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Calendar No. 311
105th CONGRESS
2d Session
S. 1133
[Report No. 105-164]
To amend the Internal Revenue Code of 1986 to allow tax-free
expenditures from education individual retirement accounts for
elementary and secondary school expenses and to increase the maximum
annual amount of contributions to such accounts.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 31, 1997
Mr. Coverdell (for himself, Mr. Lott, Mr. Nickles, Mr. Mack, Mr. Craig,
Mr. McConnell, Mr. Roth, Mr. Gramm, Mr. Abraham, Mr. Ashcroft, Mr.
Allard, Mr. Bennett, Mr. Bond, Mr. Brownback, Mr. Coats, Mr. Domenici,
Mr. DeWine, Mr. Faircloth, Mr. Gorton, Mr. Grams, Mr. Gregg, Mr. Hagel,
Mr. Hatch, Mr. Helms, Mr. Hutchinson, Mrs. Hutchison, Mr. Inhofe, Mr.
Lieberman, Mr. McCain, Mr. Murkowski, Mr. Roberts, Mr. Sessions, Mr.
Shelby, Mr. Smith of New Hampshire, Mr. Torricelli, Mr. Warner, Mr.
Cochran, Mr. Kyl, Mr. Thompson, Mr. Burns, Mr. D'Amato, Mr. Santorum,
Mr. Thomas, and Mr. Frist) introduced the following bill; which was
read twice and referred to the Committee on Finance
February 19, 1998
Reported by Mr. Roth, under authority of the order of the Senate of
February 12, 1998, with an amendment and an amendment to the title
[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 allow tax-free
expenditures from education individual retirement accounts for
elementary and secondary school expenses and to increase the maximum
annual amount of contributions to such accounts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
<DELETED>SECTION 1. SHORT TITLE.</DELETED>
<DELETED> This Act may be cited as the ``Parent and Student Savings
Account PLUS Act''.</DELETED>
<DELETED>SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT
ACCOUNTS.</DELETED>
<DELETED> (a) Tax-Free Expenditures for Elementary and Secondary
School Expenses.--</DELETED>
<DELETED> (1) In general.--Section 530(b)(2) of the Internal
Revenue Code of 1986 is amended to read as follows:</DELETED>
<DELETED> ``(2) Qualified education expenses.--</DELETED>
<DELETED> ``(A) In general.--The term `qualified
education expenses' means--</DELETED>
<DELETED> ``(i) qualified higher education
expenses (as defined in section 529(e)(3)),
and</DELETED>
<DELETED> ``(ii) qualified elementary and
secondary education expenses (as defined in
paragraph (4)).</DELETED>
<DELETED>Such expenses shall be reduced as provided in
section 25A(g)(2).</DELETED>
<DELETED> ``(B) Qualified state tuition programs.--
Such term shall include amounts paid or incurred to
purchase tuition credits or certificates, or to make
contributions to an account, under a qualified State
tuition program (as defined in section 529(b)) for the
benefit of the beneficiary of the account.''</DELETED>
<DELETED> (2) Qualified elementary and secondary education
expenses.--Section 530(b) of such Code is amended by adding at
the end the following new paragraph:</DELETED>
<DELETED> ``(4) Qualified elementary and secondary education
expenses.--</DELETED>
<DELETED> ``(A) In general.--The term `qualified
elementary and secondary education expenses' means
tuition, fees, tutoring, special needs services, books,
supplies, equipment, transportation, and supplementary
expenses required for the enrollment or attendance of
the designated beneficiary of the trust at a public,
private, or sectarian school.</DELETED>
<DELETED> ``(B) Special rule for homeschooling.--
Such term shall include expenses described in
subparagraph (A) required for education provided for
homeschooling if the requirements of any applicable
State or local law are met with respect to such
education.</DELETED>
<DELETED> ``(C) School.--The term `school' means any
school which provides elementary education or secondary
education (through grade 12), as determined under State
law.''</DELETED>
<DELETED> (3) Conforming amendments.--Subsections (b)(1) and
(d)(2) of section 530 of such Code are each amended by striking
``higher'' each place it appears in the text and heading
thereof.</DELETED>
<DELETED> (b) Increase in Maximum Annual Contributions.--</DELETED>
<DELETED> (1) In general.--Section 530(b)(1)(A)(iii) of the
Internal Revenue Code of 1986 is amended by striking ``$500''
and inserting ``$2,000''.</DELETED>
<DELETED> (2) Conforming amendments.--</DELETED>
<DELETED> (A) Section 530(d)(4)(C) of such Code is
amended by striking ``$500'' and inserting
``$2,000''.</DELETED>
<DELETED> (B) Section 4973(e)(1)(A) of such Code is
amended by striking ``$500'' and inserting
``$2,000''.</DELETED>
<DELETED> (c) Effective Date; References.--</DELETED>
<DELETED> (1) Effective date.--The amendments made by this
section shall take effect as if included in the amendments made
by section 213 of the Taxpayer Relief Act of 1997.</DELETED>
<DELETED> (2) References.--Any reference in this section to
any section of the Internal Revenue Code of 1986 shall be a
reference to such section as added by the Taxpayer Relief Act
of 1997.</DELETED>
SECTION 1. SHORT TITLE; AMENDMENT TO 1986 CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Parent and Student
Savings Account PLUS Act''.
(b) Amendment to 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; amendment to 1986 Code; table of contents.
TITLE I--TAX INCENTIVES FOR EDUCATION
Sec. 101. Modifications to education individual retirement accounts.
Sec. 102. Exclusion from gross income of education distributions from
qualified State tuition programs.
