Title: 529 Expansion and Modernization Act of 2018
Policy area: Taxation

Summary:
529 Expansion and Modernization Act of 2018
This bill allows tax-exempt distributions from qualified tuition programs (known as 529 plans) to be used for:
The bill also allows employers to make contributions to an employee's 529 plan as a fringe benefit that is excluded from the gross income of the employee. The contributions per employee may not exceed $500 per year (adjusted for inflation after 2019) and must be made in connection with a payroll deduction contribution program.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 3228 Introduced in Senate (IS)]

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115th CONGRESS
  2d Session
                                S. 3228

To amend the Internal Revenue Code of 1986 to provide for distributions 
 from 529 programs to pay apprenticeship and qualified early education 
                   expenses, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 17, 2018

  Mr. Gardner introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide for distributions 
 from 529 programs to pay apprenticeship and qualified early education 
                   expenses, 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 ``529 Expansion and Modernization Act 
of 2018''.

SEC. 2. EXPANSION OF 529 PROGRAM EXPENSES.

    (a) Distributions From Qualified Tuition Programs for Certain 
Expenses Associated With Registered Apprenticeship Programs.--Section 
529(e)(3) of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new subparagraph:
                    ``(C) Certain expenses associated with registered 
                apprenticeship programs.--The term `qualified higher 
                education expenses' shall include books, supplies, and 
                equipment required for the enrollment or attendance of 
                a designated beneficiary in an apprenticeship program 
                registered and certified with the Secretary of Labor 
                under section 1 of the National Apprenticeship Act (29 
                U.S.C. 50).''.
    (b) Special Rules for 529 Programs With Respect to Qualified Early 
Education Expenses.--Section 529(e)(3) of the Internal Revenue Code of 
1986, as amended by subsection (c), is amended by adding at the end the 
following new subparagraph:
                    ``(D) Special rules permitting limited treatment of 
                qualified early education expenses.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), qualified early education expenses 
                        shall be treated as qualified higher education 
                        expenses.
                            ``(ii) Limitation.--If the aggregate amount 
                        of cash distributions from all qualified 
                        tuition programs described in subsection 
                        (b)(1)(A)(ii) with respect to a beneficiary for 
                        qualified early education expenses during any 
                        taxable year exceeds $10,000, such excess shall 
                        be treated for purposes of subsection (c)(3) as 
                        distributions in excess of the qualified higher 
                        education expenses of the beneficiary.
                            ``(iii) Qualified early education 
                        expenses.--For purposes of this subparagraph, 
                        the term `qualified early education expenses' 
                        means expenses for providing educational and 
                        other care to a child under age 5 (including 
                        childcare provided before and after school), as 
                        determined under the law of the State, pursuant 
                        to attendance at a school or facility licensed 
                        in the State for such purpose.''.
    (c) Career and Technical Education Expenses.--Section 529(e)(3) of 
the Internal Revenue Code of 1986, as amended by the preceding 
subsections, is amended by adding at the end the following new 
subparagraph:
                    ``(E) Treatment of career and technical education 
                expenses.--Such term shall include expenses for books, 
                supplies, and equipment required for enrollment or 
                attendance of a designated beneficiary in a career and 
                technical education program (as defined in section 3 of 
                the Carl D. Perkins Career and Technical Education Act 
                of 2006 (20 U.S.C. 2302)).''.
    (d) Industry Intermediary Education Expenses.--Section 529(e)(3) of 
the Internal Revenue Code of 1986, as amended by the preceding 
subsections, is amended by adding at the end the following new 
subparagraph:
                    ``(F) Treatment of industry intermediary education 
                expenses.--
                            ``(i) In general.--Such term shall include 
                        expenses for books, supplies, and equipment 
                        required for enrollment or attendance of a 
                        designated beneficiary in an industry 
                        intermediary education program.
                            ``(ii) Industry intermediary education 
                        program.--For purposes of this subparagraph, 
                        the term `industry intermediary education 
                        program' means any entity that--
                                    ``(I) in order to accelerate 
                                apprenticeship program development and 
                                help establish new apprenticeship 
                                partnerships at the national, State, or 
                                regional level, serves as a conduit 
                                between an employer and an entity, such 
                                as an industry partner, the Department 
                                of Labor, or a State agency responsible 
                                for workforce development programs,
                                    ``(II) demonstrates a capacity to 
                                work with employers and other key 
                                partners to identify workforce trends 
                                and foster public-private funding to 
                                establish new apprenticeship programs, 
                                and
                                    ``(III) is a business, a consortium 
                                of businesses, a business-related 
                                nonprofit organization (including 
                                industry associations and business 
                                federations), a private organization 
                                functioning as a workforce intermediary 
                                for the express purpose of serving the 
                                needs of businesses (including 
                                community-based nonprofit service 
                                providers and industry-aligned training 
                                providers), or a consortium of any of 
                                such entities.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to contributions made and distributions paid after December 31, 
2018.

SEC. 3. EMPLOYER CONTRIBUTIONS TO QUALIFIED TUITION PROGRAMS.

    (a) In General.--Subsection (a) of section 132 of the Internal 
Revenue Code of 1986 is amended by striking ``or'' at the end of 
paragraph (7), by striking the period at the end of paragraph (8) and 
inserting ``, or'', and by adding at the end the following new 
paragraph:
            ``(9) qualified tuition program contributions.''.
    (b) Qualified Tuition Program Contributions.--Section 132 of the 
Internal Revenue Code of 1986 is amended by redesignating subsection 
(o) as subsection (p) and by inserting after subsection (n) the 
following new subsection:
    ``(o) Qualified Tuition Program Contributions.--For purposes of 
this section--
            ``(1) In general.--The term `qualified tuition program 
        contributions' means contributions (including matching 
        contributions) made by an employer directly to a qualified 
        tuition program (as described in section 529) designated by an 
        employee if--
                    ``(A) such contribution is made to an account under 
                such program for which the designated beneficiary is 
                the employee or a member of the family of the employee 
                (within the meaning of section 529(e)(2)), and
                    ``(B) such contribution is made in connection with 
                a qualified payroll deduction contribution program 
                established by the employer.
            ``(2) Qualified payroll deduction contribution program.--
        For purposes of this subsection, the term `qualified payroll 
        deduction contribution program' means a program established by 
        an employer--
                    ``(A) under which employees may elect to make 
                contributions to accounts described in paragraph (1)(A) 
                which reduce the amount of wages received directly by 
                such employee by the amount of such contribution, and
                    ``(B) which is made available on substantially the 
                same terms to each member of a group of employees which 
                is defined under a reasonable classification set up by 
                the employer which does not discriminate in favor of 
                highly compensated employees (as defined in section 
                414(q)).
            ``(3) Limitation on exclusion.--The amount of qualified 
        tuition program contributions which may be excluded from gross 
        income under subsection (a)(9) with respect to any employee 
        shall not exceed $500 in any calendar year.
            ``(4) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2019, the $500 
                amount contained in paragraph (3) shall be increased by 
                an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2018' 
                        for `calendar year 2016' in subparagraph 
                        (A)(ii) thereof.
                    ``(B) Rounding.--Any increase determined under 
                subparagraph (A) shall be rounded to the nearest 
                multiple of $25.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions made after December 31, 2018.
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