I
107TH CONGRESS
1ST SESSION
H. R. 549
To amend the Internal Revenue Code of 1986 to provide additional tax
incentives for education.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 8, 2001
Mr. SCARBOROUGH (for himself, Mr. FROST, Mr. DREIER, Mr. BOUCHER, Mr.
FOLEY, Mrs. JONES of Ohio, Mr. WATKINS, Mr. PASCRELL, Mr.
TANCREDO, Mr. PRICE of North Carolina, Mr. PAUL, Mr. DUNCAN, Mr.
RILEY, Mr. HORN, Mr. ROGERS of Michigan, Mr. BARR of Georgia, Mr.
MILLER of Florida, Ms. HART, Mr. KING, Ms. ROS-LEHTINEN, and Mr.
SUNUNU) introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Finan-
cial Services, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
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. SHORT TITLE.
This Act may be cited as the ‘‘Collegiate Learning
and Student Savings Act’’.
SEC. 
2. 
ELIGIBLE 
EDUCATIONAL 
INSTITUTIONS 
PER-
MITTED TO MAINTAIN QUALIFIED TUITION
PROGRAMS.
(a) IN GENERAL.—Section 529(b)(1) of the Internal
Revenue Code of 1986 (defining qualified State tuition
program) is amended by inserting ‘‘or by 1 or more eligible
educational institutions or a consortium that consists sole-
ly of eligible educational institutions’’ after ‘‘maintained
by a State or agency or instrumentality thereof’’.
(b) PRIVATE QUALIFIED TUITION PROGRAMS LIM-
ITED
TO
BENEFIT
PLANS.—Clause (ii) of section
529(b)(1)(A) of the Internal Revenue Code of 1986 is
amended by inserting ‘‘in the case of a program estab-
lished and maintained by a State or agency or instrumen-
tality thereof’’ before ‘‘may make’’.
(c) CONFORMING AMENDMENTS.—
(1) The text and headings of each of the sec-
tions 72(e)(9), 135(c)(2(C), 135(d)(1)(D), 529,
530(b)(2)(B), 4973(e), and 6693(a)(2)(C) of the In-
ternal Revenue Code of 1986 is amended by striking
‘‘qualified State tuition’’ each place it appears and
inserting ‘‘qualified tuition’’.
(2)(A) The section heading of section 529 of
such Code 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 of such Code is amended by striking
‘‘State’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3. EXCLUSION FROM GROSS INCOME OF EDUCATION
DISTRIBUTIONS FROM QUALIFIED TUITION
PROGRAMS.
(a) IN GENERAL.—Section 529(c)(3)(B) of the Inter-
nal Revenue Code of 1986 (relating to distributions) is
amended to read as follows:
‘‘(B) 
DISTRIBUTIONS
FOR
QUALIFIED
HIGHER EDUCATION EXPENSES.—
‘‘(i) IN
GENERAL.—If a distributee
elects the application of this clause for any
taxable year—
‘‘(I) no amount shall be includ-
ible in gross income under subpara-
graph (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
expense, and
‘‘(II) the amount which (but for
the election) would be includible in
gross income under subparagraph (A)
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 includ-
ible as such expenses bear to such ag-
gregate distributions.
‘‘(ii) IN-KIND
DISTRIBUTIONS.—Any
benefit furnished to a designated bene-
ficiary under a qualified State tuition pro-
gram shall be treated as a distribution to
the beneficiary for purposes of this para-
graph.
‘‘(iii) DISALLOWANCE OF EXCLUDED
AMOUNTS AS CREDIT OR DEDUCTION.—No
deduction or credit shall be allowed to the
taxpayer under any other section of this
chapter for any qualified higher education
expenses to the extent taken into account
in determining the amount of the exclusion
under this subparagraph.’’.
(b) BENEFICIARY MAY CHANGE PROGRAM.—Section
529(c)(3)(C) of the Internal Revenue Code of 1986 (relat-
ing to change in beneficiaries) is amended—
(1) in clause (i), by inserting ‘‘to another quali-
fied tuition program for the benefit of the des-
ignated beneficiary or’’ after ‘‘transferred’’, and
(2) in the heading, by inserting ‘‘OR
PRO-
GRAMS’’ after ‘‘BENEFICIARIES’’.
(c) ADDITIONAL TAX ON AMOUNTS NOT USED FOR
HIGHER EDUCATION EXPENSES.—Section 529(c)(3) of
the Internal Revenue Code of 1986 (relating to distribu-
tions) is amended by adding at the end the following:
‘‘(E) ADDITIONAL TAX ON AMOUNTS NOT
USED
FOR
HIGHER
EDUCATION
EXPENSES.—
The tax imposed by section 530(d)(4) shall
apply to payments and distributions from quali-
fied tuition programs in the same manner as
such tax applies to education individual retire-
ment accounts.’’.
(d) COORDINATION WITH EDUCATION CREDITS.—
Section 25A(e)(2) of the Internal Revenue Code of 1986
(relating to coordination with exclusions) is amended—
(1) by inserting ‘‘a qualified tuition program
or’’ before ‘‘an education individual retirement ac-
count’’, and
(2) by striking ‘‘section 530(d)(2)’’ and insert-
ing ‘‘section 529(c)(3)(B) or 530(d)(2)’’.
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to distributions made after December 31,
2001, for education furnished in academic periods
beginning after such date.
(2) PRIVATE
PROGRAMS.—In the case of a
qualified tuition program established and maintained
by an entity other than a State or agency or instru-
mentality thereof, the amendments made by sub-
sections (a), (c), and (d) shall apply to distributions
made after December 31, 2005, for education fur-
nished in academic periods beginning after such
date.
SEC. 4. QUALIFIED TUITION PROGRAMS INCLUDED IN SE-
CURITIES EXEMPTION.
(a) EXEMPTED SECURITIES.—Section 3(a)(4) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(4)) is amended
by striking ‘‘individual;’’ and inserting ‘‘individual or any
security issued by a prepaid tuition program described in
section 529 of the Internal Revenue Code of 1986;’’.
(b) QUALIFIED TUITION PROGRAMS NOT INVEST-
MENT COMPANIES.—Section 3(c) of the Investment Com-
pany Act of 1940 (15 U.S.C. 80a–3(c)) is amended by
adding at the end the following:
‘‘(15) Any prepaid tuition program described in
section 529 of the Internal Revenue Code of 1986.’’.
Æ