Lifelong Learning Accounts Act of 2007 - Amends the Internal Revenue Code to: (1) establish tax-exempt lifelong learning accounts to pay for certain higher education expenses and allow a tax deduction for cash contributions to such accounts; and (2) allow employers, employees, and self-employed individuals tax credits for contributions to such accounts.
Requires the Comptroller General to study the effectiveness of such accounts and the tax credits provided by this Act.
[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2901 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 2901
To amend the Internal Revenue Code of 1986 to establish a program
demonstrating multiple approaches to Lifelong Learning Accounts, which
are portable, worker-owned savings accounts that can be used by workers
to help finance education, training, and apprenticeships and which are
intended to supplement both public and employer-provided education and
training resources, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 28, 2007
Mr. Allen (for himself and Mr. Michaud) 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 establish a program
demonstrating multiple approaches to Lifelong Learning Accounts, which
are portable, worker-owned savings accounts that can be used by workers
to help finance education, training, and apprenticeships and which are
intended to supplement both public and employer-provided education and
training resources, 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 ``Lifelong Learning Accounts Act of
2007''.
SEC. 2. ESTABLISHMENT OF LIFELONG LEARNING ACCOUNTS.
(a) In General.--Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to computation of taxable
income) is amended by redesignating section 224 as section 225 and
inserting after section 223 the following new section:
``SEC. 224. LIFELONG LEARNING ACCOUNTS.
``(a) Deduction Allowed.--In the case of any eligible individual,
there shall be allowed as a deduction for the taxable year an amount
equal to the aggregate amount paid in cash during such taxable year by
or on behalf of such individual to a lifelong learning account of such
individual.
``(b) Lifelong Learning Accounts.--For purposes of this title, the
term `lifelong learning account' means a trust created or organized in
the United States for the exclusive benefit of an eligible individual,
but only if the written governing instrument creating the trust meets
the following requirements:
``(1) No contribution will be accepted unless it is in
cash.
``(2) The trustee is a bank (as defined in section 408(n)),
an agency or instrumentality of a State, or another person who
demonstrates to the satisfaction of the Secretary that the
manner in which that person will administer the trust will be
consistent with the requirements of this section.
``(3) No part of the trust assets will be invested in any
collectible (as defined in section 408(m)).
``(4) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(c) Tax Treatment of Distributions.--
``(1) In general.--Except as otherwise provided in this
subsection, any amount distributed out of a lifelong learning
account shall be included in gross income by the distributee.
``(2) Qualified higher education expenses.--
``(A) In general.--No amount shall be includible in
gross income under paragraph (1) if the qualified
higher education expenses of the individual for whom
the account was established during the taxable year are
not less than the aggregate distributions from the
account during such taxable year.
``(B) Distributions in excess of expenses.--If the
aggregate distributions from a lifelong learning
account for any taxable year exceed the qualified
higher education expenses of the individual for whom
the account was established during the taxable year,
the amount otherwise includible in gross income under
paragraph (1) shall be reduced by the amount which
bears the same ratio to the amount which would be
includible in gross income under paragraph (1) (without
regard to this subparagraph) as such expenses bear to
such aggregate distributions.
``(C) Election to waive exclusion.--A taxpayer may
elect to waive the application of this paragraph for
any taxable year.
``(D) No double benefit.--No exclusion, credit, or
deduction shall be allowed to the taxpayer under this
chapter for any qualified higher education expenses
taken into account in determining the amount of the
exclusion under this paragraph.
``(3) Additional tax.--
``(A) In general.--The tax imposed by this chapter
on the account holder for any taxable year in which
there is a distribution from a lifelong learning
account includible in gross income under paragraph (1)
shall be increased by 15 percent of the amount so
includible.
``(B) Exceptions.--Subparagraph (A) shall not apply
if the distribution is made after the account holder
dies or becomes disabled (within the meaning of section
72(m)(7)).
``(4) Transfer of account incident to divorce.--The
transfer of an individual's interest in a lifelong learning
account to such individual's former spouse under a divorce
decree or under a written instrument incident to a divorce
shall not be considered a taxable transfer made by such
individual notwithstanding any other provision of this
subtitle, and such interest at the time of the transfer shall
be treated as a lifelong learning account of such spouse and
not of such individual. Thereafter such account shall be
treated, for purposes of this subtitle, as maintained for the
benefit of such spouse.
``(d) Time When Contributions Deemed Made.--A taxpayer shall be
deemed to have made a contribution on the last day of a taxable year if
the contribution is made on account of such taxable year and is made
not later than the time prescribed by law for filing the return for
such taxable year (not including extensions thereof).
