A bill to amend the Internal Revenue Code of 1986 to improve 529 plans.

Bill: 114-s-335
Sponsor: full_name: Sen. Grassley, Chuck [R-IA]
Introduced: 2015-02-02
Policy area: Taxation
Subjects: Computers and information technology

Educational technology and distance education

Higher education

Income tax exclusion

Student aid and college costs
Latest action: action_date: 2015-05-21
text: Placed on Senate Legislative Calendar under General Orders. Calendar No. 97.

Summaries:
action_date: 2015-02-02
action_desc: Introduced in Senate
text: <p>This bill amends the Internal Revenue Code, with respect to qualified tuition programs (529 plans), to: (1) make permanent the allowance for payment of computer technology and equipment expenses from a 529 plan if such technology and equipment is to be used primarily by the plan beneficiary (currently, use is allowed by the beneficiary and the beneficiary's family); (2) eliminate the requirement that distributions to a 529 plan be aggregated for purposes of determining the amount includible in a taxpayer's income; and (3) allow a tax-free recontribution to a 529 plan of amounts refunded to a student who withdraws from an educational institution if the recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount. </p>

action_date: 2015-05-21
action_desc: Reported to Senate with amendment(s)
text: <p>(Sec. 2) This section amends the Internal Revenue Code to modify the types of higher education expenses that may be paid from a qualified tuition program (known as a 529 plan) to&nbsp;include expenses for the purchase of computer or peripheral equipment and computer software. This amendment applies to taxable years beginning after December 31, 2014. </p> <p>(Sec. 3) This section repeals, after 2014, the provision of the Internal Revenue Code that requires 529 plan accounts to be aggregated for purposes of calculating the amount of&nbsp;distributions that&nbsp;are&nbsp;includible in taxpayer income. </p> <p>(Sec. 4) This section amends the Internal Revenue Code to provide that a 529 plan beneficiary who receives a refund of higher education expenses after 2014 will not be required to include the amount of such refund in income for tax purposes if such beneficiary recontributes the refunded amount to the 529 plan within 60 days of receiving the refund and the recontribution does not exceed the refunded amount. </p>

tv_txt: II 114th CONGRESS 1st Session S. 335 IN THE SENATE OF THE UNITED STATES February 2, 2015 Mr. Grassley (for himself, Mr. Casey , Mr. Burr , Mr. Warner , Mr. Roberts , and Mr. Cardin ) 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 improve 529 plans.

1. Computer technology and equipment allowed as a qualified higher education expense for section 529 accounts (a) Made permanent Clause (iii) of section 529(e)(3)(A) of the Internal Revenue Code of 1986 is amended by striking in 2009 or 2010 . (b) Only for use primarily by the beneficiary Clause (iii) of section 529(e)(3)(A) of such Code is amended by striking used by the beneficiary and the beneficiary’s family and inserting used primarily by the beneficiary . (c) Effective date The amendments made by this section shall apply to expenses paid or incurred after December 31, 2014. 2. Elimination of distribution aggregation requirements (a) In general Clause (ii) of section 529(c)(3)(D) of the Internal Revenue Code of 1986 is amended by inserting before the comma at the end the following: , except for purposes of calculating the earnings portion of any distribution. . (b) Effective date The amendment made by this section shall apply to distributions after December 31, 2014. 3. Contribution of amounts previously distributed in case of withdrawal from school (a) In general Paragraph (3) of section 529(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph: (E) Special rule for contributions relating to withdrawal from school In the case of a beneficiary who receives a refund of any qualified higher education expenses from an eligible educational institution in connection with withdrawal from enrollment at such institution, subparagraph (A) shall not apply to that portion of any distribution for the taxable year which is recontributed to a qualified tuition program of which such individual is a beneficiary, but only to the extent such recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount. . (b) Effective date The amendment made by this section shall apply with respect to distributions after December 31, 2014.

tv_txt: II Calendar No. 97 114th CONGRESS 1st Session S. 335 [Report No. 114–56] IN THE SENATE OF THE UNITED STATES February 2, 2015 Mr. Grassley (for himself, Mr. Casey , Mr. Burr , Mr. Warner , Mr. Roberts , Mr. Cardin , Mr. Scott , Ms. Ayotte , Mr. Isakson , Mr. McConnell , Ms. Collins , Mr. Schumer , Mrs. Fischer , Mr. Gardner , Mr. Moran , Mr. Wicker , Mr. King , Mr. Portman , Mr. Toomey , and Ms. Murkowski ) introduced the following bill; which was read twice and referred to the Committee on Finance May 21, 2015 Reported by Mr. Hatch , with an amendment Strike out all after the enacting clause and insert the part printed in italic A BILL To amend the Internal Revenue Code of 1986 to improve 529 plans.

