H. R. 2646
One Hundred Fifth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the twenty-seventh day of January, one thousand nine hundred and ninety-eight
An Act
To amend the Internal Revenue Code of 1986 to allow tax-free expenditures from
education individual retirement accounts for elementary and secondary school
expenses, to increase the maximum annual amount of contributions to such
accounts, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Education Savings and School
Excellence Act of 1998’’.
TITLE I—TAX INCENTIVES FOR
EDUCATION
SEC. 100. AMENDMENT TO 1986 CODE.
Except as otherwise expressly provided, whenever in this title
an amendment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference shall
be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
Subtitle A—Tax Incentives For Education
SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT
ACCOUNTS.
(a) TAX-FREE EXPENDITURES FOR ELEMENTARY AND SECONDARY
SCHOOL EXPENSES.—
(1) IN
GENERAL.—Section 530(b)(2) (defining qualified
higher education expenses) is amended to read as follows:
‘‘(2) QUALIFIED EDUCATION EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified education
expenses’ means—
‘‘(i) qualified higher education expenses (as defined
in section 529(e)(3)); and
‘‘(ii) qualified elementary and secondary education
expenses (as defined in paragraph (4)).
Such expenses shall be reduced as provided in section
25A(g)(2).
‘‘(B) QUALIFIED STATE TUITION PROGRAMS.—Such term
shall include amounts paid or incurred to purchase tuition
credits or certificates, or to make contributions to an
account, under a qualified State tuition program (as defined
H. R. 2646—2
in section 529(b)) for the benefit of the beneficiary of the
account.’’.
(2) QUALIFIED
ELEMENTARY
AND
SECONDARY
EDUCATION
EXPENSES.—Section 530(b) (relating to definitions and special
rules) is amended by adding at the end the following new
paragraph:
‘‘(4) QUALIFIED ELEMENTARY AND SECONDARY EDUCATION
EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘qualified elementary and
secondary education expenses’ means—
‘‘(i) expenses for tuition, fees, academic tutoring,
special needs services, books, supplies, computer equip-
ment (including related software and services), and
other equipment which are incurred in connection with
the enrollment or attendance of the designated bene-
ficiary of the trust as an elementary or secondary
school student at a public, private, or religious school;
or
‘‘(ii) expenses for room and board, uniforms,
transportation, and supplementary items and services
(including extended day programs) which are required
or provided by a public, private, or religious school
in connection with such enrollment or attendance.
‘‘(B) SPECIAL RULE FOR HOMESCHOOLING.—Such term
shall include expenses described in subparagraph (A)(i)
in connection with education provided by homeschooling
if the requirements of any applicable State or local law
are met with respect to such education.
‘‘(C) SCHOOL.—The term ‘school’ means any school
which provides elementary education or secondary edu-
cation (kindergarten through grade 12), as determined
under State law.’’.
(3) 
SPECIAL
RULES
FOR
APPLYING
EXCLUSION
TO
ELEMENTARY
AND
SECONDARY
EXPENSES.—Section 530(d)(2)
(relating to distributions for qualified higher education
expenses), as amended by subsection (e), is amended by adding
at the end the following new subparagraph:
‘‘(E) SPECIAL RULES FOR ELEMENTARY AND SECONDARY
EXPENSES.—
‘‘(i) IN GENERAL.—The aggregate amount of quali-
fied elementary and secondary education expenses
taken into account for purposes of this paragraph with
respect to any education individual retirement account
for all taxable years shall not exceed the sum of the
aggregate contributions to such account for taxable
years beginning after December 31, 1998, and before
January 1, 2003, and earnings on such contributions.
‘‘(ii) SPECIAL OPERATING RULES.—For purposes of
clause (i)—
‘‘(I) the trustee of an education individual
retirement account shall keep separate accounts
with 
respect 
to 
contributions 
and 
earnings
described in clause (i); and
‘‘(II) if there are distributions in excess of
qualified elementary and secondary education