I 
114TH CONGRESS 
1ST SESSION H. R. 3432 
To provide the legal framework and income tax treatment necessary for 
the growth of innovative private financing options for students to fund 
postsecondary education, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 29, 2015 
Mr. YOUNG of Indiana (for himself and Mr. POLIS) introduced the following 
bill; which was referred to the Committee on Ways and Means, and in 
addition to the Committees on Education and the Workforce and 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 provide the legal framework and income tax treatment 
necessary for the growth of innovative private financing 
options for students to fund postsecondary education, 
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. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Investing in Student Success Act of 2015’’. 
(b) TABLE OF CONTENTS.— 
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Sec. 1. Short title and table of contents. 
TITLE I—TAX TREATMENT OF INCOME-SHARE AGREEMENTS 
Sec. 101. Definition of ‘‘income-share agreement’’. 
Sec. 102. Tax treatment of proceeds and payments of future income. 
Sec. 103. Terms and conditions of income-share agreement contracts. 
Sec. 104. Rulemaking; model disclosure forms. 
TITLE II—TREATMENT OF INCOME-SHARE AGREEMENTS UNDER 
STATE LAW 
Sec. 201. Purpose; lawfulness of contracts; preemption of State law. 
Sec. 202. Preemption of State law with respect to usury. 
Sec. 203. Definitions. 
TITLE III—QUALIFIED EDUCATION LOAN 
Sec. 301. Qualified Education loan. 
TITLE IV—FEDERAL INDIVIDUAL ASSISTANCE TREATMENT OF 
INCOME-SHARE AGREEMENTS 
Sec. 401. Proceeds not treated as income in calculation of financial need under 
the higher education act of 1965. 
TITLE V—INVESTMENT COMPANY TREATMENT 
Sec. 501. Businesses making income-share agreements excluded from invest-
ment company treatment. 
TITLE I—TAX TREATMENT OF 
INCOME-SHARE AGREEMENTS 
SEC. 101. DEFINITION OF ‘‘INCOME-SHARE AGREEMENT’’. 
For purposes of this title, the term ‘‘income-share 
agreement’’ means an agreement between an individual 
and any other person under which the individual commits 
to pay a specified percentage of the individual’s future in-
come, for a specified period of time, in exchange for pay-
ments to or on behalf of such individual for use only for 
costs associated with postsecondary education, as the reg-
ulations issued pursuant to section 104(a) shall provide 
and which shall include the costs of any items and ex-
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penses included as costs of attendance under section 472 
of the Higher Education Act of 1965 (20 U.S.C. 1087ll). 
SEC. 102. TAX TREATMENT OF PROCEEDS AND PAYMENTS 
OF FUTURE INCOME. 
(a) EXCLUSION FROM GROSS INCOME OF INCOME- 
SHARE AGREEMENT PROCEEDS.—Payments made under 
an income-share agreement that complies with the require-
ments of section 103 to or on behalf of the individual who 
commits to pay a specified percentage of such individual’s 
future income to another person under such agreement, 
and any difference in value of the payments to or on behalf 
of such individual and the total amount paid by such indi-
vidual, shall not be includible in the gross income of such 
individual for purposes of the Internal Revenue Code of 
1986. 
(b) TREATMENT
OF PAYMENTS
OF FUTURE IN-
COME.—Payments of future income received by another 
person under an income-share agreement that complies 
with the requirements of section 103 shall be treated for 
purposes of the Internal Revenue Code of 1986— 
(1) first, with respect to so much of such pay-
ments as does not exceed the amount of the pay-
ments to which subsection (a) applies with respect to 
such agreement, as a repayment of investment in the 
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contract which reduces the holder’s basis in such 
agreement, and 
(2) second, as income on the contract which is 
includible in gross income. 
SEC. 103. TERMS AND CONDITIONS OF INCOME-SHARE 
AGREEMENT CONTRACTS. 
(a) TERMS
AND
CONDITIONS.—An income-share 
agreement complies with the requirements of this section 
only if the contract complies with each of the following 
conditions: 
(1) SPECIFIED PERCENTAGE OF INCOME.—The 
income-share agreement shall specify the percentage 
of future income that the individual subject to the 
agreement will be obligated to pay, except that the 
agreement shall provide that for any year covered by 
such agreement during which the individual has an 
income that is less than $18,000 (as such amount 
is adjusted pursuant to paragraph (8)) the indi-
vidual shall not be required to pay for such year any 
portion of the individual’s income. 
(2) DEFINITION
OF
INCOME.—The income- 
share agreement shall specify the definition of in-
come to be used for purposes of calculating an indi-
vidual’s obligation to pay under the agreement. 
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(3) ANNUAL LIMITATION ON OBLIGATION.—The 
percentage of income required under the income- 
share agreement to be paid by the individual subject 
to the agreement may not exceed a percentage such 
that, when multiplied by $15,000 (as such amount 
is adjusted pursuant to paragraph (8)), the product 
exceeds the aggregate amount of periodic payments 
of principal and interest that would be required to 
be paid during a 12-month period under a com-
parable loan that bears interest at a fixed annual 
rate of 20 percent. 
