‘‘(B) Any contribution to a qualified tui-
tion program (as so defined) described in sec-
tion 530(b)(2)(B) from any such account.
‘‘(C) Any rollover contribution.’’.
(g) TECHNICAL AMENDMENTS.—
(1) Paragraph (2) of section 26(b) is amended
by redesignating subparagraphs (E) through (P) as
subparagraphs (F) through (Q), respectively, and by
inserting after subparagraph (D) the following new
subparagraph:
‘‘(E) section 529(f) (relating to additional
tax on certain distributions from qualified tui-
tion programs),’’.
(2) The text of section 529 is amended by strik-
ing ‘‘qualified State tuition program’’ each place it
appears and inserting ‘‘qualified tuition program’’.
(3) Subsection (b) of section 529 is amended by
striking paragraph (3) and by redesignating para-
graphs (4) through (7) as paragraphs (3) through
(6), respectively.
(4)(A) The section heading of section 529 is
amended to read as follows:
‘‘SEC. 529. QUALIFIED TUITION PROGRAMS.’’.
(B) The item relating to section 529 in the
table of sections for part VIII of subchapter F of
chapter 1 is amended by striking ‘‘State’’.
(5)(A) The heading for part VIII of subchapter
F of chapter 1 is amended to read as follows:
‘‘PART VIII—HIGHER EDUCATION SAVINGS
ENTITIES’’.
(B) The table of parts for subchapter F of
chapter 1 is amended by striking the item relating
to part VIII and inserting:
‘‘Part VIII. Higher education savings entities.’’.
(h) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall take effect on January 1, 1998.
(2) EXPENSES TO INCLUDE ROOM AND BOARD,
ETC.—The amendments made by subsection (b) and
(c)(2) shall apply to distributions after December
31, 1997, with respect to expenses paid after such
date (in taxable years ending after such date), for
education furnished in academic periods beginning
after such date.
(3) PENALTY FOR NONEDUCATION WITHDRAW-
ALS.—The amendment made by subsection (d) shall
apply to distributions after December 31, 1997.
(4) COORDINATION WITH EDUCATION SAVINGS
BONDS.—The amendment made by subsection (e)
shall apply to taxable years beginning after Decem-
ber 31, 1997.
(5) ESTATE AND GIFT TAX CHANGES.—
(A) GIFT TAX CHANGES.—Paragraphs (2)
and (5) of section 529(c) of the Internal Reve-
nue Code of 1986, as amended by this section,
shall apply to transfers (including designations
of new beneficiaries) made after the date of the
enactment of this Act.
(B) ESTATE
TAX
CHANGES.—Paragraph
(4) of such section 529(c) shall apply to estates
of decedents dying after June 8, 1997.
SEC. 212. EDUCATION INVESTMENT ACCOUNTS.
(a) IN GENERAL.—Part VIII of subchapter F of
chapter 1 (relating to qualified State tuition programs)
is amended by adding at the end the following new section:
‘‘SEC. 530. EDUCATION INVESTMENT ACCOUNTS.
‘‘(a) GENERAL RULE.—An education investment ac-
count shall be exempt from taxation under this subtitle.
Notwithstanding the preceding sentence, the education in-
vestment account shall be subject to the taxes imposed by
section 511 (relating to imposition of tax on unrelated
business income of charitable organizations).
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) EDUCATION INVESTMENT ACCOUNT.—The
term ‘education investment account’ means a trust
created or organized in the United States exclusively
for the purpose of paying the qualified higher edu-
cation expenses of the account holder, but only if the
written governing instrument creating the trust
meets the following requirements:
‘‘(A) No contribution will be accepted—
‘‘(i) unless it is in cash,
‘‘(ii) after the date on which the ac-
count holder attains age 18, or
‘‘(iii) in excess of $5,000 for the tax-
able year.
‘‘(B) The trustee is a bank (as defined in
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary
that the manner in which that person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts.
‘‘(D) The assets of the trust shall not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(E) Any balance in the account will be
distributed 
as 
required 
under 
section
529(b)(8)(B) (as if such account were a quali-
fied tuition program).