``(e) Tax Treatment of Accounts.--
``(1) In general.--A lifelong learning account shall be
exempt from taxation under this subtitle. Notwithstanding the
preceding sentence, any lifelong learning account shall be
subject to the taxes imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable,
etc., organizations).
``(2) Loss of exemption of account where individual engages
in prohibited transaction.--
``(A) In general.--If, during any taxable year of
the individual for whose benefit the lifelong learning
account is established, the individual engages in any
transaction prohibited by section 4975 with respect to
the account, the account shall cease to be a lifelong
learning account as of the first day of that taxable
year.
``(B) Account treated as distributing all its
assets.--In any case in which any account ceases to be
a lifelong learning account by reason of subparagraph
(A) on the first day of any taxable year, paragraph (1)
of subsection (c) shall be applied as if there were a
distribution on such first day in an amount equal to
the fair market value (on such first day) of all assets
in the account (on such first day).
``(3) Effect of pledging account as security.--If, during
any taxable year, an individual for whose benefit a lifelong
learning account is established uses the account or any portion
thereof as security for a loan, the portion so used shall be
treated as distributed to that individual.
``(4) Rollover contributions.--Subsection (c)(1) shall not
apply to any amount paid or distributed out of a lifelong
learning account to the individual for whose benefit the
account is maintained if such amount is paid into another
lifelong learning account for the benefit of such individual
not later than the 60th day after the day on which the
individual receives the payment or distribution.
``(f) Other Definitions.--For purposes of this section--
``(1) Eligible individual.--The term `eligible individual'
means an individual who--
``(A) is an employee or a self-employed individual
(within the meaning of section 401(c)(1)(B)), and
``(B) is a resident of a State designated by the
Secretary under subsection (i), on the date the
lifelong learning account is established for such
individual.
``(2) Qualified higher education expenses.--The term
`qualified higher education expenses' means--
``(A) the expenses and courses of instruction
described in section 127(c)(1), and
``(B) such expenses, including tools, equipment,
information technology devices, and training and
apprenticeship programs, as the Secretary shall
prescribe after consultation with the Secretary of
Labor.
``(g) Custodial Accounts.--For purposes of this section, a
custodial account shall be treated as a trust if the assets of such
account are held by a bank (as defined in section 408(n)) or another
person who demonstrates, to the satisfaction of the Secretary, that the
manner in which such person will administer the account will be
consistent with the requirements of this section, and if the custodial
account would, except for the fact that it is not a trust, constitute a
lifelong learning account described in subsection (b). For purposes of
this title, in the case of a custodial account treated as a trust by
reason of the preceding sentence, the custodian of such account shall
be treated as the trustee thereof.
``(h) Reports.--The trustee of a lifelong learning account shall
make such reports regarding such account to the Secretary and to the
individual for whose benefit the account is maintained with respect to
contributions, distributions, and such other matters as the Secretary
may require under regulations. The reports required by this subsection
shall be filed at such time and in such manner and furnished to such
individuals at such time and in such manner as may be required by those
regulations.
``(i) Establishment of Demonstration Program.--From among States
which apply (in such form and manner and at such time as the Secretary
determines), the Secretary shall designate 10 States in which residents
shall be treated as eligible individuals.
``(j) Limitation on Number of Taxpayers Having Lifelong Learning
Accounts.--
``(1) In general.--No individual shall be treated as an
eligible individual for any taxable year beginning after the
cut-off year unless such individual was an eligible individual
for any taxable year ending on or before the close of the cut-
off year.
``(2) Cut-off year.--For purposes of paragraph (1), the
term `cut-off year' means the first calendar year for which the
Secretary determines that the number of eligible individuals
for whom a lifelong learning account has been established
exceeds 200,000 by the close of such calendar year.
``(3) Reporting.--The Secretary shall establish such
reporting requirements for trustees of lifelong learning
accounts as are necessary to carry out this subsection.
``(k) Special Rules for Employer Contributions.--In the case of any
contribution by an employer to a lifetime learning account made on
behalf of an employee, rules similar to the rules of paragraphs (2)
through (6) of section 127(b) shall apply.''.
(b) Deduction Allowed Whether or Not Individual Itemizes Other
Deductions.--Subsection (a) of section 62 of the Internal Revenue Code
of 1986 is amended by inserting after paragraph (21) the following new
paragraph:
``(22) Lifelong learning accounts.--The deduction allowed
under section 224.''.
