(2) CHARITABLE CONTRIBUTIONS.—
(A) Subparagraph (B) of section 170(c)(2)
of such Code is amended by inserting ‘‘, or
which is a qualified State education savings
plan (as defined in section 137(c)(2)),’’ after
‘‘animals’’.
(B) Section 170(b)(1)(A) of such Code is
amended by striking ‘‘or’’ at the end of clause
(vii), by inserting ‘‘or’’ at the end of clause
(viii) and by inserting after clause (viii) the fol-
lowing new clause:
‘‘(ix) a qualified State educational
savings 
plan 
(as 
defined 
in 
section
137(c)(2)).’’
(c) CONTRIBUTION NOT SUBJECT TO GIFT TAX.—
Section 2503 of such Code (relating to taxable gifts) is
amended by adding at the end thereof the following new
subsection:
‘‘(h) EDUCATION SAVINGS ACCOUNTS.—Any con-
tribution made by an individual to an education savings
account described in section 137 shall not be treated as
a transfer of property by gift for purposes of this chap-
ter.’’
(d) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR EDUCATION SAVINGS
ACCOUNTS.—An individual for whose benefit an edu-
cation savings account is established and any con-
tributor to such account shall be exempt from the
tax imposed by this section with respect to any
transaction concerning such account (which would
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
an education savings account by reason of the appli-
cation of section 137(d)(2)(A) to such account.’’,
and
(2) by inserting ‘‘, an education savings account
described in section 137(c),’’ in subsection (e)(1)
after ‘‘described in section 408(a)’’.
(e) FAILURE TO PROVIDE REPORTS ON EDUCATION
SAVINGS ACCOUNTS.—Section 6693 of such Code (relat-
ing to failure to provide reports on individual retirement
accounts or annuities) is amended—
(1) by inserting ‘‘OR ON EDUCATION SAV-
INGS
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the
heading of such section, and
(2) by adding at the end of subsection (a) the
following new sentence: ‘‘Any person required by
section 137(e) to file a report regarding an edu-
cation savings account who fails to file the report at
the time or in the manner required by such section
shall pay a penalty of $50 for each failure, unless
it is shown that such failure is due to reasonable
cause.’’
(f) SPECIAL RULE FOR DETERMINING AMOUNTS OF
SUPPORT FOR DEPENDENT.—Subsection (b) of section
152 of such Code (relating to definition of dependent) is
amended by adding at the end the following new para-
graph:
‘‘(6) A distribution from an education savings
account described in section 137(c) to the individual
for whose benefit such account has been established
shall not be taken into account in determining sup-
port for purposes of this section to the extent such
distribution is excluded from gross income of such
individual under section 137.’’
(g) CLERICAL AMENDMENTS.—
(1) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by
striking out the item relating to section 137 and in-
serting the following new items:
‘‘Sec. 137. Education savings accounts.
‘‘Sec. 138. Cross references to other Acts.’’
(2) The table of sections for subchapter B of
chapter 68 of such Code is amended by striking out
the item relating to section 6693 and inserting the
following new item:
‘‘Sec. 6693. Failure to provide reports on individual retirement
accounts or annuities or on education savings ac-
counts.’’
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions made in taxable
years beginning after December 31, 1993.
Æ