For $50,000 limit on aggregate contributions to ac-
counts, see section 4973(e).
‘‘(2) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ has the same mean-
ing given such term by section 529(e)(3).
‘‘(B) QUALIFIED
TUITION
PROGRAMS.—
Such term shall include amounts paid or in-
curred to purchase tuition credits or certifi-
cates, or to make contributions to an account,
under a qualified tuition program (as defined in
section 529(b)) for the benefit of the account
holder.
‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.—
The term ‘eligible educational institution’ has the
meaning given such term by section 529(e)(5).
‘‘(4) ACCOUNT
HOLDER.—The term ‘account
holder’ means the individual for whose benefit the
education investment account is established.
‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Any amount paid or dis-
tributed shall be includible in gross income as re-
quired by section 529(c)(3) (determined as if such
account were a qualified tuition program).
‘‘(2) SPECIAL
RULES
FOR
APPLYING
ESTATE
AND GIFT TAXES WITH RESPECT TO ACCOUNT.—
Rules similar to the rules of paragraphs (2), (4),
and (5) of section 529(c) shall apply for purposes of
this section.
‘‘(3) ADDITIONAL TAX FOR DISTRIBUTIONS NOT
USED FOR EDUCATIONAL EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by
section 529(f) shall apply to payments and dis-
tributions from an education investment ac-
count in the same manner as such tax applies
to qualified tuition programs (as defined in sec-
tion 529).
‘‘(B) EXCESS CONTRIBUTIONS RETURNED
BEFORE
DUE
DATE
OF
RETURN.—Subpara-
graph (A) shall not apply to the distribution to
a contributor of any contribution paid during a
tion 530(d) applies with respect to such trans-
action.’’.
(c) FAILURE TO PROVIDE REPORTS ON EDUCATION
INVESTMENT ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
6693(a) (relating to failure to provide reports on in-
dividual retirement accounts or annuities) is amend-
ed by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subpara-
graph (B) and inserting ‘‘, and’’, and by adding at
the end the following new subparagraph:
‘‘(C) section 530(g) (relating to education
investment accounts).’’.
(2) CLERICAL AMENDMENT.—The section head-
ing for section 6693 is amended by striking ‘‘INDI-
VIDUAL RETIREMENT’’ and inserting ‘‘CERTAIN
TAX-FAVORED’’.
(d) TECHNICAL AMENDMENTS.—
(1) Subparagraph (F) of section 26(b)(2), as
added by the preceding section, is amended by in-
serting before the comma ‘‘and section 530(c)(3)
(relating to additional tax on certain distributions
from education investment accounts)’’.
(2) Subparagraph (C) of section 135(c)(2), as
added by the preceding section, is amended by in-
serting ‘‘, or to an education investment account (as
defined in section 530) on behalf of an account hold-
er (as defined in such section),’’ after ‘‘(as defined
in such section)’’.
(3) The table of sections for part VIII of sub-
chapter F of chapter 1 is amended by adding at the
end the following new item:
‘‘Sec. 530. Education investment accounts.’’.
(4) The item relating to section 6693 in the
table of sections for part I of subchapter B of chap-
ter 68 is amended by striking ‘‘individual retire-
ment’’ and inserting ‘‘certain tax-favored’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1997.
Subtitle C—Other Education
Initiatives
SEC. 221. EXTENSION OF EXCLUSION FOR EMPLOYER-PRO-
VIDED EDUCATIONAL ASSISTANCE.
(a) IN GENERAL.—Subsection (d) of section 127 (re-
lating to educational assistance programs) is amended to
read as follows:
‘‘(d) TERMINATION.—This section shall not apply to
expenses paid with respect to courses of instruction begin-
ning after December 31, 1997.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1996.
SEC. 222. INCREASE IN LIMITATION ON QUALIFIED 501(C)(3)
BONDS OTHER THAN HOSPITAL BONDS.
(a) IN GENERAL.—The text of paragraph (1) of sec-
tion 145(b) is amended by striking ‘‘$150,000,000.’’ and
inserting ‘‘the limitation determined in accordance with
the following table:
In the case of
calendar year:
The limitation is:
1998 ..................................................................................