(c) Employer Contributions Excluded From Income.--Section 127 of
the Internal Revenue Code of 1986 (relating to educational assistance)
is amended by redesignating subsection (d) as subsection (e) and by
inserting after subsection (c) the following new subsection:
``(d) Employer Contributions to Lifelong Learning Account.--Gross
income of an employee of an employer shall not include the amount of
any contribution by the employer to a lifelong learning account
established on behalf of the employee.''.
(d) Exclusion From Employment Taxes.--
(1) Railroad retirement tax.--Subsection (e) of section
3231 of the Internal Revenue Code of 1986 is amended by adding
at the end the following new paragraph:
``(13) Lifelong learning account contributions.--The term
`compensation' shall not include any payment made to or for the
benefit of an employee if at the time of such payment it is
reasonable to believe that the employee will be able to exclude
such payment from income under section 127(d).''.
(2) Unemployment tax.--Subsection (b) of section 3306 of
such Code is amended by striking ``or'' at the end of paragraph
(18), by striking the period at the end of paragraph (19) and
inserting ``; or'', and by inserting after paragraph (19) the
following new paragraph:
``(20) any payment made to or for the benefit of an
employee if at the time of such payment it is reasonable to
believe that the employee will be able to exclude such payment
from income under section 127(d).''.
(3) Withholding tax.--Subsection (a) of section 3401 of
such Code is amended by striking ``or'' at the end of paragraph
(21), by striking the period at the end of paragraph (22) and
inserting ``; or'', and by inserting after paragraph (22) the
following new paragraph:
``(23) any payment made to or for the benefit of an
employee if at the time of such payment it is reasonable to
believe that the employee will be able to exclude such payment
from income under section 127(d).''.
(4) Employer contributions required to be shown on w-2.--
Subsection (a) of section 6051 of such Code is amended by
striking ``and'' at the end of paragraph (12), by striking the
period at the end of paragraph (13) and inserting ``, and'',
and by inserting after paragraph (13) the following new
paragraph:
``(14) the amount contributed to any lifelong learning
account (as defined in section 224) on behalf of such
employee.''.
(e) Tax on Prohibited Transactions.--
(1) Paragraph (1) of section 4975(e) of the Internal
Revenue Code of 1986 (relating to prohibited transactions) is
amended by redesignating subparagraphs (H) and (I) as
subparagraphs (I) and (J), respectively, and by inserting the
following new subparagraph after subparagraph (G):
``(H) a lifelong learning account described in
section 224(b),''.
(2) Subsection (c) of section 4975 of such Code is amended
by adding at the end the following new paragraph:
``(7) Special rule for lifelong learning accounts.--An
individual for whose benefit a lifelong learning account is
established shall be exempt from the tax imposed by this
section with respect to any transaction concerning such account
(which would otherwise be taxable under this section) if, with
respect to such transaction, the account ceases to be a
lifelong learning account by reason of the application of
section 224(e)(2)(A) to such account.''.
(f) Failure To Provide Reports on Lifelong Learning Accounts.--
Paragraph (2) of section 6693(a) of the Internal Revenue Code of 1986
is amended by striking ``and'' at the end of subparagraph (D), by
redesignating subparagraph (E) as subparagraph (F), and by inserting
after subparagraph (D) the following new subparagraph:
``(E) section 224(h) (relating to lifelong learning
accounts), and''.
(g) Exemption From ERISA Requirements.--A lifelong learning account
(as defined in section 224 of the Internal Revenue Code of 1986, as
added by this section) shall not be treated as an employee welfare
benefit plan for purposes of title I of the Employee Retirement Income
Security Act of 1974.
(h) Clerical Amendment.--The table of sections for part VII of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by redesignating the item relating to section 224 as an item
relating to section 225 and inserting after the item relating to
section 223 the following new item:
``Sec. 224. Lifelong learning accounts.''.
(i) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2007.
SEC. 3. REFUNDABLE CREDIT FOR CONTRIBUTIONS TO LIFELONG LEARNING
ACCOUNTS.
(a) General Rule.--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:
``SEC. 36. CONTRIBUTIONS TO LIFELONG LEARNING ACCOUNTS.
``(a) General Rule.--In the case of an eligible individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the aggregate amount paid in
cash for the taxable year by such individual to a lifelong learning
account established for the benefit of such individual under section
224.
``(b) Limitations.--
``(1) In general.--The credit allowed under subsection (a)
with respect to any taxable year shall not exceed $500.
