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Calendar No. 124
106th CONGRESS
1st Session
S. 1134
[Report No. 106-54]
_______________________________________________________________________
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, to increase the maximum
annual amount of contributions to such accounts, and for other
purposes.
_______________________________________________________________________
May 26, 1999
Read twice and placed on the calendar
Calendar No. 124
106th CONGRESS
1st Session
S. 1134
[Report No. 106-54]
To amend the Internal Revenue Code of 1986 to allow tax-free
expenditures from education individual retirement accounts for
elementary and secondary school expenses, to increase the maximum
annual amount of contributions to such accounts, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 26, 1999
Mr. Roth, from the Committee on Finance, reported the following
original bill; which was read twice and placed on the calendar
_______________________________________________________________________
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, to increase the maximum
annual amount of contributions to such accounts, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Affordable
Education Act of 1999''.
(b) Amendment of 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 of 1986 Code; table of contents.
TITLE I--EDUCATION SAVINGS INCENTIVES
Sec. 101. Modifications to education individual retirement accounts.
Sec. 102. Modifications to qualified tuition programs.
TITLE II--EDUCATIONAL ASSISTANCE
Sec. 201. Extension of exclusion for employer-provided educational
assistance.
Sec. 202. Elimination of 60-month limit on student loan interest
deduction.
Sec. 203. Exclusion of certain amounts received under the National
Public Health Service Corps Scholarship
Program and the F. Edward Hebert Armed
Forces Health Professions Scholarship and
Financial Assistance Program.
TITLE III--LIBERALIZATION OF TAX-EXEMPT FINANCING RULES FOR PUBLIC
SCHOOL CONSTRUCTION
Sec. 301. Additional increase in arbitrage rebate exception for
governmental bonds used to finance
educational facilities.
Sec. 302. Treatment of qualified public educational facility bonds as
exempt facility bonds.
Sec. 303. Federal guarantee of school construction bonds by Federal
Housing Finance Board.
TITLE IV--REVENUE PROVISIONS
Sec. 401. Modification to foreign tax credit carryback and carryover
periods.
Sec. 402. Limitation on use of non-accrual experience method of
accounting.
Sec. 403. Returns relating to cancellations of indebtedness by
organizations lending money.
Sec. 404. Extension of Internal Revenue Service user fees.
Sec. 405. Property subject to a liability treated in same manner as
assumption of liability.
Sec. 406. Charitable split-dollar life insurance, annuity, and
endowment contracts.
Sec. 407. Transfer of excess defined benefit plan assets for retiree
health benefits.
Sec. 408. Limitations on welfare benefit funds of 10 or more employer
plans.
Sec. 409. Modification of installment method and repeal of installment
method for accrual method taxpayers.
Sec. 410. Inclusion of certain vaccines against streptococcus
pneumoniae to list of taxable vaccines.
TITLE I--EDUCATION SAVINGS INCENTIVES
SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
(a) 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) is amended by adding at the end
the following new paragraph:
``(4) Contribution limit.--The term `contribution limit'
means $500 ($2,000 in the case of any taxable year beginning
after December 31, 1999, and ending before January 1, 2004).''
(3) Conforming amendment.--Section 4973(e)(1)(A) is amended
by striking ``$500'' and inserting ``the contribution limit (as
defined in section 530(b)(4)) for such taxable year''.
(b) 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
(5)).
Such expenses shall be reduced as provided in section
25A(g)(2).
``(B) Qualified state tuition programs.--Such term
shall include any contribution to a qualified State
tuition program (as defined in section 529(b)) on
behalf of the designated beneficiary (as defined in
section 529(e)(1)); but there shall be no increase in
the investment in the contract for purposes of applying
section 72 by reason of any portion of such
contribution which is not includible in gross income by
reason of subsection (d)(2).''
(2) Qualified elementary and secondary education
expenses.--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) 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, and
``(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:
``(E) 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, 1999, and before
January 1, 2004, 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.--Section 530 is amended--
(A) by striking ``higher'' each place it appears in
subsections (b)(1) and (d)(2), and
(B) by striking ``higher'' in the heading for
subsection (d)(2).
(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 and paragraphs
(5) and (6) of subsection (d) shall not apply to any designated
beneficiary with special needs (as determined under regulations
prescribed by the Secretary).''
(d) Entities 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) Time When Contributions Deemed Made.--
(1) In general.--Section 530(b) (relating to definitions
and special rules), as amended by subsection (b)(2), is amended
by adding at the end the following new paragraph:
``(6) Time when contributions deemed made.--An individual
shall be deemed to have made a contribution to an education
individual retirement account on the last day of the preceding
taxable year if the contribution is made on account of such
taxable year and is made not later than the time prescribed by
law for filing the return for such taxable year (not including
extensions thereof).''
(2) Extension of time to return excess contributions.--
Subparagraph (C) of section 530(d)(4) (relating to additional
tax for distributions not used for educational expenses) is
amended--
(A) by striking clause (i) and inserting the
following new clause:
``(i) such distribution is made before the
1st day of the 6th month of the taxable year
following the taxable year, and'', and
(B) by striking ``due date of return'' in the
heading and inserting ``june''.
(f) Coordination With Hope and Lifetime Learning Credits and
Qualified Tuition Programs.--
(1) In general.--Section 530(d)(2)(C) is amended to read as
follows:
``(C) Coordination with hope and lifetime learning
credits and qualified tuition programs.--
``(i) Credit coordination.--
``(I) In general.--Except as
provided in subclause (II),
subparagraph (A) shall not apply for
any taxable year to any qualified
higher education expenses with respect
to any individual if a credit is
allowed under section 25A with respect
to such expenses for such taxable year.
``(II) Special coordination rule.--
In the case of any taxable year
beginning after December 31, 1999, and
before January 1, 2004, subclause (I)
shall not apply, but the total amount
of qualified higher education expenses
otherwise taken into account under
subparagraph (A) with respect to an
individual for such taxable year shall
be reduced (after the application of
the reduction provided in section
25A(g)(2)) by the amount of such
expenses which were taken into account
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