1. Computer technology and equipment allowed as a qualified higher education expense for section 529 accounts (a) Made permanent Clause (iii) of section 529(e)(3)(A) of the Internal Revenue Code of 1986 is amended by striking in 2009 or 2010 . (b) Only for use primarily by the beneficiary Clause (iii) of section 529(e)(3)(A) of such Code is amended by striking used by the beneficiary and the beneficiary’s family and inserting used primarily by the beneficiary . (c) Effective date The amendments made by this section shall apply to expenses paid or incurred after December 31, 2014. 2. Elimination of distribution aggregation requirements (a) In general Clause (ii) of section 529(c)(3)(D) of the Internal Revenue Code of 1986 is amended by inserting before the comma at the end the following: , except for purposes of calculating the earnings portion of any distribution. . (b) Effective date The amendment made by this section shall apply to distributions after December 31, 2014. 3. Contribution of amounts previously distributed in case of withdrawal from school (a) In general Paragraph (3) of section 529(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph: (E) Special rule for contributions relating to withdrawal from school In the case of a beneficiary who receives a refund of any qualified higher education expenses from an eligible educational institution in connection with withdrawal from enrollment at such institution, subparagraph (A) shall not apply to that portion of any distribution for the taxable year which is recontributed to a qualified tuition program of which such individual is a beneficiary, but only to the extent such recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount. . (b) Effective date The amendment made by this section shall apply with respect to distributions after December 31, 2014.

1. Findings and purpose (a) Findings Congress finds the following: (1) When the Economic Growth and Tax Relief Reconciliation Act of 2001 became law, the tax treatment of section 529 college savings plans was changed so that qualified distributions were no longer taxed as income. The favorable tax treatment of college savings plans was made permanent with the passage of the Pension Protection Act of 2006. (2) Section 529 college savings plans empower middle-class families to accumulate savings to offset the rising costs of attending college. (3) The latest data from the College Savings Plan Network shows that there are 11.83 million 529 accounts open throughout all 50 states, which represent $244.5 billion in total assets. The average 529 account size is $20,671. (4) States that sponsor 529 college savings plans have taken steps to ensure these plans are a tool that all families can use to save for college, including setting minimum contributions as low as $25 per month to encourage participation by families of all income levels. (5) The President’s fiscal year 2016 Budget proposes raising taxes by taxing certain future distributions made from 529 college savings plans. (6) The tax proposed by the President would discourage the use of 529 college savings plans, requiring families and students to take on more debt. (7) Purchase of a computer represents a significant higher education expense and therefore should be eligible for qualified distributions under 529 college savings plans. (b) Purpose It is the purpose of this Act to— (1) enact policies that strengthen 529 college savings plans; and (2) make 529 plans more modern, consumer-friendly, and responsive to the realities faced by students today. 2. Computer technology and equipment permanently allowed as a qualified higher education expense for section 529 accounts (a) In general Section 529(e)(3)(A)(iii) of the Internal Revenue Code of 1986 is amended to read as follows: (iii) expenses for the purchase of computer or peripheral equipment (as defined in section 168(i)(2)(B)), computer software (as defined in section 197(e)(3)(B)), or Internet access and related services, if such equipment, software, or services are to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution. . (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2014. 3. Elimination of distribution aggregation requirements (a) In general Section 529(c)(3) of the Internal Revenue Code of 1986 is amended by striking subparagraph (D). (b) Effective date The amendment made by this section shall apply to distributions after December 31, 2014. 4. Recontribution of refunded amounts (a) In general Section 529(c)(3) of the Internal Revenue Code of 1986, as amended by section 3, is amended by adding at the end the following new subparagraph: (D) Special rule for contributions of refunded amounts In the case of a beneficiary who receives a refund of any qualified higher education expenses from an eligible educational institution, subparagraph (A) shall not apply to that portion of any distribution for the taxable year which is recontributed to a qualified tuition program of which such individual is a beneficiary, but only to the extent such recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount. . (b) Effective date (1) In general The amendment made by this section shall apply with respect to refunds of qualified higher education expenses after December 31, 2014. (2) Transition rule In the case of a refund of qualified higher education expenses received after December 31, 2014, and before the date of the enactment of this Act, section 529(c)(3)(D) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by substituting not later than 60 days after the date of the enactment of this subparagraph for not later than 60 days after the date of such refund .

May 21, 2015 Reported with an amendment