I
107TH CONGRESS
1ST SESSION
H. R. 475
To amend the Internal Revenue Code of 1986 to allow a deduction for
amounts paid to any qualified State tuition program and to provide
that distributions from such programs which are used to pay educational
expenses shall not be includible in gross income.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 6, 2001
Mr. ROGERS of Michigan (for himself, Mr. ENGLISH, Mr. CAMP, Mrs. KELLY,
Ms. GRANGER, Mr. SMITH of Michigan, and Mr. KNOLLENBERG) intro-
duced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow a
deduction for amounts paid to any qualified State tuition
program and to provide that distributions from such
programs which are used to pay educational expenses
shall not be includible in gross income.
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 ‘‘Securing Affordable
Vocational and Collegiate Education (SAVE) Act.’’
SEC. 2. DEDUCTION FOR PAYMENTS TO QUALIFIED STATE
TUITION PROGRAMS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 222 as section 223 and by insert-
ing after section 221 the following new section:
‘‘SEC. 222. PAYMENTS TO QUALIFIED STATE TUITION PRO-
GRAMS.
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an
individual, there shall be allowed as a deduction an
amount equal to the amount paid by the taxpayer during
the taxable year to any qualified State tuition program
(as defined in section 529) for the benefit of any des-
ignated beneficiary (as defined in such section).
‘‘(b) DOLLAR LIMITATION.—The deduction allowed
by subsection (a) for the taxable year shall not exceed
$5,000 ($10,000 in the case of a joint return).’’
(b) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED GROSS INCOME.—Section 62(a) of such Code is
amended by inserting after paragraph (17) the following
new paragraph:
‘‘(18) PAYMENTS
TO
QUALIFIED
STATE
TUI-
TION PROGRAMS.—The deduction allowed by section
222.’’
(c) CONFORMING AMENDMENT.—The table of sec-
tions for part VII of subchapter B of chapter 1 of such
Code is amended by striking the item relating to section
222 and inserting:
‘‘Sec. 222. Payments to qualified State tuition programs.
‘‘Sec. 223. Cross reference.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3. EXCLUSION FROM GROSS INCOME OF EDUCATION
DISTRIBUTIONS 
FROM 
QUALIFIED 
STATE
TUITION PROGRAMS.
(a) IN GENERAL.—Section 529(c)(3)(B) of the Inter-
nal Revenue Code of 1986 (relating to distributions) is
amended to read as follows:
‘‘(B) 
DISTRIBUTIONS
FOR
QUALIFIED
HIGHER EDUCATION EXPENSES.—For purposes
of this paragraph—
‘‘(i) 
IN-KIND
DISTRIBUTIONS.—No
amount shall be includible in gross income
under subparagraph (A) by reason of a
distribution which consists of providing a
benefit to the distributee which, if paid for
by the distributee, would constitute pay-
ment of a qualified higher education ex-
pense.
‘‘(ii) CASH
DISTRIBUTIONS.—In the
case of distributions not described in
clause (i), if—
‘‘(I) such distributions do not ex-
ceed the qualified higher education ex-
penses (reduced by expenses described
in clause (i)), no amount shall be in-
cludible in gross income, and
‘‘(II) in any other case, the
amount otherwise includible in gross
income shall be reduced by an amount
which bears the same ratio to such
amount as such expenses bear to such
distributions.
‘‘(iii) 
TREATMENT
AS
DISTRIBU-
TIONS.—Any benefit furnished to a des-
ignated beneficiary under a qualified State
tuition program shall be treated as a dis-
tribution to the beneficiary for purposes of
this paragraph.
‘‘(iv) COORDINATION WITH HOPE AND
LIFETIME LEARNING CREDITS.—The total
amount of qualified higher education ex-
penses with respect to an individual for the
taxable year shall be reduced—