547
(6) Clause (ii) of section 543(a)(2)(B) is amend-
ed by striking ‘‘section 563(c)’’ and inserting ‘‘section
563(d)’’.
(7) Paragraph (1) of section 958(a) is amended
by striking ‘‘sections 955(b)(1) (A) and (B),
955(c)(2)(A)(ii), and 960(a)(1)’’ and inserting ‘‘sec-
tion 960(a)(1)’’.
(8) Subsection (g) of section 642 is amended by
striking ‘‘under 2621(a)(2)’’ and inserting ‘‘under
section 2621(a)(2)’’.
(9) Section 1463 is amended by striking ‘‘this
subsection’’ and inserting ‘‘this section’’.
(10) Subsection (k) of section 3306 is amended
by inserting a period at the end thereof.
(11) The item relating to section 4472 in the
table of sections for subchapter B of chapter 36 is
amended by striking ‘‘and special rules’’.
(12) Paragraph (3) of section 5134(c) is amend-
ed by striking ‘‘section 6662(a)’’ and inserting ‘‘sec-
tion 6665(a)’’.
(13) Paragraph (2) of section 5206(f) is amended
by striking ‘‘section 5(e)’’ and inserting ‘‘section
105(e)’’.
548
(14) Paragraph (1) of section 6050B(c) is
amended by striking ‘‘section 85(c)’’ and inserting
‘‘section 85(b)’’.
(15) Subsection (k) of section 6166 is amended
by striking paragraph (6).
(16) Subsection (e) of section 6214 is amended to
read as follows:
‘‘(e) CROSS REFERENCE.—
‘‘For provision giving Tax Court jurisdiction to
order a refund of an overpayment and to award
sanctions, see section 6512(b)(2).’’.
(17) The section heading for section 6043 is
amended by striking the semicolon and inserting a
comma.
(18) The item relating to section 6043 in the
table of sections for subpart B of part III of sub-
chapter A of chapter 61 is amended by striking the
semicolon and inserting a comma.
(19) The table of sections for part I of subchapter
A of chapter 68 is amended by striking the item relat-
ing to section 6662.
(20)(A) Section 7232 is amended—
(i) by striking ‘‘LUBRICATING OIL,’’ in
the heading, and
(ii) by striking ‘‘lubricating oil,’’ in the
text.
549
(B) The table of sections for part II of sub-
chapter A of chapter 75 is amended by striking ‘‘lu-
bricating oil,’’ in the item relating to section 7232.
(21) Paragraph (1) of section 6701(a) of the Om-
nibus Budget Reconciliation Act of 1989 is amended
by striking ‘‘subclause (IV)’’ and inserting ‘‘subclause
(V)’’.
(22) Clause (ii) of section 7304(a)(2)(D) of such
Act is amended by striking ‘‘subsection (c)(2)’’ and
inserting ‘‘subsection (c)’’.
(23) Paragraph (1) of section 7646(b) of such
Act is amended by striking ‘‘section 6050H(b)(1)’’
and inserting ‘‘section 6050H(b)(2)’’.
(24) Paragraph (10) of section 7721(c) of
such 
Act 
is 
amended 
by 
striking 
‘‘section
6662(b)(2)(C)(ii)’’ 
and 
inserting 
‘‘section
6661(b)(2)(C)(ii)’’.
(25) Subparagraph (A) of section 7811(i)(3) of
such Act is amended by inserting ‘‘the first place it
appears’’ before ‘‘in clause (i)’’.
(26) Paragraph (10) of section 7841(d) of
such Act is amended by striking ‘‘section 381(a)’’
and inserting ‘‘section 381(c)’’.
550
(27) Paragraph (2) of section 7861(c) of such Act
is amended by inserting ‘‘the second place it appears’’
before ‘‘and inserting’’.
(28) Paragraph (1) of section 460(b) is amended
by striking ‘‘the look-back method of paragraph (3)’’
and inserting ‘‘the look-back method of paragraph
(2)’’.
