Section 1 Short title
This Act may be cited as the “Help All Americans Save for College Act of 2017”.
Help All Americans Save for College Act of 2017
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.
Sec. 2 Tax treatment of contributions to 529 plans
Exclusion from gross income for employer contributions—
In general— Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 139F the following new section:
“139G. 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).”
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.”
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 139F the following new item:
Federal insurance contributions—
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 139G.”
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 139G.”
Conforming amendments to Social Security Act—
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 139G of the Internal Revenue Code of 1986.”
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 139G of the Internal Revenue Code of 1986.”
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 139G.”
Deduction for individual contributions—
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.”
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:
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.
Sec. 3 Additional tax for distributions not used for qualified purposes
Qualified tuition programs—
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.”.
Rate— Paragraph (6) of section 529(c) of such Code, as amended by subsection (a), is amended—
by striking “The tax” and inserting
“(A) In general—The tax”
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.”
Qualified ABLE programs—
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”.
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.”
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.