H.R. 529, To amend the Internal Revenue Code of 1986 to Improve 529 Plans

H.R. 529

To amend the Internal Revenue Code of 1986 to Improve 529 Plans

Committee
Ways and Means

Date
February 25, 2015 (114th Congress, 1st Session)

Staff Contact
David Smentek

Floor Situation

On Wednesday, February 25, 2015, the House will consider H.R. 529, a bill to amend the Internal Revenue Code of 1986 to improve 529 plans, under a rule.  The bill was introduced on January 26, 2015 by Rep. Lynn Jenkins (R-KS) and referred to the House Committee on Ways and Means, which ordered the bill reported, as amended, by voice vote.

Bill Summary

H.R. 529 amends the Internal Revenue Code to expand, strengthen, and modernize 529 college savings accounts.  Specifically, the bill: 1) allows payments from 529 plans to be used for the purchase of computer or peripheral equipment, computer software, or internet access while an individual is enrolled at an educational institution; 2) eliminates a burdensome requirement that requires distributions from a 529 plan to be aggregated for purposes of determining the amount includible in a taxpayer’s income; and 3) allows taxpayers to re-deposit refunds from educational institutions tax-free, provided that it occurs within 60 days of the refund and does not exceed the refund amount.

Background

Enacted in the 107th Congress, The Economic Growth and Tax Relief Reconciliation Act of 2001 changed the tax treatment of section 529 college savings plans to exempt qualified distributions from taxation.[1]  This treatment was eventually made permanent with the passage of the Pension Protection Act of 2006.  As a result of the favorable tax status afforded to section 529 plans, they have become a frequently used method of saving for college.  The College Savings Plan Network reported in 2014 that there were approximately 11.83 million 529 accounts totaling $244.5 billion in total assets.[2]  Additionally, the average size of a 529 account has continued to grow, reaching an all-time high of $20,671 in mid-2014.[3]  Moreover, states that sponsor 529 plans have taken steps to ensure that plans are used by families of all economic backgrounds, including setting low minimum contribution levels.[4]  The President’s FY 2016 Budget originally proposed to tax certain future distributions made from 529 college savings plans.  This proposal was ultimately omitted from the President’s final budget proposal.

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[1] See H.R. 529, at 3
[2] http://www.collegesavings.org/includes/pdfs/Sept%202014%20529%20Report%20final.pdf, at 3.
[3] Id. at 3.
[4] Id. at 3.

Cost

According to estimates from the Joint Committee on Taxation (JCT), implementing H.R. 529 would reduce revenues by $51 million over the 2015-2025 period.

Additional Information

For questions or further information contact the GOP Conference at 5-5107.