(29) Subparagraph (C) of section 50(a)(2) is
amended by striking ‘‘subsection (c)(4)’’ and inserting
‘‘subsection (d)(5)’’.
(30) Subparagraph (B) of section 172(h)(4) is
amended by striking the material following the head-
ing and preceding clause (i) and inserting ‘‘For pur-
poses of subsection (b)(2)—’’.
(31) Subparagraph (A) of section 355(d)(7) is
amended by inserting ‘‘section’’ before ‘‘267(b)’’.
(32) Subparagraph (C) of section 420(e)(1) is
amended by striking ‘‘mean’’ and inserting ‘‘means’’.
(33) Paragraph (4) of section 537(b) is amended
by striking ‘‘section 172(i)’’ and inserting ‘‘section
172(f)’’.
(34) Subparagraph (B) of section 613(e)(1) is
amended by striking the comma at the end thereof
and inserting a period.
551
(35) Paragraph (4) of section 856(a) is amended
by striking ‘‘section 582(c)(5)’’ and inserting ‘‘section
582(c)(2)’’.
(36) 
Sections 
904(f)(2)(B)(i) 
and
907(c)(4)(B)(iii) are each amended by inserting ‘‘(as
in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1990)’’ after
‘‘section 172(h)’’.
(37) Subsection (b) of section 936 is amended by
striking ‘‘subparagraphs (D)(ii)(I)’’ and inserting
‘‘subparagraphs (D)(ii)’’.
(38) Subsection (c) of section 2104 is amended
by striking ‘‘subparagraph (A), (C), or (D) of section
861(a)(1)’’ and inserting ‘‘section 861(a)(1)(A)’’.
(39) Subparagraph (A) of section 280A(c)(1) is
amended to read as follows:
‘‘(A) as the principal place of business for
any trade or business of the taxpayer,’’.
(40) Section 6038 is amended by redesignating
the subsection relating to cross references as subsection
(f).
(41) Clause (iv) of section 6103(e)(1)(A) is
amended by striking all that follows ‘‘provisions of’’
and inserting ‘‘section 1(g) or 59(j);’’.
552
(42) The subsection (f) of section 6109 of the In-
ternal Revenue Code of 1986 which was added by sec-
tion 2201(d) of Public Law 101–624 is redesignated
as subsection (g).
(43) Subsection (b) of section 7454 is amended
by striking ‘‘section 4955(e)(2)’’ and inserting ‘‘sec-
tion 4955(f)(2)’’.
(44) Subsection (d) of section 11231 of the Reve-
nue Reconciliation Act of 1990 shall be applied as if
‘‘comma’’ appeared instead of ‘‘period’’ and as if the
paragraph (9) proposed to be added ended with a
comma.
(45) Paragraph (1) of section 11303(b) of the
Revenue Reconciliation Act of 1990 shall be applied
as if ‘‘paragraph’’ appeared instead of ‘‘subpara-
graph’’ in the material proposed to be stricken.
(46) Subsection (f) of section 11701 of the Reve-
nue Reconciliation Act of 1990 is amended by insert-
ing ‘‘(relating to definitions)’’ after ‘‘section 6038(e)’’.
(47) Subsection (i) of section 11701 of the Reve-
nue Reconciliation Act of 1990 shall be applied as if
‘‘subsection’’ appeared instead of ‘‘section’’ in the ma-
terial proposed to be stricken.
(48) Subparagraph (B) of section 11801(c)(2) of
the Revenue Reconciliation Act of 1990 shall be ap-
553
plied as if ‘‘section 56(g)’’ appeared instead of ‘‘sec-
tion 59(g)’’.
(49) Subparagraph (C) of section 11801(c)(8) of
the Revenue Reconciliation Act of 1990 shall be ap-
plied as if ‘‘reorganizations’’ appeared instead of ‘‘re-
organization’’ in the material proposed to be stricken.
(50) Subparagraph (H) of section 11801(c)(9) of
the Revenue Reconciliation Act of 1990 shall be ap-
plied as if ‘‘section 1042(c)(1)(B)’’ appeared instead
of ‘‘section 1042(c)(2)(B)’’.
