I
106TH CONGRESS
1ST SESSION
H. R. 464
To amend the Internal Revenue Code of 1986 to provide tax incentives
for education.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 2, 1999
Ms. GRANGER (for herself, Mr. WELLER, Mr. PICKERING, Mr. BEREUTER,
Mr. BONILLA, Mr. PAUL, Mr. PITTS, Mr. CUNNINGHAM, Mr. KING, Mr.
POMBO, Mr. SESSIONS, Mr. FROST, Mr. MANZULLO, Mr. BRADY of
Texas, Mr. YOUNG of Alaska, Ms. DUNN, Mrs. MORELLA, Mr. SISISKY,
Ms. ROS-LEHTINEN, Mr. MCINTOSH, Mr. WATKINS, Mr. LATOURETTE,
Mrs. MYRICK, Mr. BARTON of Texas, Mr. MCHUGH, Mr. SCHAFFER, Mr.
SHOWS, Mr. ARMEY, Mr. THORNBERRY, Mr. ROGAN, Mr. COMBEST, Mr.
BUYER, and Mr. SCARBOROUGH) introduced the following bill; which was
referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
tax incentives for education.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Higher Education
Affordability and Availability Act’’.
SEC. 2. EXCLUSION FROM GROSS INCOME OF EDUCATION
DISTRIBUTIONS FROM QUALIFIED TUITION
PROGRAMS; COVERAGE OF PRIVATE PRO-
GRAMS.
(a) EXCLUSION.—
(1) IN GENERAL.—Subparagraph (B) of section
529(c)(3) of the Internal Revenue Code of 1986 (re-
lating to distributions) is amended to read as fol-
lows:
‘‘(B) 
DISTRIBUTIONS
FOR
QUALIFIED
HIGHER EDUCATION EXPENSES.—If a distribu-
tee elects the application of this subparagraph
for any taxable year—
‘‘(i) no amount shall be includible in
gross income by reason of a distribution
which consists of providing a benefit to the
distributee which, if paid for by the dis-
tributee, would constitute payment of a
qualified higher education expense, and
‘‘(ii) the amount which (but for the
election) would be includible in gross in-
come by reason of any other distribution
shall not be so includible in an amount
which bears the same ratio to the amount
which would be so includible as the amount
of the qualified higher education expenses
of the distributee bears to the amount of
the distribution.’’
(2) ADDITIONAL TAX ON AMOUNTS NOT USED
FOR HIGHER EDUCATION EXPENSES.—Section 529
of such Code is amended by adding at the end the
following new subsection:
‘‘(f) ADDITIONAL TAX
FOR DISTRIBUTIONS NOT
USED FOR EDUCATIONAL EXPENSES.—
‘‘(1) IN GENERAL.—The tax imposed by section
530(d)(4) shall apply to payments and distributions
from qualified tuition programs in the same manner
as such tax applies to education individual retire-
ment accounts.
‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution to a contributor of any
contribution paid during a taxable year to a quali-
fied tuition program to the extent that such con-
tribution exceeds the limitation in section 4973(e) if
such distribution (and the net income with respect
to such excess contribution) meets requirements
comparable to the requirements of clauses (i) and
(ii) of section 530(d)(4)(C).’’
(3) COORDINATION
WITH
EDUCATION
CRED-
ITS.—Section 25A(e)(2) of such Code is amended by
inserting ‘‘529(c)(3)(B) or’’ before ‘‘530(d)(2)’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to distributions after
December 31, 1998, for education furnished in aca-
demic periods beginning after such date.
(b) ELIGIBLE EDUCATIONAL INSTITUTIONS PER-
MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—
(1) IN
GENERAL.—Paragraph (1) of section
529(b) of such Code (defining qualified State tuition
program) is amended by inserting ‘‘or by one or
more eligible educational institutions’’ after ‘‘main-
tained by a State or agency or instrumentality there-
of’’.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (2) of section 26(b) of such
Code is amended by redesignating subpara-
graphs (E) through (Q) as subparagraphs (F)
through (R), respectively, and by inserting after
subparagraph (D) the following new subpara-
graph:
‘‘(E) section 529(f) (relating to additional
tax on certain distributions from qualified tui-
tion programs),’’.
Code is amended by striking ‘‘subparagraph (B).’’
and inserting ‘‘subparagraph (B),
except that such term shall include any sibling
(whether by the whole or half blood) of the des-
ignated beneficiary.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1998.
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