H.R. 3585 – Reading Mode

109th CONGRESS

1st Session

H. R. 3585

IN THE HOUSE OF REPRESENTATIVES

July 28, 2005

Mr. Porter (for himself, Mr. McKeon, Mr. Garrett of New Jersey, Ms. Ginny Brown-Waite of Florida, Mr. Ruppersberger, Mr. Hostettler, Mr. Kline, Mr. Paul, Mr. Souder, Mr. Neugebauer, Mr. Platts, Ms. Ros-Lehtinen, and Mr. Rehberg) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to exclude from gross income employer contributions to college tuition plans and education savings accounts.

Short title

This Act may be cited as the Education Savings Act of 2005.

Exclusion from gross income for contributions to education savings entities

(a)

In general

Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by inserting after section 127 the following new section:

127A.

Contributions to education savings entities

(a)

In general

Gross income of an employee does not include amounts paid by the employer as contributions to an education savings entity held by the employee or spouse of the employee if the contributions are made pursuant to a program which is described in subsection (b).

(b)

Educational assistance program

For purposes of this section, an educational assistance program is a separate written plan of an employer for the benefit of such employer’s employees—

(1)

under which the employer makes contributions to education savings entities of such employees or spouses of employees, and

(2)

which meets requirements similar to the requirements of paragraphs (2), (3), (4), (5), and (6) of section 127(b).

(c)

Definitions and special rules

For purposes of this section—

(1)

Education savings entity

The term education savings entity means—

(A)

a qualified tuition program (as defined in section 529(b)), and

(B)

a Coverdell education savings account (as defined in section 530(b)).

(2)

Employee and employer

The terms employee and employer shall have the meaning given such terms by paragraphs (2) and (3), respectively, of section 127(c).

(3)

Applicable rules

Rules similar to the rules of paragraphs (4), (5), (6), and (7) of section 127(c) shall apply.

(d)

Cross reference

For reporting and recordkeeping requirements, see section 6039D.

(b)

Exclusion from employment taxes

(1)

Sections 3121(a)(18), 3306(b)(13), and 3401(a)(18) of such Code are each amended by inserting 127A, after 127, each place it appears.

(2)

Section 3231(e)(6) of such Code is amended by striking section 127 and inserting section 127 or 127A.

(c)

Reporting and recordkeeping requirements

Section 6039D(d)(1) of such Code is amended by inserting 127A, after 127,.

(d)

Other conforming amendments

(1)

Section 51A(b)(5)(B) of such Code is amended by striking or at the end of clause (iii), by redesignating clause (iv) as clause (v), and by inserting after clause (iii) the following new clause:

(iv)

section 127A (relating to contributions to education savings entities), but only to the extent paid or incurred to a person not related to the employer, or

(2)

Sections 125(f), 414(n)(3)(C), and 414(t)(2) of such Code are each amended by inserting 127A, after 127, each place it appears.

(3)

Section 132(j)(8) of such Code is amended by striking section 127 and inserting section 127 or 127A.

(4)

Section 1397(a)(2)(A) of such Code is amended by inserting at the end the following new clause:

(iii)

Any amount paid or incurred by an employer which is excludable from the gross income of an employee under section 127A, but only to the extent paid or incurred to a person not related to the employer.

(5)

Section 209(15) of the Social Security Act (42 U.S.C. 409(15)) is amended by striking or 129 and inserting , 127A, or 129.

(e)

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 127 the following new item:

Sec. 127A. Contributions to education savings entities

(f)

Effective date

The amendments made by this section shall apply to remuneration paid after December 31, 2005.