(51) Subparagraph (F) of section 11801(c)(12) of
the Revenue Reconciliation Act of 1990 shall be ap-
plied as if ‘‘and (3)’’ appeared instead of ‘‘and (E)’’.
(52) Subparagraph (A) of section 11801(c)(22) of
the Revenue Reconciliation Act of 1990 shall be ap-
plied as if ‘‘chapters 21’’ appeared instead of ‘‘chap-
ter 21’’ in the material proposed to be stricken.
(53) Paragraph (3) of section 11812(b) of the
Revenue Reconciliation Act of 1990 shall be applied
by not executing the amendment therein to the head-
ing of section 42(d)(5)(B).
(54) Clause (i) of section 11813(b)(9)(A) of the
Revenue Reconciliation Act of 1990 shall be applied
as if a comma appeared after ‘‘(3)(A)(ix)’’ in the ma-
terial proposed to be stricken.
554
(55) Subparagraph (F) of section 11813(b)(13)
of the Revenue Reconciliation Act of 1990 shall be ap-
plied as if ‘‘tax’’ appeared after ‘‘investment’’ in the
material proposed to be stricken.
(56) Paragraph (19) of section 11813(b) of the
Revenue Reconciliation Act of 1990 shall be applied
as if ‘‘Paragraph (20) of section 1016(a), as redesig-
nated by section 11801,’’ appeared instead of ‘‘Para-
graph (21) of section 1016(a)’’.
(57) Paragraph (5) section 8002(a) of the Sur-
face Transportation Revenue Act of 1991 shall be ap-
plied as if ‘‘4481(e)’’ appeared instead of ‘‘4481(c)’’.
(58) Section 7872 is amended—
(A) by striking ‘‘foregone’’ each place it ap-
pears in subsections (a) and (e)(2) and inserting
‘‘forgone’’, and
(B) by striking ‘‘FOREGONE’’ in the heading
for subsection (e) and the heading for paragraph
(2) of subsection (e) and inserting ‘‘FORGONE’’.
(59) Paragraph (7) of section 7611(h) is amend-
ed by striking ‘‘approporiate’’ and inserting ‘‘appro-
priate’’.
(60) The heading of paragraph (3) of section
419A(c) is amended by striking ‘‘SEVERENCE’’ and
inserting ‘‘SEVERANCE’’.
555
(61) Clause (ii) of section 807(d)(3)(B) is
amended by striking ‘‘Commissoners’ ’’ and inserting
‘‘Commissioners’ ’’.
(62) Subparagraph (B) of section 1274A(c)(1) is
amended by striking ‘‘instument’’ and inserting ‘‘in-
strument’’.
(63) Subparagraph (B) of section 724(d)(3) by
striking ‘‘Subparagaph’’ and inserting ‘‘Subpara-
graph’’.
(64) The last sentence of paragraph (2) of section
42(c) is amended by striking ‘‘of 1988’’.
(65) Paragraph (1) of section 9707(d) is amend-
ed by striking ‘‘diligence,’’ and inserting ‘‘diligence’’.
(66) Subsection (c) of section 4977 is amended
by striking ‘‘section 132(i)(2)’’ and inserting ‘‘section
132(h)’’.
(67) The last sentence of section 401(a)(20) is
amended by striking ‘‘section 211’’ and inserting
‘‘section 521’’.
(68) Subparagraph (A) of section 402(g)(3) is
amended by striking ‘‘subsection (a)(8)’’ and insert-
ing ‘‘subsection (e)(3)’’.
(69) The last sentence of section 403(b)(10) is
amended by striking ‘‘an direct’’ and inserting ‘‘a
direct’’.
556
(70) Subparagraph (A) of section 4973(b)(1) is
amended by striking ‘‘sections 402(c)’’ and inserting
‘‘section 402(c)’’.
(71) Paragraph (12) of section 3405(e) is
amended by striking ‘‘(b)(3)’’ and inserting ‘‘(b)(2)’’.
