II
110th CONGRESS
1st Session
S. 1230
IN THE SENATE OF THE UNITED STATES
April 26, 2007
Mr. Dodd introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide a refundable credit for contributions to qualified tuition programs.
Short title
This Act may be cited as
the College Saver's Credit Act of
2007
.
College saver's credit
Allowance of refundable credit
Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 36 as section 37 and by inserting after section 35 the following new section:
College saver's credit
Allowance of credit
In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 50 percent of so much of the qualified college savings contributions made during the taxable year as do not exceed $2,000.
Limitations
Limitation based on modified adjusted gross income
In general
The amount which would (but for this paragraph) be taken into account under subsection (a) for the taxable year shall be reduced (but not below zero) by the amount determined under subparagraph (B).
Amount of reduction
The amount determined under this subparagraph is the amount which bears the same ratio to the amount which would be so taken into account as—
the excess of—
the taxpayer's modified adjusted gross income for the taxable year, over
the applicable amount, bears to
the phaseout amount.
Applicable amount; phaseout amount
For purposes of subparagraph (B), the applicable amount and the phaseout amount shall be determined as follows:
| The applicable amount is: | The phaseout amount is: | |
| In the case of a joint return | $60,000 | $10,000 |
| In the case of a head of household | $45,000 | $7,500 |
| In any other case | $30,000 | $5,000 |
Modified adjusted gross income
For purposes of this paragraph, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.
Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2008, each of the applicable amounts in the second column of the table in subparagraph (C) shall be increased by an amount equal to—
such dollar amount, multiplied by
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 2007
for calendar year 1992
in
subparagraph (B) thereof.
Earned income limitation
The amount of the credit allowable under subsection (a) to any taxpayer for any taxable year shall not exceed the earned income (as defined by section 32(c)(2)) of such taxpayer for such taxable year.
Eligible individual
For purposes of this section—
In general
The term eligible individual means any individual if such individual has attained the age of 18 as of the close of the taxable year.
Dependents not eligible
The term eligible individual shall not include any individual with respect to whom a deduction under section 151 is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.
Qualified college savings contributions
The term qualified college savings contributions means, with respect to any taxable year, the aggregate contributions made by the taxpayer to any account which—
is described in section 529(b)(1)(A)(ii),
is part of a qualified tuition program, and
is established for the benefit of—
the taxpayer,
the taxpayer’s spouse, or
any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151.
Treatment of contributions by dependent
If a deduction under section 151 with respect to an individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins—
no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year, and
any qualified college savings contributions made by such individual during such taxable year shall be treated for purposes of this section as made by such other taxpayer.
.
Refundable amount credited to qualified tuition plan
Transfer of refund to qualified tuition plans
Section 6402 of the Internal Revenue Code of 1986 (relating to authority to make credits or refunds) is amended by adding at the end the following new subsection:
Special rule for overpayments attributable to college saver's credit
In general
In the case of any overpayment attributable to the credit allowed under section 36, the Secretary shall transfer such amount to the qualified tuition program to which the taxpayer made a qualified college savings contribution.
Transfers to more than 1 qualified tuition program
If the taxpayer made qualified college savings contributions to more than 1 qualified tuition program, the Secretary shall transfer the overpayment described in paragraph (1) to each such qualified tuition program in an amount that bears the same ratio to the amount of such overpayment as—
the amount of qualified college savings contributions made by such taxpayer to such qualified tuition program, bears to
the amount of qualified college savings contribution made by such taxpayer to all qualified tuition programs.
Qualified college savings contribution
For purposes of this subsection, the term qualified college savings contribution has the meaning given such term by section 36(d).
.
Separate accounting for refundable amounts
Section 529 of such Code is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:
Special rules for contributions attributable to college saver's credit
In general
A program shall not be treated as a qualified tuition program unless it provides separate accounting for contributions transferred by the Secretary under section 6402(l) to an account in the program.
Special rules for distribution
In the case of a distribution under a qualified tuition program which includes any amount transferred by the Secretary under section 6402(l) (including any earnings attributable to such amount) and which is includible in gross income, the tax imposed by this chapter on the person receiving such distribution shall be increased by 100 percent of the amount so includible.
Ordering rules
For purposes of applying this subsection to any distribution from a qualified tuition program—
In general
Except as provided in subparagraph (B), such distribution shall be treated as made—
first from amounts contributed under the program, and
second from amounts transferred by the Secretary under section 6402(l).
Exception for distributions for qualified higher education expenses
In the case of a distribution described in subsection (c)(3), such distribution shall be treated as made—
first from amounts transferred by the Secretary under section 6402(l), and
second from other amounts contributed under the program.
.
Conforming amendments
Section
1324(b)(2) of title 31, United States Code, is amended by inserting before the
period at the end , or enacted by the College Saver's Credit Act of
2007
.
The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 36 and inserting the following:
Sec. 36. College saver's credit.
Sec. 37. Overpayments of tax.
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2007.
Distribution of financial education materials to individuals investing in qualified tuition programs
In general
Subsection (b) of section 529 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
Financial education materials
A program shall not be treated as a qualified tuition program unless it requires that financial education materials are distributed to individuals participating in the program.
.
Guidance
Subsection
(g) of section 529 of such Code, as redesignated by this Act, is amended by
inserting and regulations providing guidance on the types of financial
education material required to be provided under subsection (b)(7)
before the period at the end.
Effective date
The amendments made by this section shall take effect 1 year after the date of the enactment of this Act.
Study on participation in qualified tuition programs
In general
The Secretary of the Treasury shall conduct a study on the participation of individuals in qualified tuition programs under section 529 of the Internal Revenue Code of 1986.
Matter studied
The study conducted under subsection (a) shall consider—
the income and age of individuals participating in qualified tuition programs, and
the amount of fees charged under each qualified tuition program established or maintained by a State (or agency or instrumentality thereof).
Report
Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall submit to Congress a report on the study conducted under subsection (a).