I
106TH CONGRESS
1ST SESSION
H. R. 3120
To amend the Internal Revenue Code of 1986 to provide additional tax
incentives for education.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 21, 1999
Mr. BACHUS 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
additional tax incentives for education.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
‘‘(II) $45,000 ($90,000 in the
case of a joint return), bears to
‘‘(ii) $15,000.’’.
(2) 
CONFORMING
AMENDMENT.—Section
221(g)(1) is amended by striking ‘‘$40,000 and
$60,000 amounts’’ and inserting ‘‘$45,000 and
$90,000 amounts’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years end-
ing after December 31, 1999, and before January 1,
2005.
SEC. 3. MODIFICATIONS TO QUALIFIED TUITION PRO-
GRAMS.
(a) SHORT TITLE.—This section may be cited as the
‘‘Collegiate Learning and Student Savings (CLASS) Act’’.
(b) ELIGIBLE EDUCATIONAL INSTITUTIONS PER-
MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—
(1) IN GENERAL.—Section 529(b)(1) (defining
qualified State tuition program) is amended by in-
serting ‘‘or by one or more eligible educational insti-
tutions’’ after ‘‘maintained by a State or agency or
instrumentality thereof ’’.
(2) PRIVATE
QUALIFIED
TUITION
PROGRAMS
LIMITED TO BENEFIT PLANS.—Clause (ii) of section
529(b)(1)(A) is amended by inserting ‘‘in the case of
a program established and maintained by a State or
agency or instrumentality thereof,’’ before ‘‘may
make’’.
(3) CONFORMING AMENDMENTS.—
(A) 
Sections 
72(e)(9), 
135(c)(2)(C),
135(d)(1)(D), 529, 530(b)(2)(B), 4973(e), and
6693(a)(2)(C) are each amended by striking
‘‘qualified State tuition’’ each place it appears
and inserting ‘‘qualified tuition’’.
(B) The headings for sections 72(e)(9) and
135(c)(2)(C) are each amended by striking
‘‘QUALIFIED
STATE
TUITION’’ and inserting
‘‘QUALIFIED TUITION’’.
(C) The headings for sections 529(b) and
530(b)(2)(B) are each amended by striking
‘‘QUALIFIED
STATE
TUITION’’ and inserting
‘‘QUALIFIED TUITION’’.
(D) The heading for section 529 is amend-
ed by striking ‘‘STATE’’.
(E) 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’’.
(c) EXCLUSION FROM GROSS INCOME
OF EDU-
CATION DISTRIBUTIONS FROM QUALIFIED TUITION PRO-
GRAMS.—
(1) IN GENERAL.—Section 529(c)(3)(B) (relat-
ing 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) EXCEPTION FOR INSTITUTIONAL
PROGRAMS.—In the case of any taxable
year beginning before January 1, 2004,
clauses (i) and (ii) shall not apply with re-
spect to any distribution during such tax-
able year under a qualified tuition program
established and maintained by one or more
eligible educational institutions.
‘‘(iv) 
TREATMENT
AS
DISTRIBU-
TIONS.—Any benefit furnished to a des-
ignated beneficiary under a qualified tui-
tion program shall be treated as a distribu-
tion to the beneficiary for purposes of this
paragraph.
‘‘(v) 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—
‘‘(I) 
as 
provided 
in 
section
25A(g)(2), and
‘‘(II) by the amount of such ex-
penses which were taken into account
in determining the credit allowed to
the taxpayer or any other person
under section 25A.
‘‘(vi) 
COORDINATION
WITH
EDU-
CATION
INDIVIDUAL
RETIREMENT
AC-
COUNTS.—If, with respect to an individual
for any taxable year—
‘‘(I) the aggregate distributions
to which clauses (i) and (ii) and sec-
tion 530(d)(2)(A) apply, exceed
‘‘(II) the total amount of quali-
fied higher education expenses other-
wise taken into account under clauses
(i) and (ii) (after the application of
clause (v)) for such year,
the taxpayer shall allocate such expenses
among such distributions for purposes of
determining the amount of the exclusion
under clauses (i) and (ii) and section
530(d)(2)(A).’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 135(d)(2)(B) is amended by
striking 
‘‘the 
exclusion 
under 
section
530(d)(2)’’ and inserting ‘‘the exclusions under
sections 529(c)(3)(B)(i) and 530(d)(2)’’.