(72) Paragraph (41) of section 521(b) of the Un-
employment Compensation Amendments of 1992 shall
be applied as if ‘‘section’’ appeared instead of ‘‘sec-
tions’’ in the material proposed to be stricken.
(73) Paragraph (27) of section 521(b) of the Un-
employment Compensation Amendments of 1992 shall
be applied as if ‘‘Section 691(c)(5)’’ appeared instead
of ‘‘Section 691(c)’’.
(74) Paragraph (5) of section 860F(a) is amend-
ed by striking ‘‘paragraph (1)’’ and inserting ‘‘para-
graph (2)’’.
(75) Paragraph (1) of section 415(k) is amended
by adding ‘‘or’’ at the end of subparagraph (C), by
striking subparagraphs (D) and (E), and by redesig-
nating subparagraph (F) as subparagraph (D).
(76) Paragraph (2) of section 404(a) is amended
by striking ‘‘(18),’’.
(77) Clause (ii) of section 72(p)(4)(A) is amend-
ed to read as follows:
557
‘‘(ii) SPECIAL RULE.—The term ‘quali-
fied employer plan’ shall include any plan
which was (or was determined to be) a
qualified employer plan or a government
plan.’’.
(78) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i)
are 
each 
amended 
by 
striking 
‘‘section
6662(d)(2)(C)(ii)’’ 
and 
inserting 
‘‘section
6662(d)(2)(C)(iii)’’.
(79) Subsection (a) of section 164 is amended by
striking the paragraphs relating to the generation-
skipping tax and the environmental tax imposed by
section 59A and by inserting after paragraph (3) the
following new paragraphs:
‘‘(4) The GST tax imposed on income distribu-
tions.
‘‘(5) The environmental tax imposed by section
59A.’’.
(80) Subclause (I) of section 936(a)(4)(A)(ii) is
amended by striking ‘‘deprecation’’ and inserting ‘‘de-
preciation’’.
558
Subtitle G—Other Provisions
SEC. 
1801. 
EXEMPTION 
FROM 
DIESEL 
FUEL 
DYEING
REQUIREMENTS WITH RESPECT TO CERTAIN
STATES.
(a) IN GENERAL.—Section 4082 (relating to exemp-
tions for diesel fuel) is amended by redesignating sub-
sections (c) and (d) as subsections (d) and (e), respectively,
and by inserting after subsection (b) the following new sub-
section:
‘‘(c) EXCEPTION TO DYEING REQUIREMENTS.—Para-
graph (2) of subsection (a) shall not apply with respect to
any diesel fuel—
‘‘(1) removed, entered, or sold in a State for ulti-
mate sale or use in an area of such State during the
period such area is exempted from the fuel dyeing re-
quirements under subsection (i) of section 211 of the
Clean Air Act (as in effect on the date of the enact-
ment of this subsection) by the Administrator of the
Environmental Protection Agency under paragraph
(4) of such subsection (i) (as so in effect), and
‘‘(2) the use of which is certified pursuant to reg-
ulations issued by the Secretary.’’
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to fuel removed, entered,
559
or sold on or after the first day of the first calendar quarter
beginning after the date of the enactment of this Act.
SEC. 
1802. 
TREATMENT 
OF 
CERTAIN 
UNIVERSITY
ACCOUNTS.
(a) IN GENERAL.—For purposes of subsection (s) of
section 3121 of the Internal Revenue Code of 1986 (relating
to concurrent employment by 2 or more employers)—
(1) the following entities shall be deemed to be
related corporations that concurrently employ the
same individual:
(A) a State university which employs health
professionals as faculty members at a medical
school, and
(B) an agency account of a State university
which is described in subparagraph (A) and
from which there is distributed to such faculty
members payments forming a part of the com-
pensation that the State, or such State univer-
sity, as the case may be, agrees to pay to such
faculty members, but only if—
(i) such agency account is authorized
by State law and receives the funds for such
payments from a faculty practice plan de-
scribed in section 501(c)(3) of such Code
560
and exempt from tax under section 501(a)
of such Code,
(ii) such payments are distributed by
such agency account to such faculty mem-
bers who render patient care at such medi-
cal school, and
(iii) such faculty members comprise at
least 30 percent of the membership of such
faculty practice plan, and
(2) remuneration which is disbursed by such
agency account to any such faculty member of the
medical school described in paragraph (1)(A) shall be
deemed to have been actually disbursed by the State,
or such State university, as the case may be, as a
common paymaster and not to have been actually dis-
bursed by such agency account.
