529 Expansion and Modernization Act of 2019

II 116TH CONGRESS 1ST SESSION S. 220 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 JANUARY 24, 2019 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 distribu- tions from 529 programs to pay apprenticeship and qualified early education expenses, and for other pur- poses. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘529 Expansion and 4 Modernization Act of 2019’’. 5 SEC. 2. EXPANSION OF 529 PROGRAM EXPENSES. 6 (a) DISTRIBUTIONS FROM QUALIFIED TUITION PRO- 7 GRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REG- 8 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 220 IS ISTERED APPRENTICESHIP PROGRAMS.—Section 1 529(e)(3) of the Internal Revenue Code of 1986 is amend- 2 ed by adding at the end the following new subparagraph: 3 ‘‘(C) CERTAIN EXPENSES ASSOCIATED 4 WITH REGISTERED APPRENTICESHIP PRO- 5 GRAMS.—The term ‘qualified higher education 6 expenses’ shall include books, supplies, and 7 equipment required for the enrollment or at- 8 tendance of a designated beneficiary in an ap- 9 prenticeship program registered and certified 10 with the Secretary of Labor under section 1 of 11 the National Apprenticeship Act (29 U.S.C. 12 50).’’. 13 (b) SPECIAL RULES FOR 529 PROGRAMS WITH RE- 14 SPECT TO QUALIFIED EARLY EDUCATION EXPENSES.— 15 Section 529(e)(3) of the Internal Revenue Code of 1986, 16 as amended by subsection (c), is amended by adding at 17 the end the following new subparagraph: 18 ‘‘(D) SPECIAL RULES PERMITTING LIM- 19 ITED TREATMENT OF QUALIFIED EARLY EDU- 20 CATION EXPENSES.— 21 ‘‘(i) IN GENERAL.—Except as pro- 22 vided in clause (ii), qualified early edu- 23 cation expenses shall be treated as quali- 24 fied higher education expenses. 25 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 220 IS ‘‘(ii) LIMITATION.—If the aggregate 1 amount of cash distributions from all 2 qualified tuition programs described in 3 subsection (b)(1)(A)(ii) with respect to a 4 beneficiary for qualified early education ex- 5 penses during any taxable year exceeds 6 $10,000, such excess shall be treated for 7 purposes of subsection (c)(3) as distribu- 8 tions in excess of the qualified higher edu- 9 cation expenses of the beneficiary. 10 ‘‘(iii) QUALIFIED EARLY EDUCATION 11 EXPENSES.—For purposes of this subpara- 12 graph, the term ‘qualified early education 13 expenses’ means expenses for providing 14 educational and other care to a child under 15 age 5 (including childcare provided before 16 and after school), as determined under the 17 law of the State, pursuant to attendance at 18 a school or facility licensed in the State for 19 such purpose.’’. 20 (c) CAREER AND TECHNICAL EDUCATION EX- 21 PENSES.—Section 529(e)(3) of the Internal Revenue Code 22 of 1986, as amended by the preceding subsections, is 23 amended by adding at the end the following new subpara- 24 graph: 25 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 220 IS ‘‘(E) TREATMENT OF CAREER AND TECH- 1 NICAL EDUCATION EXPENSES.—Such term shall 2 include expenses for books, supplies, and equip- 3 ment required for enrollment or attendance of 4 a designated beneficiary in a career and tech- 5 nical education program (as defined in section 6 3 of the Carl D. Perkins Career and Technical 7 Education Act of 2006 (20 U.S.C. 2302)).’’. 8 (d) INDUSTRY INTERMEDIARY EDUCATION EX- 9 PENSES.—Section 529(e)(3) of the Internal Revenue Code 10 of 1986, as amended by the preceding subsections, is 11 amended by adding at the end the following new subpara- 12 graph: 13 ‘‘(F) TREATMENT OF INDUSTRY INTER- 14 MEDIARY EDUCATION EXPENSES.— 15 ‘‘(i) IN GENERAL.—Such term shall 16 include expenses for books, supplies, and 17 equipment required for enrollment or at- 18 tendance of a designated beneficiary in an 19 industry intermediary education program. 20 ‘‘(ii) INDUSTRY INTERMEDIARY EDU- 21 CATION PROGRAM.