Sec. 103. Extension of exclusion for employer-provided educational
assistance.
Sec. 104. Additional increase in arbitrage rebate exception for
governmental bonds used to finance
education facilities.
Sec. 105. Exclusion of certain amounts received under the National
Health Corps Scholarship program.
TITLE II--REVENUE
Sec. 201. Clarification of deduction for deferred compensation.
Sec. 202. Modification to foreign tax credit carryback and carryover
periods.
TITLE I--TAX INCENTIVES FOR EDUCATION
SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
(a) Tax-Free Expenditures for Elementary and Secondary School
Expenses.--
(1) In general.--Section 530(b)(2) (defining qualified
higher education expenses) is amended to read as follows:
``(2) Qualified education expenses.--
``(A) In general.--The term `qualified education
expenses' means--
``(i) qualified higher education expenses
(as defined in section 529(e)(3)), and
``(ii) qualified elementary and secondary
education expenses (as defined in paragraph
(4)).
Such expenses shall be reduced as provided in section
25A(g)(2).
``(B) Qualified state tuition programs.--Such term
shall include amounts paid or incurred to purchase
tuition credits or certificates, or to make
contributions to an account, under a qualified State
tuition program (as defined in section 529(b)) for the
benefit of the beneficiary of the account.''
(2) Qualified elementary and secondary education
expenses.--Section 530(b) (relating to definitions and special
rules) is amended by adding at the end the following new
paragraph:
``(4) Qualified elementary and secondary education
expenses.--
``(A) In general.--The term `qualified elementary
and secondary education expenses' means--
``(i) expenses for tuition, fees, academic
tutoring, special needs services, books,
supplies, computer equipment (including related
software and services), and other equipment
which are incurred in connection with the
enrollment or attendance of the designated
beneficiary of the trust as an elementary or
secondary school student at a public, private,
or religious school, or
``(ii) expenses for room and board,
uniforms, transportation, and supplementary
items and services (including extended day
programs) which are required or provided by a
public, private, or religious school in
connection with such enrollment or attendance.
``(B) Special rule for homeschooling.--Such term
shall include expenses described in subparagraph (A)(i)
in connection with education provided by homeschooling
if the requirements of any applicable State or local
law are met with respect to such education.
``(C) School.--The term `school' means any school
which provides elementary education or secondary
education (kindergarten through grade 12), as
determined under State law.''
(3) Special rules for applying exclusion to elementary and
secondary expenses.--Section 530(d)(2) (relating to
distributions for qualified higher education expenses) is
amended by adding at the end the following new subparagraph:
``(D) Special rules for elementary and secondary
expenses.--
``(i) In general.--The aggregate amount of
qualified elementary and secondary education
expenses taken into account for purposes of
this paragraph with respect to any education
individual retirement account for all taxable
years shall not exceed the sum of the aggregate
contributions to such account for taxable years
beginning after December 31, 1998, and before
January 1, 2003, and earnings on such
contributions.
``(ii) Special operating rules.--For
purposes of clause (i)--
``(I) the trustee of an education
individual retirement account shall
keep separate accounts with respect to
contributions and earnings described in
clause (i), and
``(II) if there are distributions
in excess of qualified elementary and
secondary education expenses for any
taxable year, such excess distributions
shall be allocated first to
contributions and earnings not
described in clause (i).''
(4) Conforming amendments.--Subsections (b)(1) and (d)(2)
of section 530 are each amended by striking ``higher'' each
place it appears in the text and heading thereof.
(b) Maximum Annual Contributions.--
(1) In general.--Section 530(b)(1)(A)(iii) (defining
education individual retirement account) is amended by striking
``$500'' and inserting ``the contribution limit for such
taxable year''.
(2) Contribution limit.--Section 530(b) (relating to
definitions and special rules), as amended by subsection
(a)(2), is amended by adding at the end the following new
paragraph:
``(5) Contribution limit.--The term `contribution limit'
means $500 ($2,000 in the case of any taxable year beginning
after December 31, 1998, and ending before January 1, 2003).''
(3) Conforming amendments.--
(A) Section 530(d)(4)(C) is amended by striking
``$500'' and inserting ``the contribution limit for
such taxable year''.
(B) Section 4973(e)(1)(A) is amended by striking
``$500'' and inserting ``the contribution limit (as
defined in section 530(b)(5)) for such taxable year''.
(c) Waiver of Age Limitations for Children With Special Needs.--
Section 530(b)(1) (defining education individual retirement account) is
amended by adding at the end the following flush sentence:
``The age limitations in the preceding sentence shall not apply
to any designated beneficiary with special needs (as determined
under regulations prescribed by the Secretary).''
(d) Corporations Permitted To Contribute to Accounts.--Section
530(c)(1) (relating to reduction in permitted contributions based on
adjusted gross income) is amended by striking ``The maximum amount
which a contributor'' and inserting ``In the case of a contributor who
is an individual, the maximum amount the contributor''.
(e) No Double Benefit.--Section 530(d)(2) (relating to
distributions for qualified education expenses), as amended by
subsection (a)(3), is amended by adding at the end the following new
subparagraph:
``(E) Disallowance of excluded amounts as credit or
deduction.--No deduction or credit shall be allowed to
the taxpayer under any other section of this chapter
for any qualified education expenses to the extent
taken into account in determining the amount of the
exclusion under this paragraph.''
(f) Technical Corrections.--
(1)(A) Section 530(b)(1)(E) (defining education individual
retirement account) is amended to read as follows:
``(E) Any balance to the credit of the designated
beneficiary on the date on which the beneficiary
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