I
104TH CONGRESS
1ST SESSION
H. R. 1328
To amend the Internal Revenue Code of 1986 to provide that no amount
shall be includible in gross income by reason of participation in a State
prepaid tuition program.
IN THE HOUSE OF REPRESENTATIVES
MARCH 28, 1995
Mr. ENGLISH of Pennsylvania (for himself and Mr. DOYLE) 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
that no amount shall be includible in gross income by
reason of participation in a State prepaid tuition pro-
gram.
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 ‘‘Tuition Account
Assistance Act of 1995’’.
SEC. 2. TREATMENT OF PARTICIPATION IN STATE PREPAID
TUITION PROGRAM.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. TREATMENT OF PARTICIPATION IN STATE PRE-
PAID TUITION PROGRAM.
‘‘(a) GENERAL RULE.—No amount shall be includ-
ible in the gross income of any person by reason of—
‘‘(1) education furnished to a designated bene-
ficiary pursuant to a qualified State prepaid tuition
program, or
‘‘(2) earnings on any amount paid to such a
program for the purchase of tuition credits for a
designated beneficiary.
‘‘(b) QUALIFIED STATE PREPAID TUITION PRO-
GRAM.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified State
prepaid tuition program’ means a program estab-
lished and maintained by a State or any agency
thereof under which—
‘‘(A) an individual may purchase tuition
credits for tuition for the undergraduate edu-
cation of a designated beneficiary,
‘‘(B) the value of the tuition credits is not
limited to the amounts paid for such credits
and earnings thereon,
‘‘(C) the individual has no authority to di-
rect the investment of amounts paid to the pro-
gram, and
‘‘(D) the requirements of paragraph (3)
are met with respect to any refund of amounts
paid to the program.
Subparagraph (B) shall not apply to tuition at an
institution of higher education which is not required
by the laws of such State to participate in such pro-
gram.
‘‘(2) TREATMENT OF EXCESS TUITION CRED-
ITS.—A program shall not fail to be treated as a
qualified State prepaid tuition program by reason of
permitting tuition credits to be used other than for
tuition for an undergraduate education if—
‘‘(A) the only other purposes for which
such credits may be used are—
‘‘(i) for tuition for a graduate degree
program of the designated beneficiary, or
‘‘(ii) for education expenses (other
than tuition) of such beneficiary, and
‘‘(B) the program provides a significant re-
duction in the value of such credits if used for
such other purposes.
‘‘(3) RESTRICTIONS
ON
REFUNDS.—A refund
meets the requirements of this paragraph if the re-
fund meets the requirements of any of the following
subparagraphs.
‘‘(A) DEATH
OR
DISABILITY
OF
DES-
IGNATED
BENEFICIARY.—A refund meets the
requirements of this subparagraph if the refund
is made on account of the death or disability of
the designated beneficiary.
‘‘(B) SCHOLARSHIPS.—A refund meets the
requirements of this subparagraph if the refund
is made on account of a scholarship received by
the designated beneficiary and the amount of
the refund does not exceed the amount of the
scholarship which is used for tuition.
‘‘(C) FAILURE TO GAIN ADMISSION.—A re-
fund meets the requirements of this subpara-
graph if the refund is made on account of the
failure of the designated beneficiary to gain ad-
mission to an institution of higher education
(after making a good faith attempt, as deter-
mined by the program, to gain admission) and