(4) AGGREGATE LIMITATION ON OBLIGATION.— 
The income-share agreement may not provide for the 
individual subject to the agreement to pay under the 
agreement an amount of the future income of such 
individual that, when added to any other amounts of 
future income that such individual has agreed to pay 
under any other income-share agreements to which 
such individual is subject, equals a sum that at any 
time exceeds 15 percent of the future income of such 
individual. 
(5) TIME-BASED
LIMITATION
ON
OBLIGA-
TION.— 
(A) 
LIMITATION.—The 
income-share 
agreement may not provide for the individual 
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subject to the agreement to assume a commit-
ment to pay future income having a commit-
ment factor, that when added to the commit-
ment factors for any other income-share agree-
ments to which such individual is subject, 
equals a sum that exceeds the maximum com-
mitment factor. 
(B) COMMITMENT
FACTOR.—As used in 
this paragraph, the term ‘‘commitment factor’’ 
means, with respect to an income-share agree-
ment, the product of— 
(i) the percentage (expressed as a dec-
imal) of such future income required to be 
paid during such period; and 
(ii) the remaining number of years 
under the agreement that future income is 
required to be paid at such percentage. 
(C) MAXIMUM COMMITMENT FACTOR.—As 
used in this paragraph, the term ‘‘maximum 
commitment factor’’ means, with respect to an 
income-share agreement, 2.25 (which figure is 
the product of 7.5 percent and the number of 
years in the longest allowable contract under 
paragraph (6)(A)). 
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(6) SPECIFIED DURATION; EXTENSION OF PE-
RIOD.— 
(A) DURATION.—The income-share agree-
ment shall specify the maximum period of time 
during which the individual will be obligated to 
pay a portion of the individual’s future income 
which may not, except as provided in subpara-
graph (B), exceed 360 months. 
(B) EXTENSION OF PERIOD.—The income- 
share agreement may provide that such period 
may be extended by a number of years that is 
equal to the number of years during which the 
agreement is in force for which the individual’s 
annual income is below the dollar amount speci-
fied in paragraph (3)(A) (as such amount is ad-
justed pursuant to paragraph (8)). 
(7) EARLY
TERMINATION.—The income-share 
agreement shall specify the terms and conditions by 
which the individual subject to the agreement may 
extinguish the individual’s obligations under the 
agreement before the end of the payment period 
specified in the agreement and any application ex-
tension provided for in the agreement pursuant to 
paragraph (6)(B). 
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(8) ADJUSTMENT
FOR
INFLATION.—A dollar 
amount adjusted in accordance with this paragraph 
shall be adjusted each year to reflect changes in the 
Consumer Price Index for All Urban Consumers 
published by the Bureau of Labor Statistics of the 
Department of Labor for the most recent 12-month 
period for which such data are available. 
(b) REQUIRED
DISCLOSURES.—An income-share 
agreement does not comply with the requirements of this 
section unless the individual who is committing under the 
agreement to pay future income is provided, before enter-
ing into such agreement, a written document that clearly 
and simply discloses— 
(1) that the agreement is not a debt instru-
ment, and that the amount the individual will be re-
quired to pay under the agreement— 
(A) may be more or less than the amount 
provided to the individual pursuant to the 
agreement; and 
(B) will vary in proportion to the individ-
ual’s future income; 
(2) that the obligations of the individual under 
the agreement are not dischargeable under bank-
ruptcy law, except in a case that would impose an 
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undue hardship on the debtor and the debtor’s de-
pendents; 
(3) whether the obligations of the individual 
under the agreement may be extinguished by accel-
erating payments, and, if so, under what terms; 
(4) the duration of the individual’s obligations 
under the agreement (absent such accelerating pay-
ments), including any circumstances under which 
the duration of the agreement would be extended; 
(5) the percentage of income the individual is 
committing to pay under the agreement and the 
minimum amount of annual income that, pursuant 
to subsection (b)(1), triggers the individual’s obliga-
tion under the agreement to make payments for 
such year; 
(6) the definition of income to be used for pur-
poses of calculating the individual’s obligation under 
the agreement; and 
(7) a comparison of— 
(A) the amounts an individual would be re-
quired to pay under the income-share agree-
ment at a range of annual income levels, which 
income levels shall correspond to the levels the 
individual might reasonably be expected to 
make given the intended use of the funds pro-
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vided under the agreement, as determined in 
accordance with guidance issued by the Sec-
retary of the Treasury; to 
(B) the amounts required to be paid under 
a comparable loan that bears interest at a fixed 
annual rate of 10 percent. 
(c) NON-INTERFERENCE.—An income-share agree-
ment represents an obligation by the individual pay the 
specific percentage of future income, but shall not be con-
strued to give the contract holder any rights over an indi-
vidual’s actions. 
(d) COMPARABLE LOAN.—For purposes of this sec-
tion, the term ‘‘comparable loan’’ means, with respect to 
an income-share agreement, a loan that— 
(1) has the same original principal amount as 
the total amount of the payment or payments made 
under the income-share agreement to or on behalf 
the individual subject to the agreement; 
(2) has the same term to maturity as the dura-
tion of the income-share agreement; and 
(3) is fully amortized over such term with 
monthly payments of principal and interest. 
