H.R. 249 (107th): College Savings Protection Act

107th Congress, 2001–2002. Text as of Jan 30, 2001 (Introduced).

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HR 249 IH

107th CONGRESS

1st Session

H. R. 249

To amend the Internal Revenue Code of 1986 to permit private educational institutions to maintain qualified tuition programs and to provide that distributions from such programs which are used to pay educational expenses shall not be includible in gross income.

IN THE HOUSE OF REPRESENTATIVES

January 30, 2001

Mr. BACHUS introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to permit private educational institutions to maintain qualified tuition programs and to provide that distributions from such programs which are used to pay educational expenses shall not be includible in gross income.

    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 ‘College Savings Protection Act’.

SEC. 2. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

    (a) ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS-

      (1) IN GENERAL- Section 529(b)(1) of the Internal Revenue Code of 1986 (defining qualified State tuition program) is amended by inserting ‘or by one or more eligible educational institutions’ after ‘maintained by a State or agency or instrumentality thereof’.

      (2) PRIVATE QUALIFIED TUITION PROGRAMS LIMITED TO BENEFIT PLANS- Clause (ii) of section 529(b)(1)(A) of such Code is amended by inserting ‘in the case of a program established and maintained by a State or agency or instrumentality thereof,’ before ‘may make’.

      (3) CONFORMING AMENDMENTS-

        (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 530(b)(2)(B), 4973(e), and 6693(a)(2)(C) of such Code are each amended by striking ‘qualified State tuition’ each place it appears and inserting ‘qualified tuition’.

        (B) The headings for sections 72(e)(9) and 135(c)(2)(C) of such Code are each amended by striking ‘QUALIFIED STATE TUITION’ and inserting ‘QUALIFIED TUITION’.

        (C) The headings for sections 529(b) and 530(b)(2)(B) of such Code are each amended by striking ‘QUALIFIED STATE TUITION’ and inserting ‘QUALIFIED TUITION’.

        (D) The heading for section 529 of such Code is amended by striking ‘state’.

        (E) The item relating to section 529 in the table of sections for part VIII of subchapter F of chapter 1 of such Code is amended by striking ‘State’.

    (b) EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM QUALIFIED TUITION PROGRAMS-

      (1) IN GENERAL- Section 529(c)(3)(B) of such Code (relating to distributions) is amended to read as follows:

        ‘(B) DISTRIBUTIONS FOR QUALIFIED HIGHER EDUCATION EXPENSES- For purposes of this paragraph--

          ‘(i) IN-KIND DISTRIBUTIONS- No amount shall be includible in gross income under subparagraph (A) by reason of a distribution which consists of providing a benefit to the distributee which, if paid for by the distributee, would constitute payment of a qualified higher education expense.

          ‘(ii) CASH DISTRIBUTIONS- In the case of distributions not described in clause (i), if--

            ‘(I) such distributions do not exceed the qualified higher education expenses (reduced by expenses described in clause (i)), no amount shall be includible in gross income, and

            ‘(II) in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions.

          ‘(iii) TREATMENT AS DISTRIBUTIONS- Any benefit furnished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary for purposes of this paragraph.

          ‘(iv) COORDINATION WITH HOPE AND LIFETIME LEARNING CREDITS- The total amount of qualified higher education expenses with respect to an individual for the taxable year shall be reduced--

            ‘(I) as provided in section 25A(g)(2), and

            ‘(II) by the amount of such expenses which were taken into account in determining the credit allowed to the taxpayer or any other person under section 25A.

          ‘(v) COORDINATION WITH EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS- If, with respect to an individual for any taxable year--

            ‘(I) the aggregate distributions to which clauses (i) and (ii) and section 530(d)(2)(A) apply, exceed

            ‘(II) the total amount of qualified higher education expenses otherwise taken into account under clauses (i) and (ii) (after the application of clause (iv)) for such year,

          the taxpayer shall allocate such expenses among such distributions for purposes of determining the amount of the exclusion under clauses (i) and (ii) and section 530(d)(2)(A).’.

      (2) CONFORMING AMENDMENTS-

        (A) Section 135(d)(2)(B) of such Code is amended by striking ‘the exclusion under section 530(d)(2)’ and inserting ‘the exclusions under sections 529(c)(3)(B)(i) and 530(d)(2)’.

        (B) Section 221(e)(2)(A) of such Code is amended by inserting ‘529,’ after ‘135,’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.