(b) EFFECTIVE DATE.—The provisions of subsection
(a) shall apply to remuneration paid after December 31,
1996.
SEC. 1803. MODIFICATIONS TO EXCISE TAX ON OZONE-DE-
PLETING CHEMICALS.
(a) RECYCLED HALON.—
(1) IN GENERAL.—Section 4682(d)(1) (relating
to recycling) is amended by inserting ‘‘, or on any re-
cycled halon imported from any country which is a
561
signatory to the Montreal Protocol on Substances that
Deplete the Ozone Layer’’ before the period at the end.
(2) CERTIFICATION SYSTEM.—The Secretary of
the Treasury, after consultation with the Adminis-
trator of the Environmental Protection Agency, shall
develop a certification system to ensure compliance
with the recycling requirement for imported halon
under section 4682(d)(1) of the Internal Revenue Code
of 1986, as amended by paragraph (1).
(b) CHEMICALS USED AS PROPELLANTS IN METERED-
DOSE INHALERS TAX-EXEMPT.—Paragraph (4) of section
4682(g) (relating to phase-in of tax on certain substances)
is amended to read as follows:
‘‘(4) CHEMICALS USED AS PROPELLANTS IN ME-
TERED-DOSE INHALERS.—
‘‘(A) TAX-EXEMPT.—
‘‘(i) IN GENERAL.—No tax shall be im-
posed by section 4681 on—
‘‘(I) any use of any substance as
a propellant in metered-dose inhalers,
or
‘‘(II) any qualified sale by the
manufacturer, producer, or importer of
any substance.
562
‘‘(ii) QUALIFIED SALE.—For purposes
of clause (i), the term ‘qualified sale’ means
any sale by the manufacturer, producer, or
importer of any substance—
‘‘(I) for use by the purchaser as a
propellant in metered-dose inhalers, or
‘‘(II) for resale by the purchaser
to a 2d purchaser for such use by the
2d purchaser.
The preceding sentence shall apply only if
the manufacturer, producer, and importer,
and the 1st and 2d purchasers (if any) meet
such registration requirements as may be
prescribed by the Secretary.
‘‘(B) OVERPAYMENTS.—If any substance on
which tax was paid under this subchapter is
used by any person as a propellant in metered-
dose inhalers, credit or refund without interest
shall be allowed to such person in an amount
equal to the excess of—
‘‘(i) the tax paid under this subchapter
on such substance, over
‘‘(ii) the tax (if any) which would be
imposed by section 4681 if such substance
were used for such use by the manufacturer,
563
producer, or importer thereof on the date of
its use by such person.
Amounts payable under the preceding sen-
tence with respect to uses during the taxable
year shall be treated as described in section
34(a) for such year unless claim thereof has
been timely filed under this subparagraph.’’
(c) EFFECTIVE DATES.—
(1) RECYCLED HALON.—The amendment made
by subsection (a)(1) shall take effect on January 1,
1997.
(2) METERED-DOSE
INHALERS.—The amend-
ment made by subsection (b) shall take effect on the
7th day after the date of the enactment of this Act.
SEC. 1804. TAX-EXEMPT BONDS FOR SALE OF ALASKA
POWER ADMINISTRATION FACILITY.
Sections 142(f)(3) (as added by section 1605) and
147(d) of the Internal Revenue Code of 1986 shall not apply
in determining whether any private activity bond issued
after the date of the enactment of this Act and used to fi-
nance the acquisition of the Snettisham hydroelectric
project from the Alaska Power Administration is a quali-
fied bond for purposes of such Code.
