Lifelong Learning and Training Account Act of 2019

II 116TH CONGRESS 1ST SESSION S. 539 To amend the Internal Revenue Code of 1986 to establish Lifelong Learning and Training Account programs. IN THE SENATE OF THE UNITED STATES FEBRUARY 25, 2019 Mr. WARNER (for himself and Mr. COONS) 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 establish Lifelong Learning and Training Account programs. 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 ‘‘Lifelong Learning and 4 Training Account Act of 2019’’. 5 SEC. 2. LIFELONG LEARNING AND TRAINING ACCOUNT 6 PROGRAMS. 7 (a) IN GENERAL.—Part VIII of subchapter F of 8 chapter 1 of the Internal Revenue Code of 1986 is amend- 9 ed by inserting after section 530 the following new section: 10 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 2 •S 539 IS ‘‘SEC. 531. LIFELONG LEARNING AND TRAINING ACCOUNT 1 PROGRAMS. 2 ‘‘(a) IN GENERAL.—A Lifelong Learning and Train- 3 ing Account program shall be exempt from taxation under 4 this subtitle. Notwithstanding the preceding sentence, 5 such program shall be subject to the taxes imposed by sec- 6 tion 511. 7 ‘‘(b) LIFELONG LEARNING AND TRAINING ACCOUNT 8 PROGRAM.—For purposes of this section— 9 ‘‘(1) IN GENERAL.—The term ‘Lifelong Learn- 10 ing and Training Account program’ means a pro- 11 gram established and maintained by a State or 12 agency or instrumentality thereof— 13 ‘‘(A) under which the designated bene- 14 ficiary of the account or their employer may 15 make contributions to an account which is es- 16 tablished for the purpose of meeting the quali- 17 fied training expenditures of such beneficiary, 18 and 19 ‘‘(B) which meets the other requirements 20 of this section. 21 ‘‘(2) QUALIFIED TRUST.—Except to the extent 22 provided in regulations, a program shall not be 23 treated as a Lifelong Learning and Training Ac- 24 count program unless such program provides that 25 amounts are held in a qualified trust and such pro- 26 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 3 •S 539 IS gram has received a ruling or determination by the 1 Secretary that such program meets the applicable 2 requirements for a Lifelong Learning and Training 3 Account program. For purposes of the preceding 4 sentence, the term ‘qualified trust’ means a trust 5 which is created or organized in the United States 6 for the exclusive benefit of designated beneficiaries 7 and with respect to which the requirements of para- 8 graphs (2) and (5) of section 408(a) are met. 9 ‘‘(3) REQUIREMENTS.— 10 ‘‘(A) IN GENERAL.—A program shall not 11 be treated as a Lifelong Learning and Training 12 Account program unless it provides— 13 ‘‘(i) that contributions may only be 14 made in cash, 15 ‘‘(ii) separate accounting for each des- 16 ignated beneficiary, 17 ‘‘(iii) that no interest in the program 18 or any portion thereof may be used as se- 19 curity for a loan, 20 ‘‘(iv) that no contributions may be 21 made on behalf of a designated bene- 22 ficiary— 23 ‘‘(I) in excess of $2,000 during 24 any calendar year, 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 4 •S 539 IS ‘‘(II) if the total amount in the 1 account of such beneficiary is in ex- 2 cess of $15,000, or 3 ‘‘(III) during any calendar year 4 which begins after such beneficiary at- 5 tains 57 years of age, 6 ‘‘(v) that any distribution shall be 7 made in accordance with the requirements 8 under subparagraphs (B) and (C), and 9 ‘‘(vi) that required distributions shall 10 be made in accordance with paragraph (6). 11 ‘‘(B) METHOD OF DISTRIBUTION.— 12 ‘‘(i) IN GENERAL.—For purposes of 13 any distribution from the account of a des- 14 ignated beneficiary under a Lifelong 15 Learning and Training Account program— 16 ‘‘(I) the applicable amount of 17 such distribution shall be drawn from 18 amounts transferred to the account of 19 the designated beneficiary pursuant to 20 paragraph (4) and any earnings there- 21 on, and 22 ‘‘(II) after application of sub- 23 clause (I), the remainder of such dis- 24 tribution shall be drawn from 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 5 •S 539 IS amounts contributed by the des- 1 ignated beneficiary or their employer 2 and any earnings thereon. 3 ‘‘(ii) APPLICABLE AMOUNT.—For pur- 4 poses of clause (i)(I), the applicable 5 amount shall be an amount equal to the 6 lesser of— 7 ‘‘(I) 50 percent of the amount of 8 the distribution, or 9 ‘‘(II) the total amount of any 10 available funds in the account of the 11 designated beneficiary which were 12 transferred pursuant to paragraph (4) 13 and any earnings thereon. 