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H.R. 5186 (114th): Help All Americans Save for College Act of 2016

The text of the bill below is as of May 10, 2016 (Introduced).


I

114th CONGRESS

2d Session

H. R. 5186

IN THE HOUSE OF REPRESENTATIVES

May 10, 2016

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 exclude employer contributions to 529 plans from gross income and employment taxes and to allow a deduction for individual contributions to such plans.

1.

Short title

This Act may be cited as the Help All Americans Save for College Act of 2016.

2.

Tax treatment of contributions to 529 plans

(a)

Exclusion from gross income for employer contributions

(1)

In general

Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 139E the following new section:

139F.

Employer contributions to 529 plan or ABLE account

(a)

In general

In the case of an individual who is a qualified account owner, gross income shall not include the amount of any contribution to such account during the taxable year by the employer of the account owner.

(b)

Limitation

The amount exempt from gross income by subsection (a) for a taxable year shall not exceed the lesser of—

(1)

an amount equal to the compensation includible in the individual’s gross income for such taxable year, or

(2)

$5,000 ($10,000 in the case of a joint return) for each dependent who of the taxpayer is the designated beneficiary of an account under section 529.

(c)

Qualified account owner

For purposes of this section, the term qualified account owner means—

(1)

in the case of an account in connection with a qualified tuition program, the account owner of an account of a designated beneficiary under section 529, and

(2)

in the case of an ABLE account, the designated beneficiary in connection with the ABLE account under section 529A(e)(3).

.

(2)

Cafeteria plan does not include employer contributions to 529 plans or ABLE accounts

Section 125(d)(2) of such Code is amended by adding at the end the following:

(E)

Exception for contributions to 529 plan and ABLE accounts

Subparagraph (A) shall not apply to a plan to the extent of amounts which a covered employee may elect to have the employer pay as contributions to an account under section 529 or 529A.

.

(3)

Clerical amendment

The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139E the following new item:

Sec. 139F. Employer contributions to 529 plan or ABLE account.

.

(b)

Federal insurance contributions

(1)

Wages

Section 3121(a) of such Code is amended by striking or at the end of paragraph (22), by striking the period at the end of paragraph (23) and inserting ; or, and by inserting after paragraph (23) the following:

(24)

the amount of any contribution made to or on behalf of an employee if at the time of such contribution it is reasonable to believe that the employee will be able to exclude such contribution from income under section 139F.

.

(2)

Net earnings from self-employment

Section 1402(a) of such Code is amended by striking and at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting ; and, and inserting after paragraph (17) the following:

(18)

there shall be excluded any contribution made to or on behalf of an employee that is not includible in gross income of the employee under section 139F.

.

(3)

Conforming amendments to Social Security Act

(A)

Wages

Section 209(a) of the Social Security Act (42 U.S.C. 409(a)) is amended by striking or at the end of paragraph (19) and inserting a semicolon, by striking the period at the end of paragraph (20) and inserting ; or, and by inserting after paragraph (20) the following:

(21)

The amount of any contribution made to or on behalf of an employee that is not includible in gross income of the employee under section 139F of the Internal Revenue Code of 1986.

.

(B)

Net earnings from self-employment

Section 211(a) of the Social Security Act (42 U.S.C. 411(a)) is amended by striking and at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting ; and, and inserting after paragraph (16) the following:

(17)

There shall be excluded any contribution made to or on behalf of an employee that is not includible in gross income of the employee under section 139F of the Internal Revenue Code of 1986.

.

(c)

Railroad retirement

Section 3231(e) of such Code is amended by adding at the end the following:

(13)

Employer contributions to 529 plan or ABLE account

The term compensation shall not include any contribution made to or on behalf of an employee that is not includible in gross income of the employee under section 139F.

.

(d)

Deduction for individual contributions

(1)

In general

Part VII 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:

224.

Contributions to 529 plans and ABLE accounts

(a)

Allowance of deduction

In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the sum of—

(1)

the aggregate contributions made by such individual to qualified tuition programs (as defined in section 529) during such taxable year, and

(2)

the aggregate contributions made by such individual to ABLE accounts (as defined in section 529A) during such taxable year.

(b)

Limitation

The amount allowed as a deduction by subsection (a) for a taxable year shall not exceed $5,000.

.

(2)

Clerical amendment

The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as an item relating to section 225 and by inserting after the item relating to section 223 the following new item:

Sec. 224. Contributions to 529 plans and ABLE accounts.

.

(e)

Effective date

The amendments made by this section shall apply to contributions made during taxable years beginning after the date of the enactment of this Act.

3.

Additional tax for distributions not used for qualified purposes

(a)

Qualified tuition programs

(1)

In general

The first sentence of section 529(c)(6) of the Internal Revenue Code of 1986 is amended by striking the period at the end and inserting , except that the rate of such tax shall be determined under subparagraph (B) of this paragraph..

(2)

Rate

Paragraph (6) of section 529(c) of such Code, as amended by subsection (a), is amended—

(A)

by striking The tax and inserting

(A)

In general

The tax

, and

(B)

by adding at the end the following:

(B)

Rate

For purposes of subparagraph (A), the tax rate determined under this subparagraph is the greater of—

(i)

10 percent, and

(ii)

the highest rate of income tax applicable to such person under this title.

.

(b)

Qualified ABLE programs

(1)

In general

Subparagraph (A) of section 529A(c)(3) of the Internal Revenue Code of 1986 is amended by striking 10 percent and inserting the applicable percentage.

(2)

Applicable percentage

Paragraph (3) of section 529A(c) of such Code is amended by adding at the end the following:

(D)

Applicable percentage

For purposes of this paragraph, the term applicable percentage means the greater of—

(i)

10 percent, and

(ii)

the highest rate of income tax applicable to such person under this title.

.

(c)

Effective date

The amendments made by this section shall apply to distributions made during taxable years beginning after the date of the enactment of this Act.