Lifelong Learning Accounts Act of 2008 - Amends the Internal Revenue Code to: (1) establish tax-exempt lifelong learning accounts to pay certain educational expenses, including tuition, fees, books, supplies, and information technology devices; (2) allow individuals between age 18 and 71 a tax credit for cash contributions to their lifelong learning accounts; and (3) allow employers a tax credit for contributions made to the lifelong learning accounts of their employees and for administrative costs associated with small employer lifelong learning accounts.
[Congressional Bills 110th Congress]
[From the U.S. Government Printing Office]
[H.R. 6036 Introduced in House (IH)]
110th CONGRESS
2d Session
H. R. 6036
To amend the Internal Revenue Code of 1986 to establish lifelong
learning accounts to provide an incentive to save for education.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 13, 2008
Mr. Emanuel (for himself and Mr. Ramstad) introduced the following
bill; which was referred to the Committee on Ways and Means, and in
addition to the Committee on Education and Labor, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish lifelong
learning accounts to provide an incentive to save for education.
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
2008''.
SEC. 2. LIFELONG LEARNING ACCOUNTS.
(a) In General.--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) Credit Allowed.--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 applicable percentage of
the contributions (other than rollover contributions described in
subsection (e)(5)) paid in cash during such taxable year by or on
behalf of such individual to a lifelong learning account of such
individual.
``(b) Limitations and Definitions Related to Allowance of Credit.--
``(1) Dollar limitation.--The amount of contributions taken
into account under subsection (a) with respect to any eligible
individual for any taxable year shall not exceed the lesser
of--
``(A) $2,500, or
``(B) an amount equal to the compensation (as
defined in section 219(f)(1)) includible in the
individual's gross income for such taxable year.
``(2) Limitations based on modified adjusted gross
income.--
``(A) Phaseout of dollar limitation based on
account beneficiary's modified adjusted gross income.--
The $2,500 amount contained in paragraph (1)(A) shall
be reduced (but not below zero) by the account
beneficiary's reduction amount.
``(B) Per contributor limitation based on
contributor's modified adjusted gross income.--In the
case of a contributor who is an individual (other than
an employer of the account beneficiary), the aggregate
amount of the contributions of such contributor which
may be taken into account under subsection (a) with
respect to any eligible individual for any taxable year
shall not exceed the excess (if any) of $2,500 over
such contributor's reduction amount.
``(C) Account beneficiary's reduction amount.--For
purposes of subparagraph (A), the account beneficiary's
reduction amount is the amount which bears the same
ratio to $2,500 as--
``(i) the excess of--
``(I) the account beneficiary's
modified adjusted gross income for such
taxable year, over
``(II) $100,000 (twice such amount
in the case of a joint return), bears
to
``(ii) $20,000 (twice such amount in the
case of a joint return).
For purposes of the preceding sentence, the term
`modified adjusted gross income' means adjusted gross
income increased by any amount excluded from gross
income under section 911, 931, or 933.
``(D) Contributor's reduction amount.--For purposes
of subparagraph (B), the contributor's reduction amount
is the amount that would be determined under
subparagraph (C) if `contributor' were substituted for
`account beneficiary' each place it appears therein.
``(E) Special rule for married individuals filing a
separate return.--In the case of a married individual
filing a separate return, subparagraph (C)(i)(II) shall
be applied by substituting `zero' for the dollar amount
therein.
``(3) Treatment of employer contributions.--
``(A) Exclusion from gross income.--Gross income
shall not include any contribution to a lifelong
learning account made by an employer of the account
beneficiary to the extent that the aggregate amount of
such contributions made during the taxable year does
not exceed the limitation in effect under paragraph (1)
(determined without regard to subparagraph (B) of this
paragraph) for such taxable year with respect to such
beneficiary.
``(B) Coordination with credit.--The limitation
which would (but for this subparagraph) apply under
paragraph (1) with respect to the eligible individual
for any taxable year shall be reduced (but not below
zero) by the aggregate amount contributed to lifelong
learning accounts of such individual which is
excludable from the taxpayer's gross income for such
taxable year under subparagraph (A) (and such amount
shall not be taken into account in determining the
credit under subsection (a)).
``(4) Applicable percentage.--For purposes of this section,
the term `applicable percentage' means--
``(A) 50 percent with respect to the first $500 of
contributions taken into account under subsection (a)
with respect to any eligible individual for any taxable
year, and
``(B) 25 percent with respect to so much of such
contributions as exceeds $500.
``(5) Eligible individual.--For purposes of this section,
the term `eligible individual' means any individual for any
taxable year if, as of the first day of such taxable year, such
individual has attained age 18 but has not attained age 71.
``(c) Lifelong Learning Accounts.--For purposes of this section--
``(1) In general.--The term `lifelong learning account'
means a trust created or organized in the United States as a
lifelong learning account exclusively for the purpose of paying
the qualified education expenses of the account beneficiary,
but only if the written governing instrument creating the trust
meets the following requirements:
``(A) No contribution will be accepted unless it is
in cash.
