Title: Stop Taxing Death and Disability Act
Policy area: Taxation

Summary:
Stop Taxing Death and Disability Act
This bill amends the Internal Revenue Code to exclude from the gross income of an individual the discharge of student loans or private education loans due to the death or disability of the student.
The bill also amends the Higher Education Act of 1965 to require the Department of Education (ED) to discharge the liability on loans that parents received on behalf of a student who: (1) has become permanently and totally disabled, or (2) is unable to engage in any substantial gainful activity due to a physical or mental impairment that can be expected to result in death or has lasted or is expected to last continuously for at least 60 months. (Under current law, ED is required to discharge the loans to parents if the student dies.)

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 405 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  1st Session
                                 S. 405

To amend the Internal Revenue Code of 1986 and the Higher Education Act 
     of 1965 to provide an exclusion from income for student loan 
       forgiveness for students who have died or become disabled.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 16, 2017

   Mr. Coons (for himself, Mr. King, Mr. Portman, Ms. Stabenow, Mr. 
   Isakson, Mr. Blumenthal, Mr. Hoeven, Mr. Carper, Mr. Gardner, Mr. 
  Kaine, Mrs. Feinstein, Mrs. Murray, and Ms. Collins) 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 and the Higher Education Act 
     of 1965 to provide an exclusion from income for student loan 
       forgiveness for students who have died or become disabled.

    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 ``Stop Taxing Death and Disability 
Act''.

SEC. 2. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH OR 
              DISABILITY.

    (a) Amendments to Internal Revenue Code of 1986.--
            (1) In general.--Section 108(f) of the Internal Revenue 
        Code of 1986 is amended by adding at the end the following new 
        paragraph:
            ``(5) Discharges on account of death or disability.--
                    ``(A) In general.--In the case of an individual, 
                gross income does not include any amount which (but for 
                this subsection) would be includible in gross income by 
                reasons of the discharge (in whole or in part) of any 
                loan described in subparagraph (B) if such discharge 
                was--
                            ``(i) pursuant to subsection (a) or (d) of 
                        section 437 of the Higher Education Act of 1965 
                        or the parallel benefit under part D of title 
                        IV of such Act (relating to the repayment of 
                        loan liability),
                            ``(ii) pursuant to section 464(c)(1)(F) of 
                        such Act, or
                            ``(iii) otherwise discharged on account of 
                        the death or total and permanent disability of 
                        the student.
                    ``(B) Loans described.--A loan is described in this 
                subparagraph if such loan is--
                            ``(i) a student loan (as defined in 
                        paragraph (2)), or
                            ``(ii) a private education loan (as defined 
                        in section 140(7) of the Consumer Credit 
                        Protection Act (15 U.S.C. 1650(7))).''.
            (2) Effective date.--The amendment made by this section 
        shall apply to discharges of indebtedness after December 31, 
        2016.
    (b) Amendment to the Higher Education Act of 1965.--Section 437(d) 
of the Higher Education Act of 1965 (20 U.S.C. 1087(d)) is amended by 
inserting ``or becomes permanently and totally disabled (as determined 
in accordance with regulations of the Secretary), or if the student is 
unable to engage in any substantial gainful activity by reason of any 
medically determinable physical or mental impairment that can be 
expected to result in death, has lasted for a continuous period of not 
less than 60 months, or can be expected to last for a continuous period 
of not less than 60 months'' after ``dies''.
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