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

H.R. 529 · 114th Congress · Feb 26, 2015 · Lineage

AN ACT

Section 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.

Sec. 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.

Sec. 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.

Sec. 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”.