Skills Investment Act of 2021
Bill: H.R.1242 | Sponsor: Rep. Kilmer, Derek (D-WA)
Policy area: Taxation

Summary:
Skills Investment Act of 2021
This bill expands tax-favored Coverdell education savings accounts to allow the accounts to be used for educational or skill development expenses such as training services, career and technical education activities, career services, youth workforce investment activities, and adult education and literacy activities.
The bill also

To amend the Internal Revenue Code of 1986 to provide for lifelong 
               learning 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 ``Skills Investment Act of 2021''.

SEC. 2. COVERDELL LIFELONG LEARNING ACCOUNTS.

    (a) In General.--
            (1) Renaming of coverdell education savings accounts.--
        Section 530 of the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``Coverdell education savings 
                account'' each place it appears and inserting 
                ``Coverdell lifelong learning account''; and
                    (B) by striking ``coverdell education savings 
                accounts'' in the heading and inserting ``coverdell 
                lifelong learning accounts''.
            (2) Conforming amendments.--
                    (A) Section 26(b)(2)(E) of the Internal Revenue 
                Code of 1986 is amended by striking ``Coverdell 
                education savings accounts'' and inserting ``Coverdell 
                lifelong learning accounts''.
                    (B) Section 72(e)(9) of such Code is amended--
                            (i) by striking ``Coverdell education 
                        savings account'' and inserting ``Coverdell 
                        lifelong learning account''; and
                            (ii) by striking ``Coverdell education 
                        savings account'' in the heading and inserting 
                        ``Coverdell lifelong learning account''.
                    (C) Section 135(c)(2)(C) of such Code is amended--
                            (i) by striking ``Coverdell education 
                        savings account'' and inserting ``Coverdell 
                        lifelong learning account''; and
                            (ii) by striking ``Coverdell education 
                        savings account'' in the heading and inserting 
                        ``Coverdell lifelong learning account''.
                    (D) Section 408A(e)(2)(A)(ii) of such Code is 
                amended by striking ``Coverdell education savings 
                account'' and inserting ``Coverdell lifelong learning 
                account''.
                    (E) Section 529(c) of such Code is amended--
                            (i) by striking ``Coverdell education 
                        savings accounts'' in the heading of paragraph 
                        (3)(B)(vi) and inserting ``Coverdell lifelong 
                        learning account''; and
                            (ii) by striking ``an Coverdell education 
                        savings account'' in paragraph (6) and 
                        inserting ``a Coverdell lifelong learning 
                        account''.
                    (F) Section 877A(e)(2) of such Code is amended by 
                striking ``Coverdell education savings account'' and 
                inserting ``Coverdell lifelong learning account''.
                    (G) Section 4973 of such Code is amended--
                            (i) by striking ``Coverdell education 
                        savings account'' each place it appears in 
                        subsections (a)(4) and (e)(2)(A) and inserting 
                        ``Coverdell lifelong learning account'';
                            (ii) by striking ``Coverdell education 
                        savings accounts'' in subsection (e)(1) and 
                        inserting ``Coverdell lifelong learning 
                        accounts''; and
                            (iii) by striking ``Coverdell Education 
                        Savings Accounts'' in the heading of subsection 
                        (e) and inserting ``Coverdell Lifelong Learning 
                        Account''.
                    (H) Section 4975 of such Code is amended--
                            (i) by striking ``Coverdell education 
                        savings account'' each place it appears in 
                        subsections (c)(5) and (e)(1)(F) and inserting 
                        ``Coverdell lifelong learning account''; and
                            (ii) by striking ``Coverdell education 
                        savings accounts'' in the heading of subsection 
                        (c)(5) and inserting ``Coverdell lifelong 
                        learning accounts''.
                    (I) Section 6693(a)(2)(F) of such Code is amended 
                by striking ``Coverdell education savings accounts'' 
                and inserting ``Coverdell lifelong learning accounts''.
                    (J) The table of sections for part VIII of 
                subchapter F of chapter 1 of such Code is amended by 
                striking ``Coverdell education savings accounts'' and 
                inserting ``Coverdell lifelong learning accounts''.
            (3) Treatment of existing accounts.--For purposes of 
        section 530(b)(1) of the Internal Revenue Code of 1986, any 
        account established before January 1, 2021, and designated as a 
        Coverdell education savings account shall be deemed to have 
        been designated as a Coverdell lifelong learning account.
    (b) Expanded Use of Accounts.--
            (1) Eligible expenses.--
                    (A) In general.--Section 530(b)(2)(A) of the 
                Internal Revenue Code of 1986 is amended by striking 
                ``and'' at the end of clause (i), by striking the 
                period at the end of clause (ii) and inserting ``, 
                and'', and by adding at the end the following new 
                clause:
                            ``(iii) qualified educational or skill 
                        development expenses (as defined in paragraph 
                        (5)).''.
                    (B) Qualified educational or skill development 
                expenses.--Section 530(b) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(5) Qualified educational or skill development 
        expenses.--The term `qualified educational or skill development 
        expenses' means--