14 ‘‘(iii) OTHER METHODS.—The Sec- 15 retary may amend, alter, or supplement 16 the distribution requirements under this 17 subparagraph in such manner as the Sec- 18 retary deems appropriate. 19 ‘‘(C) REPORTING.—For purposes of any 20 distribution from the account of a designated 21 beneficiary under a Lifelong Learning and 22 Training Account program, the administrator 23 shall provide the beneficiary and the Secretary 24 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 6 •S 539 IS with such information as the Secretary deems 1 appropriate, including— 2 ‘‘(i) the amount of such distribution, 3 including the applicable amount of such 4 distribution (as described in subparagraph 5 (B)(ii)), and 6 ‘‘(ii) whether such distribution was 7 provided— 8 ‘‘(I) directly to the program de- 9 scribed in clauses (i) through (iii) of 10 subsection (e)(5)(A) which provides 11 training to the beneficiary, or 12 ‘‘(II) to reimburse the beneficiary 13 for any qualified training expenditures 14 incurred by such beneficiary. 15 ‘‘(4) MATCHING FUNDS.— 16 ‘‘(A) TRANSFER TO BENEFICIARY AC- 17 COUNT.— 18 ‘‘(i) IN GENERAL.—Out of any mon- 19 eys in the Treasury not otherwise appro- 20 priated, the Secretary shall transfer to the 21 account of any designated beneficiary 22 under a Lifelong Learning and Training 23 Account program an amount equal to any 24 amounts contributed to such account by 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 7 •S 539 IS such beneficiary or their employer which 1 occur during any calendar year which be- 2 gins after the date on which such bene- 3 ficiary attains 24 years of age. 4 ‘‘(ii) LIMITATION.—Any amounts 5 transferred by the Secretary to the account 6 of any designated beneficiary pursuant to 7 clause (i) during any calendar year— 8 ‘‘(I) shall not exceed $1,000, and 9 ‘‘(II) shall not be subject to the 10 limitation under paragraph 11 (3)(A)(iv)(I). 12 ‘‘(B) DEPOSIT OF MATCHING FUNDS.— 13 Any amounts required to be transferred to the 14 account of a designated beneficiary under sub- 15 paragraph (A) shall be transferred by the Sec- 16 retary as soon as is practicable following any 17 contribution to such account by such bene- 18 ficiary or their employer. 19 ‘‘(C) REDUCTION IN MATCHING FUNDS.— 20 ‘‘(i) IN GENERAL.—For each applica- 21 ble taxable year, the dollar amount in sub- 22 paragraph (A)(ii)(I) shall be reduced (but 23 not below zero) by an amount equal to the 24 greater of— 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 8 •S 539 IS ‘‘(I) an amount which bears the 1 same ratio to such dollar amount as— 2 ‘‘(aa) the amount (not less 3 than zero) equal to the adjusted 4 gross income of the taxpayer for 5 the applicable taxable year minus 6 $72,000, bears to 7 ‘‘(bb) $10,000, or 8 ‘‘(II) an amount which bears the 9 same ratio to such dollar amount as— 10 ‘‘(aa) the amount (not less 11 than zero) equal to the earned in- 12 come (as described in section 13 32(c)(2)) of the designated bene- 14 ficiary for the applicable taxable 15 year minus $72,000, bears to 16 ‘‘(bb) $10,000. 17 ‘‘(ii) MARRIED INDIVIDUALS.—In the 18 case of a designated beneficiary who is 19 married (within the meaning of section 20 7703)— 21 ‘‘(I) if such beneficiary has filed 22 a joint return for the applicable tax- 23 able year, each of the dollar amounts 24 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 9 •S 539 IS under clause (i)(I) shall be doubled 1 for such year, or 2 ‘‘(II) if such beneficiary has not 3 filed a joint return for the applicable 4 taxable year, the dollar amount in 5 subparagraph (A)(ii)(I) shall be re- 6 duced to zero for such year. 7 ‘‘(iii) APPLICABLE TAXABLE YEAR.— 8 For purposes of this subparagraph, the 9 term ‘applicable taxable year’ means the 10 taxable year in which the transfer de- 11 scribed in subparagraph (A)(i) is made to 12 the account of the designated beneficiary. 13 ‘‘(iv) EXCESS TRANSFERS.—If the 14 total amount of any transfers made to the 15 account of a designated beneficiary pursu- 16 ant to subparagraph (A)(i) during an ap- 17 plicable taxable year exceeds the dollar 18 amount under subparagraph (A)(ii)(I) 19 (after application of clauses (i) and (ii)) 20 for such taxable year, the tax imposed by 21 this chapter for such taxable year shall be 22 increased by the amount of such excess. 23 ‘‘(D) DISTRIBUTION OF MATCHING 24 FUNDS.— 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 10 •S 539 IS ‘‘(i) IN GENERAL.