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direct the investment of any contributions to the pro-
gram (or any earnings thereon).
‘‘(6) NO PLEDGING OF INTEREST AS SECURITY.—
A program shall not be treated as a qualified State
tuition program if it allows any interest in the pro-
gram or any portion thereof to be used as security for
a loan.
‘‘(c) TAX
TREATMENT
OF
DESIGNATED
BENE-
FICIARIES AND CONTRIBUTORS.—
‘‘(1) IN GENERAL.—Except as otherwise provided
in this subsection, no amount shall be includible in
gross income of—
‘‘(A) a designated beneficiary under a
qualified State tuition program, or
‘‘(B) a contributor to such program on be-
half of a designated beneficiary,
with respect to any distribution from, or earnings
under, such program.
‘‘(2) DISTRIBUTIONS.—
‘‘(A) IN GENERAL.—Any distribution under
a qualified State tuition program shall be in-
cludible in the gross income of the distributee in
the same manner as provided under section 72
to the extent not excluded from gross income
under any other provision of this chapter.
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‘‘(B) IN-KIND
DISTRIBUTIONS.—The fur-
nishing of education to a designated beneficiary
under a qualified State tuition program shall be
treated as a distribution to the beneficiary.
‘‘(C) CHANGE IN BENEFICIARIES.—
‘‘(i) ROLLOVERS.—Subparagraph (A)
shall not apply to that portion of any dis-
tribution which, within 60 days of such dis-
tribution, is transferred to the credit of an-
other designated beneficiary under a quali-
fied State tuition program who is a member
of the same family as the designated bene-
ficiary with respect to which the distribu-
tion was made.
‘‘(ii) CHANGE IN DESIGNATED BENE-
FICIARIES.—Any change in the designated
beneficiary of an interest in a qualified
State tuition program shall not be treated
as a distribution for purposes of subpara-
graph (A) if the new beneficiary is a mem-
ber of the same family as the old bene-
ficiary.
‘‘(D) OPERATING RULES.—For purposes of
applying section 72—
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‘‘(i) all qualified State tuition pro-
grams of which an individual is a des-
ignated beneficiary shall be treated as one
program,
‘‘(ii) all distributions during a taxable
year shall be treated as one distribution,
and
‘‘(iii) the value of the contract, income
on the contract, and investment in the con-
tract shall be computed as of the close of the
calendar year in which the taxable year be-
gins.
‘‘(3) GIFT TAX TREATMENT.—Any contribution
on behalf of a designated beneficiary to a qualified
State tuition program shall be treated as a qualified
transfer for purposes of section 2503(e).
‘‘(d) REPORTING REQUIREMENTS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a designated beneficiary is furnished
education under a qualified State tuition pro-
gram during any calendar year, or
‘‘(B) there is a distribution to any individ-
ual with respect to an interest in such program
during any calendar year,
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each officer or employee having control of the quali-
fied State tuition program or their designee shall
make such reports as the Secretary may require re-
garding such education or distribution to the Sec-
retary and to the designated beneficiary or the indi-
vidual to whom the distribution was made. Any such
report shall include such information as the Secretary
may prescribe.
‘‘(2) TIMING OF REPORTS.—Any report required
by this subsection—
‘‘(A) shall be filed at such time and in such
matter as the Secretary prescribes, and
‘‘(B) shall be furnished to individuals not
later than January 31 of the calendar year fol-
lowing the calendar year to which such report re-
lates.
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.—For
purposes of this section—
‘‘(1) DESIGNATED BENEFICIARY.—The term ‘des-
ignated beneficiary’ means—
‘‘(A) the individual designated at the com-
mencement of participation in the qualified
State tuition program as the beneficiary of
amounts paid (or to be paid) to the program,
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‘‘(B) in the case of a change in beneficiaries
described in subsection (c)(2)(C)(ii), the individ-
ual who is the new beneficiary, and
‘‘(C) in the case of an interest in a qualified
State tuition program purchased by a State or
local government or an organization described in
section 501(c)(3) and exempt from taxation
under section 501(a) as part of a scholarship
program operated by such government or organi-
zation, the individual receiving such interest as
a scholarship.
‘‘(2) MEMBER OF FAMILY.—The term ‘member of
family’ has the same meaning given such term as sec-
tion 2032A(e)(2).
‘‘(3) 
QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—The term ‘qualified higher education ex-
penses’ means tuition, fees, books, supplies, and
equipment required for the enrollment or attendance
of a designated beneficiary at an eligible education
institution (as defined in section 135(c)(3)).
‘‘(4) APPLICATION OF SECTION 514.—An interest
in a qualified State tuition program shall not be
treated as debt for purposes of section 514.’’.
(b) EFFECTIVE DATES.—
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paragraph (B)(ii), if a State has a 2-year legis-
lative session, each year of such session shall be
deemed to be a separate regular session of the
State legislature.
Ω2æPage 236, line 11, strike out øSECTION 1¿ and in-
sert: SEC. 2101
Ω3æPage 236, line 14, strike out øSEC. 2¿ and insert:
SEC. 2102
Ω4æPage 237, line 3, strike out øSEC. 3¿ and insert: SEC.
2103
Ω5æPage 237, line 10, strike out øSEC. 4¿ and insert:
SEC. 2104
Ω6æPage 237, line 22, strike out øSEC. 5¿ and insert:
SEC. 2105
Attest:
Secretary.
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