564
SEC. 1805. NONRECOGNITION TREATMENT FOR CERTAIN
TRANSFERS BY COMMON TRUST FUNDS TO
REGULATED INVESTMENT COMPANIES.
(a) GENERAL RULE.—Section 584 (relating to com-
mon trust funds) is amended by redesignating subsection
(h) as subsection (i) and by inserting after subsection (g)
the following new subsection:
‘‘(h) NONRECOGNITION TREATMENT
FOR CERTAIN
TRANSFERS TO REGULATED INVESTMENT COMPANIES.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a common trust fund transfers sub-
stantially all of its assets to one or more regu-
lated investment companies in exchange solely
for stock in the company or companies to which
such assets are so transferred, and
‘‘(B) such stock is distributed by such com-
mon trust fund to participants in such common
trust fund in exchange solely for their interests
in such common trust fund,
no gain or loss shall be recognized by such common
trust fund by reason of such transfer or distribution,
and no gain or loss shall be recognized by any partic-
ipant in such common trust fund by reason of such
exchange.
‘‘(2) BASIS RULES.—
565
‘‘(A) REGULATED INVESTMENT COMPANY.—
The basis of any asset received by a regulated in-
vestment company in a transfer referred to in
paragraph (1)(A) shall be the same as it would
be in the hands of the common trust fund.
‘‘(B) PARTICIPANTS.—The basis of the stock
which is received in an exchange referred to in
paragraph (1)(B) shall be the same as that of the
property exchanged. If stock in more than one
regulated investment company is received in
such exchange, the basis determined under the
preceding sentence shall be allocated among the
stock in each such company on the basis of re-
spective fair market values.
‘‘(3) 
TREATMENT
OF
ASSUMPTIONS
OF
LIABILITY.—
‘‘(A) IN GENERAL.—In determining whether
the transfer referred to in paragraph (1)(A) is in
exchange solely for stock in one or more regu-
lated investment companies, the assumption by
any such company of a liability of the common
trust fund, and the fact that any property trans-
ferred by the common trust fund is subject to a
liability, shall be disregarded.
566
‘‘(B) SPECIAL
RULE
WHERE
ASSUMED
LIABILITIES EXCEED BASIS.—
‘‘(i) IN GENERAL.—If, in any transfer
referred to in paragraph (1)(A), the as-
sumed liabilities exceed the aggregate ad-
justed bases (in the hands of the common
trust fund) of the assets transferred to the
regulated 
investment 
company 
or
companies—
‘‘(I) notwithstanding paragraph
(1), gain shall be recognized to the
common trust fund on such transfer in
an amount equal to such excess,
‘‘(II) the basis of the assets re-
ceived by the regulated investment
company or companies in such trans-
fer shall be increased by the amount so
recognized, and
‘‘(III) any adjustment to the basis
of a participant’s interest in the com-
mon trust fund as a result of the gain
so recognized shall be treated as occur-
ring immediately before the exchange
referred to in paragraph (1)(B).
567
If the transfer referred to in paragraph
(1)(A) is to two or more regulated invest-
ment companies, the basis increase under
subclause (II) shall be allocated among such
companies on the basis of the respective fair
market values of the assets received by each
of such companies.
‘‘(ii) ASSUMED LIABILITIES.—For pur-
poses of clause (i), the term ‘assumed liabil-
ities’ means the aggregate of—
‘‘(I) any liability of the common
trust fund assumed by any regulated
investment company in connection
with the transfer referred to in para-
graph (1)(A), and
‘‘(II) any liability to which prop-
erty so transferred is subject.
‘‘(4) COMMON TRUST FUND MUST MEET DIVER-
SIFICATION RULES.—This subsection shall not apply
to any common trust fund which would not meet the
requirements of section 368(a)(2)(F)(ii) if it were a
corporation. For purposes of the preceding sentence,
Government securities shall not be treated as securi-
ties of an issuer in applying the 25-percent and 50-
percent test and such securities shall not be excluded
568
for purposes of determining total assets under clause
(iv) of section 368(a)(2)(F).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to transfers after December 31, 1995.
