S. 3228 - 529 Expansion and Modernization Act of 2018

115TH CONGRESS
2D SESSION

S.  3228

To amend the Internal Revenue 1986 to provide for distributions
from 529 programs to pay apprenticeship and qualified
early education expenses, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 17, 2018

Mr. GARDNER introduced the following bill; which was
read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue 1986 to provide for distributions from 529 programs to pay apprenticeship and qualified early education expenses, 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.

This Act may be cited as the "529 Expansion and Modernization Act of 2018".

SEC. 2. EXPANSION OF 529 PROGRAM EXPENSES.

(a) DISTRIBUTIONS FROM QUALIFIED TUITION PROGRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REGISTERED APPRENTICESHIP PROGRAMS. — Section 529(e)(3) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

"(C) CERTAIN EXPENSES ASSOCIATED WITH REGISTERED APPRENTICESHIP PROGRAMS. — The term 'qualified higher education expenses' shall include books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (29 U.S.C. 50).".

(b) SPECIAL RULES FOR 529 PROGRAMS WITH RESPECT TO QUALIFIED EARLY EDUCATION EXPENSES. — Section 529(e)(3) of the Internal Revenue Code of 1986, as amended by subsection (c), is amended by adding at the end the following new subparagraph:

"(D) SPECIAL RULES PERMITTING LIMITED TREATMENT OF QUALIFIED EARLY EDUCATION EXPENSES. —

"(i) IN GENERAL. — Except as provided in clause (ii), qualified early education expenses shall be treated as qualified higher education expenses.

"(ii) LIMITATION. — If the aggregate amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary for qualified early education expenses during any taxable year exceeds $10,000, such excess shall be treated for purposes of subsection (c)(3) as distributions in excess of the qualified higher education expenses of the beneficiary.

"(iii) QUALIFIED EARLY EDUCATION EXPENSES. — For purposes of this subparagraph, the term 'qualified early education expenses' means expenses for providing educational and other care to a child under age 5 (including childcare provided before and after school), as determined under the law of the State, pursuant to attendance at a school or facility licensed in the State for such purpose.".

(c) CAREER AND TECHNICAL EDUCATION EXPENSES. — Section 529(e)(3) of the Internal Revenue Code of 1986, as amended by the preceding subsections, is amended by adding at the end the following new subparagraph:

"(E) TREATMENT OF CAREER AND TECHNICAL EDUCATION EXPENSES. — Such term shall include expenses for books, supplies, and equipment required for enrollment or attendance of a designated beneficiary in a career and technical education program (as defined in section 3 of the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2302)).".

(d) INDUSTRY INTERMEDIARY EDUCATION EXPENSES. — Section 529(e)(3) of the Internal Revenue Code of 1986, as amended by the preceding subsections, is amended by adding at the end the following new subparagraph:

"(F) TREATMENT OF INDUSTRY INTERMEDIARY EDUCATION EXPENSES. —

"(i) IN GENERAL. — Such term shall include expenses for books, supplies, and equipment required for enrollment or attendance of a designated beneficiary in an industry intermediary education program.

"(ii) INDUSTRY INTERMEDIARY EDUCATION PROGRAM. — For purposes of this subparagraph, the term 'industry intermediary education program' means any entity that —

"(I) in order to accelerate apprenticeship program development and help establish new apprenticeship partnerships at the national, State, or regional level, serves as a conduit between an employer and an entity, such as an industry partner, the Department of Labor, or a State agency responsible for workforce development programs,

"(II) demonstrates a capacity to work with employers and other key partners to identify workforce trends and foster public-private funding to establish new apprenticeship programs, and

"(III) is a business, a consortium of businesses, a business-related nonprofit organization (including industry associations and business federations), a private organization functioning as a workforce intermediary for the express purpose of serving the needs of businesses (including community-based nonprofit service providers and industry-aligned training providers), or a consortium of any of such entities.".

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to contributions made and distributions paid after December 31, 2018.

SEC. 3. EMPLOYER CONTRIBUTIONS TO QUALIFIED TUITION PROGRAMS.

(a) IN GENERAL. — Subsection (a) of section 132 of the Internal Revenue Code of 1986 is amended by striking "or" at the end of paragraph (7), by striking the period at the end of paragraph (8) and inserting ", or", and by adding at the end the following new paragraph:

"(9) qualified tuition program contributions.".

(b) QUALIFIED TUITION PROGRAM CONTRIBUTIONS. — Section 132 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

"(o) QUALIFIED TUITION PROGRAM CONTRIBUTIONS. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified tuition program contributions' means contributions (including matching contributions) made by an employer directly to a qualified tuition program (as described in section 529) designated by an employee if —

"(A) such contribution is made to an account under such program for which the designated beneficiary is the employee or a member of the family of the employee (within the meaning of section 529(e)(2)), and

"(B) such contribution is made in connection with a qualified payroll deduction contribution program established by the employer.

"(2) QUALIFIED PAYROLL DEDUCTION CONTRIBUTION PROGRAM. — For purposes of this subsection, the term 'qualified payroll deduction contribution program' means a program established by an employer —

"(A) under which employees may elect to make contributions to accounts described in paragraph (1)(A) which reduce the amount of wages received directly by such employee by the amount of such contribution, and

"(B) which is made available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (as defined in section 414(q)).

"(3) LIMITATION ON EXCLUSION. — The amount of qualified tuition program contributions which may be excluded from gross income under subsection (a)(9) with respect to any employee shall not exceed $500 in any calendar year.

"(4) INFLATION ADJUSTMENT. —

"(A) IN GENERAL. — In the case of any taxable year beginning in a calendar year after 2019, the $500 amount contained in paragraph (3) shall be increased by an amount equal to —

"(i) such dollar amount, multiplied by

"(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2018' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

"(B) ROUNDING. — Any increase determined under subparagraph (A) shall be rounded to the nearest multiple of $25.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to contributions made after December 31, 2018.