I
105TH CONGRESS
2D SESSION
H. R. 3309
To amend the Internal Revenue Code of 1986 to permit private educational
institutions to maintain qualified tuition programs which are comparable
to qualified State tuition programs, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 3, 1998
Mr. ENGLISH of Pennsylvania (for himself, Mr. WELDON of Pennsylvania, and
Mr. PAUL) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to permit
private educational institutions to maintain qualified tui-
tion programs which are comparable to qualified State
tuition programs, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ELIGIBLE EDUCATIONAL INSTITUTIONS PER-
MITTED TO MAINTAIN QUALIFIED TUITION
PROGRAMS; 
OTHER 
MODIFICATIONS 
OF
QUALIFIED TUITION PROGRAMS.
(a) ELIGIBLE EDUCATIONAL INSTITUTIONS PER-
MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—
(1) IN
GENERAL.—Paragraph (1) of section
529(b) of the Internal Revenue Code of 1986 (defin-
ing qualified State tuition program) is amended by
inserting ‘‘or by 1 or more eligible educational insti-
tutions’’ after ‘‘maintained by a State or agency or
instrumentality thereof’’.
(2) TECHNICAL AMENDMENTS.—
(A) Section 135(d)(1)(D) of such Code,
and the text of sections 529 and 530 of such
Code, are amended by striking ‘‘qualified State
tuition program’’ each place it appears and in-
serting ‘‘qualified tuition program’’.
(B)(i) The section heading of section 529
of such Code is amended to read as follows:
‘‘SEC. 529. QUALIFIED TUITION PROGRAMS.’’.
(ii) The item relating to section 529 of
such Code in the table of sections for part VIII
of subchapter F of chapter 1 of such Code is
amended by striking ‘‘State’’.
(b) EXCLUSION FROM GROSS INCOME OF DISTRIBU-
TIONS ALLOCABLE TO QUALIFIED HIGHER EDUCATION
EXPENSES.—
(1) IN GENERAL.—Subparagraph (B) of section
529(c)(3) of such Code (relating to distributions) is
amended to read as follows:
‘‘(B) 
DISTRIBUTIONS
FOR
QUALIFIED
HIGHER EDUCATION EXPENSES.—If a distribu-
tee elects the application of this subparagraph
for any taxable year—
‘‘(i) no amount shall be includible in
gross income by reason of a distribution
which consists of providing a benefit to the
distributee which, if paid for by the dis-
tributee, would constitute payment of a
qualified higher education expense, and
‘‘(ii) the amount which (but for the
election) would be includible in gross in-
come by reason of any other distribution
shall not be so includible in an amount
which bears the same ratio to the amount
which would be so includible as the amount
of the qualified higher education expenses
of the distributee bears to the amount of
the distribution.’’.
(2) DISTRIBUTIONS TREATED AS FIRST BEING
ATTRIBUTABLE TO INCOME.—Subparagraph (A) of
section 529(c)(3) of such Code is amended to read
as follows:
‘‘(A) IN GENERAL.—Any distribution from
a qualified tuition program—
‘‘(i) shall be includible in the gross in-
come of the distributee to the extent allo-
cable to income under the program, and
‘‘(ii) shall not be includible in gross
income to the extent allocable to invest-
ment in the contract.
For purposes of the preceding sentence, rules
similar to the rules of section 72(e)(3) shall
apply.’’.
(c) CHANGE OF QUALIFIED TUITION PROGRAM.—
Clause (i) of section 529(c)(3)(C) of such Code is amended
by inserting ‘‘to another qualified tuition program for the
benefit of the designated beneficiary or’’ after ‘‘trans-
ferred’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1999.
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