—For purposes of this 22 subparagraph, the term ‘industry inter- 23 mediary education program’ means any en- 24 tity that— 25 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 220 IS ‘‘(I) in order to accelerate ap- 1 prenticeship program development and 2 help establish new apprenticeship 3 partnerships at the national, State, or 4 regional level, serves as a conduit be- 5 tween an employer and an entity, such 6 as an industry partner, the Depart- 7 ment of Labor, or a State agency re- 8 sponsible for workforce development 9 programs, 10 ‘‘(II) demonstrates a capacity to 11 work with employers and other key 12 partners to identify workforce trends 13 and foster public-private funding to 14 establish new apprenticeship pro- 15 grams, and 16 ‘‘(III) is a business, a consortium 17 of businesses, a business-related non- 18 profit organization (including industry 19 associations and business federations), 20 a private organization functioning as 21 a workforce intermediary for the ex- 22 press purpose of serving the needs of 23 businesses (including community- 24 based nonprofit service providers and 25 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 220 IS industry-aligned training providers), 1 or a consortium of any of such enti- 2 ties.’’. 3 (e) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to contributions made and distribu- 5 tions paid after December 31, 2019. 6 SEC. 3. EMPLOYER CONTRIBUTIONS TO QUALIFIED TUI- 7 TION PROGRAMS. 8 (a) IN GENERAL.—Subsection (a) of section 132 of 9 the Internal Revenue Code of 1986 is amended by striking 10 ‘‘or’’ at the end of paragraph (7), by striking the period 11 at the end of paragraph (8) and inserting ‘‘, or’’, and by 12 adding at the end the following new paragraph: 13 ‘‘(9) qualified tuition program contributions.’’. 14 (b) QUALIFIED TUITION PROGRAM CONTRIBU- 15 TIONS.—Section 132 of the Internal Revenue Code of 16 1986 is amended by redesignating subsection (o) as sub- 17 section (p) and by inserting after subsection (n) the fol- 18 lowing new subsection: 19 ‘‘(o) QUALIFIED TUITION PROGRAM CONTRIBU- 20 TIONS.—For purposes of this section— 21 ‘‘(1) IN GENERAL.—The term ‘qualified tuition 22 program contributions’ means contributions (includ- 23 ing matching contributions) made by an employer 24 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 220 IS directly to a qualified tuition program (as described 1 in section 529) designated by an employee if— 2 ‘‘(A) such contribution is made to an ac- 3 count under such program for which the des- 4 ignated beneficiary is the employee or a mem- 5 ber of the family of the employee (within the 6 meaning of section 529(e)(2)), and 7 ‘‘(B) such contribution is made in connec- 8 tion with a qualified payroll deduction contribu- 9 tion program established by the employer. 10 ‘‘(2) QUALIFIED PAYROLL DEDUCTION CON- 11 TRIBUTION PROGRAM.—For purposes of this sub- 12 section, the term ‘qualified payroll deduction con- 13 tribution program’ means a program established by 14 an employer— 15 ‘‘(A) under which employees may elect to 16 make contributions to accounts described in 17 paragraph (1)(A) which reduce the amount of 18 wages received directly by such employee by the 19 amount of such contribution, and 20 ‘‘(B) which is made available on substan- 21 tially the same terms to each member of a 22 group of employees which is defined under a 23 reasonable classification set up by the employer 24 which does not discriminate in favor of highly 25 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 220 IS compensated employees (as defined in section 1 414(q)). 2 ‘‘(3) LIMITATION ON EXCLUSION.—The amount 3 of qualified tuition program contributions which may 4 be excluded from gross income under subsection 5 (a)(9) with respect to any employee shall not exceed 6 $500 in any calendar year. 7 ‘‘(4) INFLATION ADJUSTMENT.— 8 ‘‘(A) IN GENERAL.—In the case of any 9 taxable year beginning in a calendar year after 10 2020, the $500 amount contained in paragraph 11 (3) shall be increased by an amount equal to— 12 ‘‘(i) such dollar amount, multiplied by 13 ‘‘(ii) the cost-of-living adjustment de- 14 termined under section 1(f)(3) for the cal- 15 endar year in which the taxable year be- 16 gins, determined by substituting ‘calendar 17 year 2019’ for ‘calendar year 2016’ in sub- 18 paragraph (A)(ii) thereof. 19 ‘‘(B) ROUNDING.—Any increase deter- 20 mined under subparagraph (A) shall be rounded 21 to the nearest multiple of $25.’’. 22 VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 220 IS (c) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to contributions made after De- 2 cember 31, 2019. 3 Æ VerDate Sep 11 2014 01:03 Feb 01, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S220.IS S220 pamtmann on DSKBFK8HB2PROD with BILLS