                    ``(A) expenses paid or incurred--
                            ``(i) after the beneficiary attains age 16, 
                        and
                            ``(ii) for participation or enrollment of 
                        the beneficiary in services or activities that 
                        are--
                                    ``(I) training services described 
                                in section 134(c)(3)(D) of the 
                                Workforce Innovation and Opportunity 
                                Act (29 U.S.C. 3174(c)(3)(D)) that are 
                                offered by a provider included on the 
                                list of eligible providers of training 
                                services described in section 122 of 
                                such Act (29 U.S.C. 3152),
                                    ``(II) career and technical 
                                education activities defined in section 
                                3 of the Carl D. Perkins Career and 
                                Technical Education Act of 2006 (20 
                                U.S.C. 2302) that are offered through 
                                an eligible institution (as defined in 
                                such section),
                                    ``(III) career services described 
                                in clauses (iii), (iv), and (xi) of 
                                section 134(c)(2)(A) of the Workforce 
                                Innovation and Opportunity Act (29 
                                U.S.C. 3174(c)(2)(A)) that are provided 
                                by providers eligible under section 
                                134(c)(2)(C) of such Act,
                                    ``(IV) youth activities described 
                                in section 129(c)(2) of the Workforce 
                                Innovation and Opportunity Act (29 
                                U.S.C. 3164(c)(2)) that are provided by 
                                eligible providers of youth workforce 
                                investment activities under section 123 
                                of such Act, or
                                    ``(V) adult education and literacy 
                                activities, as defined in section 203 
                                of the Adult Education and Family 
                                Literacy Act (29 U.S.C. 3272), that are 
                                provided by eligible providers of adult 
                                education and literacy activities under 
                                section 231 of such Act (29 U.S.C. 
                                3321),
                    ``(B) expenses for transportation required for or 
                provided by any of the services or activities described 
                in subparagraph (A),
                    ``(C) expenses for testing necessary for enrollment 
                in, or certification in connection with, services or 
                activities described in subparagraph (A), or
                    ``(D) expenses for the purchase of any computer 
                software (as defined by section 197(e)(3)(B)), computer 
                or peripheral equipment (as defined by section 
                168(i)(2)(B)), fiber optic cable related to computer 
                use, internet access and related services, if such 
                software, equipment, or services are to be used by the 
                beneficiary for services or activities described in 
                subparagraph (A) during any of the years the 
                beneficiary is participating in or enrolled in any of 
                the services or activities described in subparagraph 
                (A).''.
    (c) Modification of Rules Relating to Age Restrictions and 
Contributions.--
            (1) $10,000 account limit after age 30.--
                    (A) In general.--Subparagraph (E) of section 
                530(b)(1) of the Internal Revenue Code of 1986 is 
                amended by inserting ``in excess of $10,000'' after 
                ``any balance to the credit of the designated 
                beneficiary''.
                    (B) Contribution limit.--Paragraph (1) of section 
                530(b) of such Code is amended by striking ``or'' at 
                the end of clause (ii), by striking the period at the 
                end of clause (iii) and inserting ``, or'', and by 
                adding at the end the following new clause:
                            ``(iv) in the case of a beneficiary who is 
                        over the age of 30, if such contribution would 
                        result in the balance of the account exceeding 
                        $10,000.''.
            (2) Increased age limit for contributions.--Clause (ii) of 
        section 530(b)(1)(A) of the Internal Revenue Code of 1986 is 
        amended by striking ``age 18'' and inserting ``age 70''.
            (3) Increased contribution limitation for individuals over 
        age 30.--
                    (A) In general.--Section 530(b)(1)(A)(iii) of the 
                Internal Revenue Code of 1986 is amended by inserting 
                ``($4,000 in the case of an account the designated 
                beneficiary of which has attained age of 30 before the 
                end of the taxable year)'' after ``$2,000''.
                    (B) Conforming amendment.--Section 4973(e)(1)(A) of 
                such Code is amended by striking ``$2,000'' and 
                inserting ``the limitation applicable under section 
                530(b)(1)(A)(iii)''.
            (4) No change in beneficiary after age 30.--Paragraph (6) 
        of section 530(d) of the Internal Revenue Code of 1986 is 
        amended by striking ``shall not be treated as a distribution 
        for purposes of paragraph (1) if the new beneficiary'' and 
        inserting ``shall not be treated as a distribution for purposes 
        of paragraph (1) if--
                    ``(A) the old beneficiary has not attained age 30 
                before the date of the change in beneficiary, and
                    ``(B) the new beneficiary''.
    (d) Credit for Employer Contributions.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following new section:

``SEC. 45U. EMPLOYEE EDUCATIONAL SKILLS AND DEVELOPMENT EXPENSES.

