(B) Section 221(e)(2)(A) is amended by
inserting ‘‘529,’’ after ‘‘135,’’.
(d) ROLLOVER TO DIFFERENT PROGRAM FOR BEN-
EFIT
OF
SAME
DESIGNATED
BENEFICIARY.—Section
529(c)(3)(C) (relating to change in beneficiaries) is
amended—
(1) by striking ‘‘transferred to the credit’’ in
clause (i) and inserting ‘‘transferred—
‘‘(I) to another qualified tuition
program for the benefit of the des-
ignated beneficiary, or
‘‘(II) to the credit’’,
(2) by adding at the end the following new
clause:
‘‘(iii) LIMITATION ON CERTAIN ROLL-
OVERS.—Clause (i)(I) shall not apply to
any amount transferred with respect to a
designated beneficiary if, at any time dur-
ing the 1-year period ending on the day of
such transfer, any other amount was
transferred with respect to such beneficiary
which was not includible in gross income
by reason of clause (i)(I).’’, and
(3) by inserting ‘‘OR PROGRAMS’’ after ‘‘BENE-
FICIARIES’’ in the heading.
(e) MEMBER OF FAMILY INCLUDES FIRST COUS-
IN.—Section 529(e)(2) (defining member of family) is
amended by striking ‘‘and’’ at the end of subparagraph
(B), by striking the period at the end of subparagraph
(C) and by inserting ‘‘; and’’, and by adding at the end
the following new subparagraph:
‘‘(D) any first cousin of such beneficiary.’’.
(f ) DEFINITION OF QUALIFIED HIGHER EDUCATION
EXPENSES.—
(1) IN GENERAL.—Subparagraph (A) of section
529(e)(3) (relating to definition of qualified higher
education expenses) is amended to read as follows:
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means—
‘‘(i) tuition and fees required for the
enrollment or attendance of a designated
beneficiary at an eligible educational insti-
tution for courses of instruction of such
beneficiary at such institution, and
‘‘(ii) expenses for books, supplies, and
equipment which are incurred in connec-
tion with such enrollment or attendance,
but not to exceed the allowance for books
and supplies included in the cost of attend-
ance (as defined in section 472 of the
Higher Education Act of 1965 (20 U.S.C.
1087ll), as in effect on the date of the en-
actment of the Taxpayer Refund and Re-
lief Act of 1999) as determined by the eli-
gible educational institution.’’.
(2) EXCEPTION
FOR
EDUCATION
INVOLVING
SPORTS, ETC.—Paragraph (3) of section 529(e) (re-
lating to qualified higher education expenses) is
amended by adding at the end the following new
subparagraph:
‘‘(C) EXCEPTION FOR EDUCATION INVOLV-
ING SPORTS, ETC.—The term ‘qualified higher
education expenses’ shall not include expenses
with respect to any course or other education
involving sports, games, or hobbies unless such
course or other education is part of the bene-
ficiary’s degree program or is taken to acquire
or improve job skills of the beneficiary.’’.
(g) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 1999, and before January 1,
2005.
(2) 
QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—The amendments made by subsection (f )
shall apply to amounts paid for courses beginning
after December 31, 1999, and before January 1,
2005.
SEC. 4. EXCLUSION OF CERTAIN AMOUNTS RECEIVED
UNDER THE NATIONAL HEALTH SERVICE
CORPS SCHOLARSHIP PROGRAM, THE F. ED-
WARD HEBERT ARMED FORCES HEALTH PRO-
FESSIONS SCHOLARSHIP AND FINANCIAL AS-
SISTANCE PROGRAM, AND CERTAIN OTHER
PROGRAMS.
(a) IN GENERAL.—Section 117(c) (relating to the ex-
clusion from gross income amounts received as a qualified
scholarship) is amended—
(1) by striking ‘‘Subsections (a)’’ and inserting
the following:
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), subsections (a)’’, and
(2) by adding at the end the following new
paragraph:
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply to any amount received by an individual
under—
‘‘(A) the National Health Service Corps
Scholarship 
program 
under 
section
338A(g)(1)(A) of the Public Health Service
Act,
‘‘(B) the Armed Forces Health Professions
Scholarship and Financial Assistance program
under subchapter I of chapter 105 of title 10,
United States Code,
‘‘(C) the National Institutes of Health Un-
dergraduate Scholarship program under section
487D of the Public Health Service Act, or
‘‘(D) any State program determined by the
Secretary to have substantially similar objec-
tives as such programs.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by subsection (a)
shall apply to amounts received in taxable years be-
ginning after December 31, 1993, and before Janu-
ary 1, 2005.
(2) STATE
PROGRAMS.—Section 117(c)(2)(D)
of the Internal Revenue Code of 1986 (as added by
the amendments made by subsection (a)) shall apply
to amounts received in taxable years beginning after
December 31, 1999, and before January 1, 2005.