$160,000,000
1999 ..................................................................................
170,000,000
2000 ..................................................................................
180,000,000
2001 ..................................................................................
190,000,000
2002 or thereafter .............................................................
200,000,000.’’.
(b) CONFORMING AMENDMENT.—The heading for
subsection (b) of section 145 is amended by striking
‘‘$150,000,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1998.
SEC. 223. CONTRIBUTIONS OF COMPUTER TECHNOLOGY
AND EQUIPMENT FOR ELEMENTARY OR SEC-
ONDARY SCHOOL PURPOSES.
(a) CONTRIBUTIONS
OF COMPUTER TECHNOLOGY
AND EQUIPMENT
FOR ELEMENTARY
OR SECONDARY
SCHOOL PURPOSES.—Subsection (e) of section 170 is
amended by adding at the end the following new para-
graph:
‘‘(6) SPECIAL RULE FOR CONTRIBUTIONS OF
COMPUTER TECHNOLOGY AND EQUIPMENT FOR ELE-
MENTARY OR SECONDARY SCHOOL PURPOSES.—
‘‘(A) LIMIT ON REDUCTION.—In the case
of a qualified elementary or secondary edu-
cational contribution, the reduction under para-
graph (1)(A) shall be no greater than the
amount determined under paragraph (3)(B).
‘‘(B) QUALIFIED
ELEMENTARY
OR
SEC-
ONDARY
EDUCATIONAL
CONTRIBUTION.—For
purposes of this paragraph, the term ‘qualified
elementary or secondary educational contribu-
tion’ means a charitable contribution by a cor-
poration of any computer technology or equip-
ment, but only if—
‘‘(i) the contribution is to—
‘‘(I) an educational organization
described in subsection (b)(1)(A)(ii),
or
‘‘(II) an entity described in sec-
tion 501(c)(3) and exempt from tax
under section 501(a) (other than an
entity described in subclause (I)) that
is organized primarily for purposes of
supporting elementary and secondary
education,
‘‘(ii) the contribution is made not
later than 2 years after the date the tax-
payer acquired the property (or in the case
of property constructed by the taxpayer,
the date the construction of the property is
substantially completed),
‘‘(iii) substantially all of the use of the
property by the donee is for use within the
United States for educational purposes in
any of the grades K–12 that are related to
the purpose or function of the organization
or entity,
‘‘(iv) the property is not transferred
by the donee in exchange for money, other
property, or services, except for shipping,
installation and transfer costs,
‘‘(v) the property will fit productively
into the entity’s education plan, and
‘‘(vi) the entity’s use and disposition
of the property will be in accordance with
the provisions of clauses (iii) and (iv).
‘‘(C) CONTRIBUTION TO PRIVATE FOUNDA-
TION.—A contribution by a corporation of any
computer technology or equipment to a private
foundation (as defined in section 509) shall be
treated as a qualified elementary or secondary
educational contribution for purposes of this
paragraph if—
‘‘(i) the contribution to the private
foundation satisfies the requirements of
clauses (ii) and (iv) of subparagraph (B),
and
‘‘(ii) within 30 days after such con-
tribution, the private foundation—
‘‘(I) contributes the property to
an entity described in clause (i) of
subparagraph (B) that satisfies the
requirements of clauses (iii) through
(vi) of subparagraph (B), and
‘‘(II) notifies the donor of such
contribution.
‘‘(D) SPECIAL RULE RELATING TO CON-
STRUCTION OF PROPERTY.—For the purposes
of this paragraph, the rules of paragraph (4)(C)
shall apply.
‘‘(E) DEFINITIONS.—For the purposes of
this paragraph—
‘‘(i) 
COMPUTER
TECHNOLOGY
OR
EQUIPMENT.—The term ‘computer tech-
nology or equipment’ means computer soft-
ware (as defined by section 197(e)(3)(B)),
computer or peripheral equipment (as de-
fined by section 168(i)(2)(B)), and fiber
optic cable related to computer use.
‘‘(ii) CORPORATION.—The term ‘cor-
poration’ has the meaning given to such
term by paragraph (4)(D).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the calendar year in which this Act is enacted.
