College Savings Plans Should Include Pre-K Expenses, State Says

November 5, 2018

The Honorable David J. Kautter
Assistant Secretary for Tax Policy
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

The Honorable Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, D.C. 20224

Dear Assistant Secretary Kautter and Commissioner Rettig:

I am writing as Chair of the Board for College Savings Mississippi to encourage the Department of the Treasury and the Internal Revenue Service (IRS) to carefully consider the plain language of the Tax Cuts and Jobs Act (TCJA) in establishing rules for the expanded use of 529 college savings plans for elementary and secondary school tuition. It is important for families in Mississippi that the forthcoming guidance promote a culture of early childhood education and savings.

Pursuant to the guidance issued by the IRS on July 30, 2018, Treasury and the IRS anticipate issuing regulations that would define elementary and secondary schools as kindergarten through 12^th grade, adopting the language currently used for Coverdell education savings accounts. This would exclude a pre-kindergarten program even if offered through a public, private, or religious elementary school. However, the language of 26 U.S.C.A. § 530, for Coverdell accounts, is notably different from that used in 26 U.S.C.A. § 529, which is the section these new rules will cover.

Section 530 specifically defines "school" to be "any school which provides elementary education or secondary education (kindergarten through grade 12), as determined under State law." Section 529 lacks the limiting language of "(kindergarten through grade 12)." In fact, the precise language of Section 529 provides that a qualified higher education expense now includes "tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school." Congress could have invoked or repeated the definition of school used in Section 530, but it did not, leaving the plain language of the statute to indicate that so long as the tuition is to be paid "in connection with enrollment or attendance" at an elementary school, as many pre-kindergarten programs are, it is a qualified expense under Section 529.

Mississippi has made early childhood education a priority in recent years and our Fall 2017 statewide Kindergarten Readiness Assessment results demonstrated the value of this focus with students who attended preschool far more likely to start school prepared to learn. Since the Tax Cuts and Jobs Act was signed into law in December 2017, many Mississippi families have taken advantage of its expanded 529 uses. It is helping us create a culture of savings for our families, providing for investment in a child's future from the beginning of an academic career to its culmination in an undergraduate or graduate degree.

I respectfully request that your new rules not limit the scope of the new qualified use of elementary and secondary tuition expenses under 26 U.S.C.A. § 529 to exclude pre-kindergarten education even when offered at an otherwise qualified elementary school. I appreciate your consideration of this request and would be happy to discuss It further at your convenience.

Sincerely,

Lynn Fitch
Treasurer
State of Mississippi
Jackson, MS

cc:
Tom West, Tax Legislative Counsel, U.S. Department of the Treasury
Michael Novey, Associate Tax Legislative Counsel, U.S. Department of the Treasury
Peter A. Hollat, Office of the Associate Chief Counsel (Tax Exempt and Government Entitles), IRS