SEC. 5. EXTENSION OF EXCLUSION FOR EMPLOYER-PRO-
VIDED EDUCATIONAL ASSISTANCE.
Section 127(d) (relating to termination of exclusion
for educational assistance programs) is amended by strik-
ing ‘‘May 31, 2000’’ and inserting ‘‘December 31, 2004’’.
SEC. 6. MODIFICATION OF ARBITRAGE REBATE RULES AP-
PLICABLE TO PUBLIC SCHOOL CONSTRUC-
TION BONDS.
(a) IN GENERAL.—Subparagraph (C) of section
148(f )(4) is amended by adding at the end the following
new clause:
‘‘(xviii) 4-YEAR
SPENDING
REQUIRE-
MENT FOR PUBLIC SCHOOL CONSTRUCTION
ISSUE.—
‘‘(I) IN GENERAL.—In the case
of a public school construction issue,
the spending requirements of clause
(ii) shall be treated as met if at least
10 percent of the available construc-
tion proceeds of the construction issue
are spent for the governmental pur-
poses of the issue within the 1-year
period beginning on the date the
bonds are issued, 30 percent of such
proceeds are spent for such purposes
within the 2-year period beginning on
such date, 60 percent of such pro-
ceeds are spent for such purposes
within the 3-year period beginning on
such date, and 100 percent of such
proceeds are spent for such purposes
within the 4-year period beginning on
such date.
‘‘(II) 
PUBLIC
SCHOOL
CON-
STRUCTION ISSUE.—For purposes of
this clause, the term ‘public school
construction issue’ means any con-
struction issue if no bond which is
part of such issue is a private activity
bond and all of the available construc-
tion proceeds of such issue are to be
used for the construction (as defined
in clause (iv)) of public school facili-
ties to provide education or training
below the postsecondary level or for
the acquisition of land that is func-
tionally related and subordinate to
such facilities.
‘‘(III) 
OTHER
RULES
TO
APPLY.—Rules similar to the rules of
the preceding provisions of this sub-
paragraph which apply to clause (ii)
also apply to this clause.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to obligations issued after Decem-
ber 31, 1999, and before January 1, 2005.
SEC. 7. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED
DEDUCTIONS NOT TO APPLY TO QUALIFIED
PROFESSIONAL DEVELOPMENT EXPENSES OF
ELEMENTARY 
AND 
SECONDARY 
SCHOOL
TEACHERS.
(a) IN GENERAL.—Section 67(b) (defining miscella-
neous itemized deductions) is amended by striking ‘‘and’’
at the end of paragraph (11), by striking the period at
the end of paragraph (12) and inserting ‘‘, and’’, and by
adding at the end the following new paragraph:
‘‘(13) any deduction allowable for the qualified
professional development expenses of an eligible
teacher.’’.
(b) DEFINITIONS.—Section 67 (relating to 2-percent
floor on miscellaneous itemized deductions) is amended by
adding at the end the following new subsection:
‘‘(g) QUALIFIED PROFESSIONAL DEVELOPMENT EX-
PENSES OF ELIGIBLE TEACHERS.—For purposes of sub-
section (b)(13)—
‘‘(1) QUALIFIED PROFESSIONAL DEVELOPMENT
EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
professional development expenses’ means ex-
penses in an amount not to exceed $1,000 for
any taxable year—
‘‘(i) for tuition, fees, books, supplies,
equipment, and transportation required for
the enrollment or attendance of an indi-
vidual in a qualified course of instruction,
and
‘‘(ii) with respect to which a deduction
is allowable under section 162 (determined
without regard to this section).
‘‘(B) QUALIFIED
COURSE
OF
INSTRUC-
TION.—The term ‘qualified course of instruc-
tion’ means a course of instruction which—
‘‘(i) is—
‘‘(I) at an institution of higher
education (as defined in section 481
of the Higher Education Act of 1965
(20 U.S.C. 1088), as in effect on the
date of the enactment of this sub-
section), or
‘‘(II) a professional conference,
and
‘‘(ii) is part of a program of profes-
sional development which is approved and
certified by the appropriate local edu-
cational agency as furthering the individ-
ual’s teaching skills.
‘‘(C) LOCAL EDUCATIONAL AGENCY.—The term
‘local educational agency’ has the meaning given
such term by section 14101 of the Elementary and
Secondary Education Act of 1965, as so in effect.
‘‘(2) ELIGIBLE TEACHER.—
‘‘(A) IN
GENERAL.—The term ‘eligible
teacher’ means an individual who is a kinder-
garten through grade 12 classroom teacher, in-
structor, counselor, aide, or principal in an ele-
mentary or secondary school.
‘‘(B) 
ELEMENTARY
OR
SECONDARY
SCHOOL.—The terms ‘elementary school’ and
‘secondary school’ have the meanings given
such terms by section 14101 of the Elementary
and Secondary Education Act of 1965 (20
U.S.C. 8801), as so in effect.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999, and ending before January 1, 2005.
Æ