I
105TH CONGRESS
1ST SESSION
H. R. 2847
To amend the Internal Revenue Code of 1986 to provide tax incentives
for education.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 6, 1997
Ms. GRANGER (for herself, Mr. WELLER, Mr. ARMEY, Mr. BLUNT, Mr. BOB
SCHAFFER of Colorado, Mr. ENGLISH of Pennsylvania, Mr. PAUL, Mr.
HILLEARY, Mr. PITTS, and Mr. SAM JOHNSON of Texas) 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
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; COORDINATION WITH TAXPAYER
RELIEF ACT OF 1997.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Higher Education Affordability and Availability Act’’.
(b) COORDINATION WITH TAXPAYER RELIEF ACT OF
1997.—Any reference in this Act to any section of the
Internal Revenue Code of 1986 amended or added by the
Taxpayer Relief Act of 1997 shall be a reference to such
section as so amended or added.
SEC. 2. EXCLUSION FROM GROSS INCOME OF EDUCATION
DISTRIBUTIONS FROM QUALIFIED TUITION
PROGRAMS; COVERAGE OF PRIVATE PRO-
GRAMS.
(a) EXCLUSION.—
(1) IN GENERAL.—Subparagraph (B) of section
529(c)(3) of the Internal Revenue Code of 1986 (re-
lating to distributions) is amended to read as fol-
lows:
‘‘(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) ADDITIONAL TAX ON AMOUNTS NOT USED
FOR HIGHER EDUCATION EXPENSES.—Section 529
of such Code is amended by adding at the end the
following new subsection:
‘‘(f) ADDITIONAL TAX
FOR DISTRIBUTIONS NOT
USED FOR EDUCATIONAL EXPENSES.—
‘‘(1) IN GENERAL.—The tax imposed by section
530(d)(4) shall apply to payments and distributions
from qualified tuition programs in the same manner
as such tax applies to education individual retire-
ment accounts.
‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution to a contributor of any
contribution paid during a taxable year to a quali-
fied tuition program to the extent that such con-
tribution exceeds the limitation in section 4973(e) if
such distribution (and the net income with respect
to such excess contribution) meets requirements
comparable to the requirements of clauses (i) and
(ii) of section 530(d)(4)(C).’’
(3) COORDINATION
WITH
EDUCATION
CRED-
ITS.—Section 25A(e)(2) of such Code is amended by
inserting ‘‘529(c)(3)(B) or’’ before ‘‘530(d)(2)’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to distributions after
December 31, 1997, for education furnished in aca-
demic periods beginning after such date.
(b) ELIGIBLE EDUCATIONAL INSTITUTIONS PER-
MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—
(1) IN
GENERAL.—Paragraph (1) of section
529(b) of such Code (defining qualified State tuition
program) is amended by inserting ‘‘or by one or
more eligible educational institutions’’ after ‘‘main-
tained by a State or agency or instrumentality there-
of’’.
(2) LIMITATION ON CONTRIBUTIONS TO QUALI-
FIED TUITION PROGRAMS NOT MAINTAINED BY A
STATE.—Subsection (b) of section 529 of such Code
is amended by adding at the end the following new
paragraph:
‘‘(8) 
LIMITATION
ON
CONTRIBUTIONS
TO
QUALIFIED TUITION PROGRAMS NOT MAINTAINED BY
A STATE.—In the case of a program not maintained
by a State or agency or instrumentality thereof, such
program shall not be treated as a qualified tuition
program unless it limits the annual contribution to
the program on behalf of a designated beneficiary to
$5,000.’’
(3) TAX ON EXCESS CONTRIBUTIONS.—
(A) IN GENERAL.—Subsection (a) of sec-
tion 4973 of such Code is amended by striking
‘‘or’’ at the end of paragraph (3), by redesig-
nating paragraph (4) as paragraph (5), and by
inserting after paragraph (3) the following new
paragraph:
‘‘(4) a qualified tuition program (as defined in
section 529) not maintained by a State or any agen-
cy or instrumentality thereof, or’’.
(B) EXCESS CONTRIBUTIONS DEFINED.—
Section 4973(e) of such Code is amended to
read as follows:
‘‘(e) EXCESS CONTRIBUTIONS TO PRIVATE QUALI-
FIED TUITION PROGRAM AND EDUCATION INDIVIDUAL
RETIREMENT ACCOUNTS.—For purposes of this section—
‘‘(1) IN GENERAL.—In the case of private edu-
cation investment accounts maintained for the bene-
fit of any 1 beneficiary, the term ‘excess contribu-
tions’ means the amount by which the amount con-
tributed for the taxable year to such accounts ex-
ceeds $5,000.
‘‘(2) PRIVATE
EDUCATION
INVESTMENT
AC-
COUNT.—For purposes of paragraph (1), the term
‘private education investment account’ means—
‘‘(A) a qualified tuition program (as de-
fined in section 529) not maintained by a State
or any agency or instrumentality thereof, and
‘‘(B) an education individual retirement
account (as defined in section 530).
‘‘(3) SPECIAL RULES.—For purposes of para-
graph (1), the following contributions shall not be
taken into account:
‘‘(A) Any contribution which is distributed
out of the education individual retirement ac-
count in a distribution to which section
530(d)(4)(C) applies.
‘‘(B) Any contribution to a qualified tui-
tion program (as so defined) described in sec-
tion 530(b)(2)(B) from any such account.
‘‘(C) Any rollover contribution.’’
(4) CONFORMING AMENDMENTS.—
(A) Paragraph (2) of section 26(b) of such
Code is amended by redesignating subpara-
graphs (E) through (Q) as subparagraphs (F)
through (R), respectively, and by inserting after
subparagraph (D) the following new subpara-
graph:
‘‘(E) section 529(f) (relating to additional
tax on certain distributions from qualified tui-
tion programs),’’.
(B) The text and headings of sections 529
and 530 of such Code are amended by striking
‘‘qualified State tuition program’’ each place it
appears and inserting ‘‘qualified tuition pro-
gram’’.
(C)(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 is amended by
striking ‘‘State’’.
(5) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on January 1,
1998.
(c) CHANGE OF QUALIFIED TUITION PROGRAM OR
OF DESIGNATED BENEFICIARY.—
(1) 
IN
GENERAL.—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’’.
(2) INCLUSION OF SIBLINGS AS MEMBER OF
FAMILY.—Paragraph (e)(2) of section 529(e) of such
Code is amended by inserting before the period at
the end the following: ‘‘, except that such term shall
include any sibling (whether by the whole or half
blood) of the designated beneficiary’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on January 1,
1998.
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