SEC. 1806. QUALIFIED STATE TUITION PROGRAMS.
(a) IN GENERAL.—Subchapter F of chapter 1 (relating
to exempt organizations) is amended by adding at the end
the following new part:
‘‘PART VIII—QUALIFIED STATE TUITION
PROGRAMS
‘‘Sec. 529. Qualified State tuition programs.
‘‘SEC. 529. QUALIFIED STATE TUITION PROGRAMS.
‘‘(a) GENERAL RULE.—A qualified State tuition pro-
gram shall be exempt from taxation under this subtitle. Not-
withstanding the preceding sentence, such program shall be
subject to the taxes imposed by section 511 (relating to im-
position of tax on unrelated business income of charitable
organizations).
‘‘(b) QUALIFIED STATE TUITION PROGRAM.—For pur-
poses of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified State
tuition program’ means a program established and
maintained by a State or agency or instrumentality
thereof—
‘‘(A) under which a person—
569
‘‘(i) may purchase tuition credits or
certificates on behalf of a designated bene-
ficiary which entitle the beneficiary to the
waiver or payment of qualified higher edu-
cation expenses of the beneficiary, or
‘‘(ii) may make contributions to an ac-
count which is established for the sole pur-
pose of meeting the qualified higher edu-
cation expenses of the designated beneficiary
of the account, and
‘‘(B) which meets the other requirements of
this subsection.
‘‘(2) CASH
CONTRIBUTIONS.—A program shall
not be treated as a qualified State tuition program
unless it provides that purchases or contributions
may only be made in cash.
‘‘(3) REFUNDS.—A program shall not be treated
as a qualified State tuition program unless it imposes
a more than de minimis penalty on any refund of
earnings from the account which are not—
‘‘(A) used for qualified higher education ex-
penses of the designated beneficiary,
‘‘(B) made on account of the death or dis-
ability of the designated beneficiary, or
570
‘‘(C) made on account of a scholarship re-
ceived by the designated beneficiary to the extent
the amount of the refund does not exceed the
amount of the scholarship used for qualified
higher education expenses.
‘‘(4) SEPARATE ACCOUNTING.—A program shall
not be treated as a qualified State tuition program
unless it provides separate accounting for each des-
ignated beneficiary.
‘‘(5) NO INVESTMENT DIRECTION.—A program
shall not be treated as a qualified State tuition pro-
gram unless it provides that any contributor to, or
designated beneficiary under, such program may not
direct the investment of any contributions to the pro-
gram (or any earnings thereon).
‘‘(6) NO PLEDGING OF INTEREST AS SECURITY.—
A program shall not be treated as a qualified State
tuition program if it allows any interest in the pro-
gram or any portion thereof to be used as security for
a loan.
‘‘(c) TAX
TREATMENT
OF
DESIGNATED
BENE-
FICIARIES AND CONTRIBUTORS.—
‘‘(1) IN GENERAL.—Except as otherwise provided
in this subsection, no amount shall be includible in
gross income of—
571
‘‘(A) a designated beneficiary under a
qualified State tuition program, or
‘‘(B) a contributor to such program on be-
half of a designated beneficiary,
with respect to any contribution to, or earnings
under, such program.
‘‘(2) DISTRIBUTIONS.—
‘‘(A) IN GENERAL.—Any distribution under
a qualified State tuition program shall be in-
cludible in the gross income of the distributee in
the same manner as provided under section 72
to the extent not excluded from gross income
under any other provision of this chapter.
‘‘(B) IN-KIND
DISTRIBUTIONS.—The fur-
nishing of education to a designated beneficiary
under a qualified State tuition program shall be
treated as a distribution to the beneficiary.
‘‘(C) CHANGE IN BENEFICIARIES.—
‘‘(i) ROLLOVERS.—Subparagraph (A)
shall not apply to that portion of any dis-
tribution which, within 60 days of such dis-
tribution, is transferred to the credit of an-
other designated beneficiary under a quali-
fied State tuition program who is a member
of the same family as the designated bene-