—Any distribution 1 under a Lifelong Learning and Training 2 Account program made from amounts 3 transferred pursuant to this paragraph 4 shall be made by the administrator— 5 ‘‘(I) directly to the program de- 6 scribed in clauses (i) through (iii) of 7 subsection (e)(5)(A) which provides 8 training to the designated beneficiary, 9 or 10 ‘‘(II) to reimburse the designated 11 beneficiary for any qualified training 12 expenditures incurred by such bene- 13 ficiary, 14 provided that the beneficiary has provided 15 the administrator with such documentation 16 as is deemed necessary to ensure compli- 17 ance with clause (ii). 18 ‘‘(ii) PROHIBITION.—No amounts 19 transferred pursuant to this paragraph to 20 any account of a designated beneficiary 21 under a Lifelong Learning and Training 22 Account program may be distributed for 23 any purpose other than for payment or re- 24 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 11 •S 539 IS imbursement of qualified training expendi- 1 tures. 2 ‘‘(E) ADDITIONAL REDUCTION FOR NON- 3 QUALIFIED DISTRIBUTIONS.—For purposes of 4 any amount of a distribution under a Lifelong 5 Learning and Training Account program which 6 is includible in the gross income of the des- 7 ignated beneficiary, any available funds in the 8 account of such beneficiary which were trans- 9 ferred pursuant to this paragraph (and any 10 earnings thereon) shall also be reduced by such 11 amount. 12 ‘‘(F) RESCISSION OF MATCHING FUNDS.— 13 On January 1 of the applicable calendar year, 14 any available funds in the account of such bene- 15 ficiary which were transferred pursuant to this 16 paragraph (and any earnings thereon) shall be 17 reduced to zero. 18 ‘‘(5) INVESTMENT.— 19 ‘‘(A) IN GENERAL.—Any contributions or 20 transfers to a Lifelong Learning and Training 21 Account program (and any earnings thereon) 22 shall be invested by the administrator in United 23 States Treasury securities with a maturity date 24 of not greater than 10 years. 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 12 •S 539 IS ‘‘(B) SECRETARIAL AUTHORITY.—The Sec- 1 retary may prescribe such regulations, rules, or 2 other guidance as may be necessary or appro- 3 priate for purposes of applying this paragraph. 4 ‘‘(6) REQUIRED DISTRIBUTIONS.—On January 5 1 of the applicable calendar year, the total amount 6 of available funds in the account of the designated 7 beneficiary which were contributed by the designated 8 beneficiary or their employer (and any earnings 9 thereon) shall be distributed to such beneficiary. 10 ‘‘(c) TAX TREATMENT.— 11 ‘‘(1) IN GENERAL.—Except as otherwise pro- 12 vided in this subsection, no amount shall be includ- 13 ible in gross income of— 14 ‘‘(A) a designated beneficiary under a Life- 15 long Learning and Training Account program, 16 or 17 ‘‘(B) an employer of such beneficiary that 18 contributes to such program on behalf of such 19 beneficiary, 20 with respect to any distribution or earnings under 21 such program. 22 ‘‘(2) DISTRIBUTIONS.— 23 ‘‘(A) IN GENERAL.—Any distribution 24 under a Lifelong Learning and Training Ac- 25 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 13 •S 539 IS count program shall be includible in the gross 1 income of the distributee in the manner as pro- 2 vided under section 72 to the extent not ex- 3 cluded from gross income under any other pro- 4 vision of this chapter. 5 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED 6 TRAINING EXPENDITURES.— 7 ‘‘(i) IN GENERAL.—In the case of any 8 distributions, if such distributions do not 9 exceed the qualified training expenditures 10 of the designated beneficiary, no amount 11 shall be includible in gross income. 12 ‘‘(ii) COORDINATION WITH OTHER 13 CREDITS AND DEDUCTIONS.—For purposes 14 of determining the credit allowed under 15 section 25A or the deduction allowed under 16 section 222, no distribution under a Life- 17 long Learning and Training Account pro- 18 gram shall be included as qualified tuition 19 and related expenses under such sections. 20 ‘‘(C) CHANGE IN BENEFICIARIES OR PRO- 21 GRAMS.— 22 ‘‘(i) ROLLOVERS.—Subparagraph (A) 23 shall not apply to that portion of any dis- 24 VerDate Sep 11 2014 05:37 Mar 01, 2019 Jkt 089200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S539.IS S539 kjohnson on DSK79L0C42 with BILLS 14 •S 539 IS tribution which, within 60 days of such 1 distribution, is transferred— 2 ‘‘(I) to another Lifelong Learn- 3 ing and Training Account p [Text truncated for display. 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