    ``(a) General Rule.--For purposes of section 38, the employee 
educational skills and development contribution credit determined under 
this section for any taxable year is 25 percent of the nonelective 
contributions made by the taxpayer during the taxable year to a 
Coverdell lifelong learning account (as defined in section 530(b)) the 
designated beneficiary of which is an employee of the taxpayer.
    ``(b) Special Rules and Definitions.--For purposes of this 
section--
            ``(1) Employee.--
                    ``(A) Certain employees excluded.--The term 
                `employee' shall not include--
                            ``(i) an employee within the meaning of 
                        section 401(c)(1),
                            ``(ii) any 2-percent shareholder (as 
                        defined in section 1372(b)) of an S 
                        corporation,
                            ``(iii) any 5-percent owner (as defined in 
                        section 416(i)(1)(B)(i)) of taxpayer, or
                            ``(iv) any individual who bears any of the 
                        relationships described in subparagraphs (A) 
                        through (G) of section 152(d)(2) to, or is a 
                        dependent described in section 152(d)(2)(H) of, 
                        an individual described in clause (i), (ii), or 
                        (iii).
                    ``(B) Leased employees.--The term `employee' shall 
                include a leased employee within the meaning of section 
                414(n).
            ``(2) Nonelective contribution.--The term `nonelective 
        contribution' means an employer contribution other than an 
        employer contribution pursuant to a salary reduction 
        arrangement.
            ``(3) Aggregation and other rules made applicable.--
                    ``(A) Aggregation rules.--All employers treated as 
                a single employer under subsection (b), (c), (m), or 
                (o) of section 414 shall be treated as a single 
                employer for purposes of this section.
                    ``(B) Other rules.--Rules similar to the rules of 
                subsections (c), (d), and (e) of section 52 shall 
                apply.''.
            (2) Credit treated as part of general business credit.--
        Section 38(b) of such Code is amended by striking ``plus'' at 
        the end of paragraph (32), by striking the period at the end of 
        paragraph (33) and inserting ``, plus'', and by adding at the 
        end the following new paragraph:
            ``(34) the employee educational skills and development 
        contribution credit determined under section 45U(a).''.
            (3) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 of such Code is 
        amended by adding at the end the following new item:

``Sec. 45U. Employee educational skills and development expenses.''.
    (e) Allowance of Deduction for Beneficiary.--
            (1) In general.--Part VIII of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by redesignating 
        section 224 as section 225 and by inserting after section 223 
        the following new section:

``SEC. 224. COVERDELL LIFELONG LEARNING ACCOUNT CONTRIBUTIONS.

    ``(a) In General.--In the case of an individual who--
            ``(1) is the designated beneficiary of a Coverdell lifelong 
        learning account (as defined in section 530(b)(1)), and
            ``(2) has attained the age of 18 before the close of the 
        taxable year,
there shall be allowed as a deduction an amount equal to the 
contributions for the taxable year by or on behalf of such individual 
to the account described in paragraph (1).
    ``(b) Recontributed Amounts.--No deduction shall be allowed under 
this section with respect to a rollover contribution described in 
section 530(d)(5).''.
            (2) Increase in additional tax.--
                    (A) Increase.--
                            (i) In general.--Section 530(d)(4)(A) of 
                        the Internal Revenue Code of 1986 is amended by 
                        striking ``10 percent'' and inserting ``20 
                        percent''.
                            (ii) Conforming amendment.--Section 
                        529(c)(6) of such Code is amended by inserting 
                        ``, except that `10 percent' shall be 
                        substituted for `20 percent' in subparagraph 
                        (A) thereof'' before the period at the end of 
                        the first sentence.
                    (B) Modification of tax treatment of deductible 
                contributions.--Paragraph (1) of section 530(d) is 
                amended to read as follows:
            ``(1) Inclusion in gross income.--
                    ``(A) In general.--Any distribution shall be 
                includible in the gross income of the distributee as 
                follows:
                            ``(i) So much of the distribution as is 
                        equal to or less than the deductible amount 
                        shall be fully included in gross income.
                            ``(ii) So much of the distribution which 
                        exceeds the deductible amount shall be included 
                        in gross income in the manner as provided in 
                        section 72 (determined by applying such section 
                        without regard to any amounts to which clause 
                        (i) applies).
                    ``(B) Deductible amount.--For purposes of this 
                paragraph, the term `deductible amount' means the 
                excess of--
                            ``(i) the sum of contributions to the 
                        account for which a deduction was allowed under 
                        section 224 in such year and any preceding 
                        taxable year, over
                            ``(ii) the amount of distributions to which 
                        subparagraph (A)(i) applied to in any preceding 
                        taxable year.''.
            (3) Clerical amendment.--The table of sections for part 
        VIII of subchapter B of chapter 1 of such Code is amended by 
        redesignating the item relating to section 224 as relating to 
        section 225 and by inserting after the item relating to section 
        223 the following new item:

``Sec. 224. Coverdell lifelong learning account contributions.''.
    (f) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect on January 1, 2021.
            (2) Eligible expenses.--The amendments made by subsection 
        (b) shall apply to distributions made after December 31, 2021.
            (3) Contributions.--The amendments made by paragraphs 
        (1)(B) and (2) of subsection (c) shall apply to contributions 
        made after December 31, 2021.
            (4) Employer contribution credit and beneficiary 
        deductions.--The amendments made by subsections (d) and (e) 
        shall apply to taxable years beginning after December 31, 2021.
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