SEC. 224. TREATMENT OF CANCELLATION OF CERTAIN STU-
DENT LOANS.
(a) CERTAIN DIRECT STUDENT LOANS THE REPAY-
MENT OF WHICH IS INCOME CONTINGENT.—Paragraph
(1) of section 108(f) is amended by striking ‘‘any student
loan if’’ and all that follows and inserting ‘‘any student
loan if—
‘‘(A) such discharge was pursuant to a
provision of such loan under which all or part
of the indebtedness of the individual would be
discharged if the individual worked for a certain
period of time in certain professions for any of
a broad class of employers, or
‘‘(B) in the case of a loan made under part
D of title IV of the Higher Education Act of
1965 which has a repayment schedule estab-
lished under section 455(e)(4) of such Act (re-
lating to income contingent repayments), such
discharge is after the maximum repayment pe-
riod under such loan (as prescribed under such
part).’’.
(b) CERTAIN LOANS BY EXEMPT ORGANIZATIONS.—
(1) IN
GENERAL.—Paragraph (2) of section
108(f) (defining student loan) is amended by strik-
ing ‘‘or’’ at the end of subparagraph (B) and by
striking subparagraph (D) and inserting the follow-
ing:
‘‘(D) any educational organization de-
scribed in section 170(b)(1)(A)(ii) if such loan
is made—
‘‘(i) pursuant to an agreement with
any entity described in subparagraph (A),
(B), or (C) under which the funds from
which the loan was made were provided to
such educational organization, or
‘‘(ii) pursuant to a program of such
educational organization which is designed
to encourage its students to serve in occu-
pations with unmet needs or in areas with
unmet needs and under which the services
provided by the students (or former stu-
dents) are for or under the direction of a
governmental unit or an organization de-
scribed in section 501(c)(3) and exempt
from tax under section 501(a).
The term ‘student loan’ includes any loan made by
an educational organization so described or by an or-
ganization exempt from tax under section 501(a) to
refinance a loan meeting the requirements of the
preceding sentence.’’.
(2) EXCEPTION FOR DISCHARGES ON ACCOUNT
OF
SERVICES
PERFORMED
FOR
CERTAIN
LEND-
ERS.—Subsection (f) of section 108 is amended by
adding at the end the following new paragraph:
‘‘(3) EXCEPTION
FOR
DISCHARGES
ON
AC-
COUNT
OF
SERVICES
PERFORMED
FOR
CERTAIN
LENDERS.—Paragraph (1) shall not apply to the
discharge of a loan made by an organization de-
scribed in paragraph (2)(D) (or by an organization
described in paragraph (2)(E) from funds provided
by an organization described in paragraph (2)(D)) if
the discharge is on account of services performed for
either such organization.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to discharges of indebtedness after
the date of the enactment of this Act.
TITLE III—SAVINGS AND
INVESTMENT INCENTIVES
Subtitle A—Retirement Savings
SEC. 301. ESTABLISHMENT OF AMERICAN DREAM IRA.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. AMERICAN DREAM IRA.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an American Dream IRA shall be treated for pur-
poses of this title in the same manner as an individual
retirement plan.
‘‘(b) AMERICAN DREAM IRA.—For purposes of this
title, the term ‘American Dream IRA’ or ‘AD IRA’ means
an individual retirement plan (as defined in section
7701(a)(37)) which is designated at the time of the estab-
lishment of the plan as an American Dream IRA. Such
designation shall be made in such manner as the Secretary
may prescribe.
‘‘(c) TREATMENT OF CONTRIBUTIONS.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an AD IRA.
‘‘(2) CONTRIBUTION LIMIT.—
‘‘(A) 
IN
GENERAL.—The 
aggregate
amount of contributions for any taxable year to
all AD IRAs maintained for the benefit of an
individual shall not exceed $2,000.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of taxable years beginning in a calendar
year after 1998, the $2,000 amount contained
in subparagraph (A) shall be increased by an
amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year by substituting ‘calendar
year 1997’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
If the amount as adjusted under the preceding
sentence is not a multiple of $50, such amount
shall be rounded to the next lowest multiple of
$50.
‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE
701⁄2.—Contributions to an AD IRA may be made
even after the individual for whom the account is
maintained has attained age 701⁄2.
‘‘(4) MANDATORY
DISTRIBUTION
RULES
NOT
TO APPLY, ETC.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), subsections (a)(6) and (b)(3)
of section 408 (relating to required distribu-
tions) and section 4974 (relating to excise tax
on certain accumulations in qualified retirement
plans) shall not apply to any AD IRA.
‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules
similar to the rules of section 401(a)(9) (other
than subparagraph (A) thereof) shall apply for
purposes of this section.
‘‘(5) RULES
RELATING
TO
ROLLOVER
CON-
TRIBUTIONS.—
‘‘(A) IN GENERAL.—No rollover contribu-
tion may be made to an AD IRA unless it is
a qualified rollover contribution.
‘‘(B) 
COORDINATION
WITH
LIMIT.—A
qualified rollover contribution shall not be taken
into account for purposes of paragraph (2).
‘‘(6) TIME WHEN CONTRIBUTIONS MADE.—For
purposes of this section, the rule of section 219(f)(3)
shall apply.
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) GENERAL RULES.—
‘‘(A) EXCLUSIONS FROM GROSS INCOME.—
Any qualified distribution from an AD IRA
shall not be includible in gross income.
‘‘(B) NONQUALIFIED DISTRIBUTIONS.—In
applying section 72 to any distribution from an
AD IRA which is not a qualified distribution,
such distribution shall be treated as made from
contributions to the AD IRA to the extent that
such distribution, when added to all previous
distributions from the AD IRA, does not exceed
the aggregate amount of contributions to the
AD IRA. For purposes of the preceding sen-
tence, all AD IRAs maintained for the benefit
of an individual shall be treated as 1 account.
‘‘(C) EXCEPTION FROM PENALTY TAX.—
Section 72(t) shall not apply to—
‘‘(i) any qualified distribution from an
AD IRA, and
‘‘(ii) any qualified first-time home-
buyer distribution (whether or not a quali-
fied distribution) from an AD IRA.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ means any payment or distribu-
tion—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of the individual) on or after the
death of the individual,
‘‘(iii) attributable to the individual’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified first-time
homebuyer distribution.
‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—
No payment or distribution shall be treated as
a qualified distribution if—
‘‘(i) it is made within the 5-taxable
year period beginning with the 1st taxable
year for which the individual made a con-
tribution to an AD IRA (or such individ-
ual’s spouse made a contribution to an AD
IRA) established for such individual, or
‘‘(ii) in the case of a payment or dis-
tribution properly allocable (as determined
in the manner prescribed by the Secretary)
to a qualified rollover contribution (or in-
come allocable thereto), it is made within
the 5-taxable year period beginning with
the taxable year in which the rollover con-
tribution was made.
Clause (ii) shall not apply to a qualified rollover
contribution from an AD IRA.
‘‘(3) ROLLOVERS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any distribution which is trans-
ferred in a qualified rollover contribution to an
AD IRA.
‘‘(B) INCOME INCLUSION FOR ROLLOVERS
FROM NON-AD IRAS.—
‘‘(i) IN GENERAL.—In the case of any
distribution to which this subparagraph
applies—
‘‘(I) sections 72(t) and 408(d)(3)
shall not apply (but section 4980A
shall apply), and
‘‘(II) any amount required to be
included in gross income by reason of
this paragraph shall be so included
ratably over the 4-taxable year period
beginning with the taxable year in
which the distribution is made.
‘‘(ii) DISTRIBUTIONS TO WHICH SUB-
PARAGRAPH APPLIES.—This subparagraph
shall apply to a distribution before Janu-
ary 1, 1999, from an individual retirement
plan (other than an AD IRA) maintained
for the benefit of an individual to an AD
IRA maintained for the benefit of such in-
dividual if such distribution would be a
qualified rollover contribution were such
individual retirement plan an AD IRA.
‘‘(iii) CONVERSIONS.—The conversion
of an individual retirement plan (other
than an AD IRA) to an AD IRA shall be
treated for purposes of this subparagraph
as a distribution from such plan to such
AD IRA.