11 (3) The latest data from the College Savings 

12 Plan Network shows that there are 11.83 million 529 

13 accounts open throughout all 50 states, which rep14 resent $244.5 billion in total assets. The average 529 

15 account size is $20,671. 

16 (4) States that sponsor 529 college savings plans 

17 have taken steps to ensure these plans are a tool that 

18 all families can use to save for college, including set19 ting minimum contributions as low as $25 per month 

20 to encourage participation by families of all income 

21 levels. 

22 (5) The President’s fiscal year 2016 Budget pro23 poses raising taxes by taxing certain future distribu24 tions made from 529 college savings plans. 


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1 (6) The tax proposed by the President would dis2 courage the use of 529 college savings plans, requiring 

3 families and students to take on more debt. 

4 (7) Purchase of a computer represents a signifi5 cant higher education expense and therefore should be 

6 eligible for qualified distributions under 529 college 

7 savings plans. 

8 (b) PURPOSE.—It is the purpose of this Act to— 

9 (1) enact policies that strengthen 529 college sav10 ings plans; and 

11 (2) make 529 plans more modern, consumer12 friendly, and responsive to the realities faced by stu13 dents today. 

14 SEC. 2. COMPUTER TECHNOLOGY AND EQUIPMENT PERMA15 NENTLY ALLOWED AS A QUALIFIED HIGHER 

16 EDUCATION EXPENSE FOR SECTION 529 AC17 COUNTS. 

18 (a) IN GENERAL.—Section 529(e)(3)(A)(iii) of the In19 ternal Revenue Code of 1986 is amended to read as follows: 

20 ‘‘(iii) expenses for the purchase of com21 puter or peripheral equipment (as defined 

22 in section 168(i)(2)(B)), computer software 

23 (as defined in section 197(e)(3)(B)), or 

24 Internet access and related services, if such 

25 equipment, software, or services are to be 


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1 used primarily by the beneficiary during 

2 any of the years the beneficiary is enrolled 

3 at an eligible educational institution.’’. 

4 (b) EFFECTIVE DATE.—The amendment made by this 

5 section shall apply to taxable years beginning after Decem6 ber 31, 2014. 

7 SEC. 3. ELIMINATION OF DISTRIBUTION AGGREGATION RE8 QUIREMENTS. 

9 (a) IN GENERAL.—Section 529(c)(3) of the Internal 

10 Revenue Code of 1986 is amended by striking subparagraph 

11 (D). 

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

13 section shall apply to distributions after December 31, 2014. 

14 SEC. 4. RECONTRIBUTION OF REFUNDED AMOUNTS. 

15 (a) IN GENERAL.—Section 529(c)(3) of the Internal 

16 Revenue Code of 1986, as amended by section 3, is amended 

17 by adding at the end the following new subparagraph: 

18 ‘‘(D) SPECIAL RULE FOR CONTRIBUTIONS

19 OF REFUNDED AMOUNTS.—In the case of a bene20 ficiary who receives a refund of any qualified 

21 higher education expenses from an eligible edu22 cational institution, subparagraph (A) shall not 

23 apply to that portion of any distribution for the 

24 taxable year which is recontributed to a qualified 

25 tuition program of which such individual is a 


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1 beneficiary, but only to the extent such recon2 tribution is made not later than 60 days after 

3 the date of such refund and does not exceed the 

4 refunded amount.’’. 

5 (b) EFFECTIVE DATE.— 

6 (1) IN GENERAL.—The amendment made by this 

7 section shall apply with respect to refunds of qualified 

8 higher education expenses after December 31, 2014. 

9 (2) TRANSITION RULE.—In the case of a refund 

10 of qualified higher education expenses received after 

11 December 31, 2014, and before the date of the enact12 ment of this Act, section 529(c)(3)(D) of the Internal 

13 Revenue Code of 1986 (as added by this section) shall 

14 be applied by substituting ‘‘not later than 60 days 

15 after the date of the enactment of this subparagraph’’ 

16 for ‘‘not later than 60 days after the date of such re17 fund’’. 


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Calendar No. 97 

114TH CONGRESS 

1ST SESSION S. 335 

[Report No. 114–56] 

A BILL 

To amend the Internal Revenue Code of 1986 to 

improve 529 plans. 

MAY 21, 2015 

Reported with an amendment 


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