``(2) Limitation based on modified adjusted gross income.--
The amount which would (but for this paragraph) be otherwise
allowable as a credit under subsection (a) for the taxable year
shall be reduced (but not below zero) by the amount which bears
the same ratio to the amount which would (but for this
paragraph) be otherwise allowable under subsection (a) as--
``(A) the excess of--
``(i) the taxpayer's modified adjusted
gross income (as defined in section 530(c)(2))
for the taxable year, over
``(ii) $55,000 (twice such amount in the
case of a joint return), bears to
``(B) $10,000 (twice such amount in the case of a
joint return).
``(c) Eligible Individual.--The term `eligible individual' has the
meaning given such term by section 224(f)(1).''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting ``or 36'' after ``section
35''.
(2) 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 last item and inserting the
following new items:
``Sec. 36. Contributions to lifelong learning accounts.
``Sec. 37. Overpayments of tax.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 4. TAX TREATMENT OF CONTRIBUTIONS BY EMPLOYERS TO LIFELONG
LEARNING ACCOUNTS OF THEIR EMPLOYEES.
(a) Allowance of Credit to Employers.--
(1) In general.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
business related credits) is amended by adding at the end the
following new section:
``SEC. 45O. CONTRIBUTIONS BY EMPLOYERS TO LIFELONG LEARNING ACCOUNTS.
``(a) In General.--For purposes of section 38, in the case of an
employer, the lifelong learning contribution credit determined under
this section for any taxable year is an amount equal to the aggregate
qualified lifelong learning contributions of the employer for the
taxable year.
``(b) Qualified Lifelong Learning Contribution.--For purposes of
this section--
``(1) In general.--The term `qualified lifelong learning
contribution' means a contribution made by an employer on
behalf of an employee of such employer to a lifelong learning
account established on behalf of such employee.
``(2) Dollar limitation.--The aggregate contributions made
by an employer on behalf of any employee which may be treated
as qualified lifelong learning contributions for any calendar
year shall not exceed the lesser of--
``(A) the contributions made by the employee to the
employee's lifelong learning account during the
calendar year, or
``(B) $500.
``(c) No Reduction in Education Benefits.--No credit shall be
allowed under this section to any employer for any taxable year unless
such employer certifies (in such form and manner as the Secretary may
provide) that such employer has not reduced the education and tuition
benefits provided by the employer to its employees.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Definitions.--Any term used in this section which is
also used in section 529A shall have the same meaning as when
used in such section.
``(2) Special rules.--Rules similar to the rules of section
45E(e) shall apply for purposes of this section.
``(3) Self-employed individuals.--A self-employed
individual (within the meaning of section 401(c)(1)(B)) shall
not be treated as an employee.''.
(2) Credit part of general business credit.--Section 38(b)
of such Code is amended by striking ``and'' at the end of
paragraph (30), by striking the period at the end of paragraph
(31) and inserting ``, plus'', and by adding at the end the
following new paragraph:
``(32) the lifelong learning contribution credit determined
under section 45O.''.
(3) Deduction for unused credit.--Section 196(c) of such
Code is amended by striking ``and'' at the end of paragraph
(12), by striking the period at the end of paragraph (13) and
inserting ``, and'', and by adding at the end the following new
paragraph:
``(14) the employer lifelong learning contribution credit
determined under section 45O(a).''.
(4) Clerical amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new item:
``Sec. 45O. Contributions by employers to lifelong learning
accounts.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 5. APPLICATION TO SECTION 529 QUALIFIED TUITION PROGRAMS.
Section 529 of the Internal Revenue Code of 1986 is amended by
adding at the end the following new subsection:
``(g) Application of Lifelong Learning Account Rules.--Not later
than 90 days after the date of the enactment of this subsection, the
Secretary shall--
``(1) prescribe regulations which provide for the
application (subject the requirements of subsection (i) and (j)
of section 224) of the rules of sections 224 (including the
deduction allowed under subsection (a) thereof), 36, and 45O,
and related provisions, to qualified tuition programs
established under this section, or
``(2) submit a report to Congress describing in detail the
reasons that such regulations have not been prescribed.''.
SEC. 6. STUDY ON EFFECTIVENESS OF LIFELONG LEARNING ACCOUNTS
DEMONSTRATION PROGRAM.
(a) In General.--The Comptroller General of the United States, in
consultation with the Secretary of Labor, shall conduct a study on
lifelong learning accounts established under section 224 of the
Internal Revenue Code of 1986 and the credits established under
sections 36 and 45O of such Code. Such study shall examine the
effectiveness of the accounts in increasing funding for career-related
education and the extent to which the tax benefits under such sections
are provided to low-income individuals.
(b) Report.--Not later than January 1, 2009, the Secretary of the
Treasury shall submit to Congress a report on the study conducted under
subsection (a).
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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