SEC. 104. RULEMAKING; MODEL DISCLOSURE FORMS. 
(a) IN GENERAL.—The Secretary of the Treasury, in 
consultation with such other agency heads as the Sec-
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retary considers appropriate, may issue such regulations 
as may be necessary to carry out this title. 
(b) MODEL DISCLOSURE FORMS.— 
(1) IN GENERAL.—Not later than the end of 
the 180-day period beginning upon the date of the 
enactment of this Act, the Secretary of the Treas-
ury, after consultation with such other agency heads 
as the Secretary considers appropriate, shall promul-
gate a model disclosure form for the disclosures re-
quired under section 103(b). 
(2) SAFE HARBOR.—Any person who uses the 
model disclosure form promulgated pursuant to 
paragraph (1) and includes accurate information re-
quired under section 103(b) to be disclosed shall be 
deemed to have satisfied the requirements of section 
103(b). 
TITLE II—TREATMENT OF IN-
COME-SHARE 
AGREEMENTS 
UNDER STATE LAW 
SEC. 201. PURPOSE; LAWFULNESS OF CONTRACTS; PRE-
EMPTION OF STATE LAW. 
(a) PURPOSE.—It is the purpose of this title to au-
thorize individuals to enter into income-share agreements 
for the purposes of obtaining funds for postsecondary edu-
cation in exchange for agreeing to pay to the holder of 
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the contract a specified percentage of the individual’s fu-
ture income for a specified period of time. 
(b) LAWFULNESS OF CONTRACTS; PREEMPTION OF 
STATE LAW.—Any income-share agreement that complies 
with the requirements of section 103 shall be a valid, bind-
ing, and enforceable contract notwithstanding any State 
law limiting or otherwise regulating assignments of future 
wages or other income. 
SEC. 202. PREEMPTION OF STATE LAW WITH RESPECT TO 
USURY. 
An income-share agreement that complies with the 
requirements of section 103 shall not be subject to State 
usury laws. 
SEC. 203. DEFINITIONS. 
As used in this title: 
(1) STATE.—The term ‘‘State’’ includes, in ad-
dition to the several States of the Union, the Com-
monwealth of Puerto Rico, the District of Columbia, 
Guam, American Samoa, the Virgin Islands, the 
government of the Northern Mariana Islands, and 
the Trust Territory of the Pacific Islands. 
(2) STATE LAW.—The term ‘‘State law’’ means 
any law, decision, rule, regulation, or other action 
having the effect of a law of any State or any polit-
ical subdivision of a State, or any agency or instru-
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mentality of a State or political subdivision of a 
State, except that a law of the United States appli-
cable only to the District of Columbia shall be treat-
ed as a State law (rather than a law of the United 
States). 
TITLE III—QUALIFIED 
EDUCATION LOAN 
SEC. 301. QUALIFIED EDUCATION LOAN. 
(a) IN GENERAL.—Paragraph (1) of section 221(d) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following: ‘‘Such term includes any in-
come-share agreement (as such term is defined in section 
101 of the Investing in Student Success Act of 2015) that 
complies with the requirements of section 103 of such Act, 
except that payments made by the taxpayer during the 
taxable year to meet an income-share agreement obligation 
shall not be taken into account under subsection (a).’’. 
(b) INFORMATION REPORTING NOT REQUIRED.— 
Subsection (e) of section 6050S of such Code is amended 
by inserting ‘‘(without regard to the last sentence there-
of)’’ after ‘‘section 221(d)(1)’’. 
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TITLE IV—FEDERAL INDIVIDUAL 
ASSISTANCE TREATMENT OF 
INCOME-SHARE AGREEMENTS 
SEC. 401. PROCEEDS NOT TREATED AS INCOME IN CAL-
CULATION OF FINANCIAL NEED UNDER THE 
HIGHER EDUCATION ACT OF 1965. 
No portion of any amounts received by an individual 
for entering into an income-share agreement (as such term 
is defined in section 101 of this Act) that complies with 
the requirements of section 103 of this Act shall be in-
cluded as income or assets in the computation of expected 
family contribution for any program funded in whole or 
in part under the Higher Education Act of 1965 (20 
U.S.C. 1001 et seq.). 
TITLE V—INVESTMENT 
COMPANY TREATMENT 
SEC. 501. BUSINESSES MAKING INCOME-SHARE AGREE-
MENTS EXCLUDED FROM INVESTMENT COM-
PANY TREATMENT. 
Section 3(c) of the Investment Company Act of 1940 
(15 U.S.C. 80a–3(c)) is amended— 
(1) in paragraph (4), by inserting after ‘‘indus-
trial banking,’’ the following: ‘‘income-share agree-
ments (as such term is defined in section 101 of the 
Investing in Student Success Act of 2015),’’; and 
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(2) in paragraph (5), by inserting ‘‘, including 
income-share agreements’’ after ‘‘services’’ each 
place such term appears. 
Æ 
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