``(B) Except in the case of a rollover contribution
described in subsection (e)(5), no contribution will be
accepted if such contribution, when added to all
previous contributions to the trust for the calendar
year, would exceed $2,500.
``(C) 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.
``(D) No part of the trust assets will be invested
in life insurance contracts.
``(E) No part of the trust assets will be invested
in any collectible (as defined in section 408(m)).
``(F) The assets of the trust will not be
commingled with other property except in a common trust
fund or common investment fund.
``(G) The interest of an individual in the balance
in his account is nonforfeitable.
``(2) Qualified education expenses.--The term `qualified
education expenses' means amounts paid by the account
beneficiary for education of, or courses of instruction
(including training and apprenticeship programs) for, the
account beneficiary or the account beneficiary's spouse,
including--
``(A) tuition, fees, and similar payments, and
``(B) books, supplies, equipment, tools, and
information technology devices, required for such
course or education.
Such term shall not include amounts paid for any course or
other education involving sports, games, or hobbies.
``(3) Account beneficiary.--The term `account beneficiary'
means the individual on whose behalf the lifelong learning
account was established.
``(4) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 219(f)(3) (relating to time when
contributions deemed made).
``(B) Section 408(g) (relating to community
property laws).
``(C) Section 408(h) (relating to custodial
accounts).
``(d) Tax Treatment of Accounts.--
``(1) In general.--A lifelong learning account is exempt
from taxation under this subtitle unless such account has
ceased to be a lifelong learning account. Notwithstanding the
preceding sentence, any such account is subject to the taxes
imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable, etc. organizations).
``(2) Account terminations.--Rules similar to the rules of
paragraphs (2) and (4) of section 408(e) shall apply to
lifelong learning accounts, and any amount treated as
distributed under such rules shall be treated as not used to
pay qualified education expenses.
``(e) Tax Treatment of Distributions.--
``(1) Inclusion in gross income.--Any amount distributed
out of a lifelong learning account shall be included in gross
income by the distributee.
``(2) Additional tax.--
``(A) In general.--Except as otherwise provided in
this subsection, the tax imposed by this chapter on the
account beneficiary for any taxable year in which there
is a nonqualified distribution from a lifelong learning
account shall be increased by 10 percent of the amount
of such distribution.
``(B) Exceptions.--Subparagraph (A) shall not apply
if the distribution is made after the account
beneficiary dies, becomes disabled (within the meaning
of section 72(m)(7)), or has attained age 70.
``(3) Nonqualified distribution.--For purposes of this
section, the term `nonqualified distribution' means the excess
(if any) of--
``(A) the aggregate distributions from the account
during the taxable year, over
``(B) the qualified education expenses of the
account beneficiary for the taxable year.
``(4) Excess contributions returned before due date of
return.--
``(A) In general.--If any excess contribution is
contributed for a taxable year to any lifelong learning
account of an individual, paragraphs (1) and (2) shall
not apply to distributions from the lifelong learning
accounts of such individual (to the extent such
distributions do not exceed the aggregate excess
contributions to all such accounts of such individual
for such year) if--
``(i) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for
filing such individual's return for such
taxable year, and
``(ii) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in clause (ii) shall be
included in the gross income of the individual for the
taxable year in which it is received.
``(B) Excess contribution.--For purposes of
subparagraph (A), the term `excess contribution' means
any contribution (other than a rollover contribution
described in paragraph (6)) which is not taken into
account for purposes of determining the credit allowed
under subsection (a) or the amount excludable from the
taxpayer's gross income under subsection (b)(3).
``(5) Rollover contribution.--An amount is described in
this paragraph as a rollover contribution if it meets the
requirements of subparagraphs (A) and (B).
``(A) In general.--Paragraphs (1) and (2) shall not
apply to any amount paid or distributed from a lifelong
learning account to the account beneficiary to the
extent the amount received is paid into a lifelong
learning account for the benefit of such beneficiary
not later than the 60th day after the day on which the
beneficiary receives the payment or distribution.
``(B) Limitation.--This paragraph shall not apply
to any amount described in subparagraph (A) received by
an individual from a lifelong learning account if, at
any time during the 1-year period ending on the day of
such receipt, such individual received any other amount
described in subparagraph (A) from a lifelong learning
account to which paragraphs (1) and (2) did not apply
by reason of the application of this paragraph.
``(6) Transfer of account incident to divorce.--The
transfer of an individual's interest in a lifelong learning
account to an individual's spouse or former spouse under a
divorce or separation instrument described in subparagraph (A)
of section 71(b)(2) shall not be considered a taxable transfer
made by such individual notwithstanding any other provision of
this subtitle, and such interest shall, after such transfer, be
treated as a lifelong learning account with respect to which
such spouse is the account beneficiary.
``(7) Treatment after death of account beneficiary.--
``(A) Treatment if designated beneficiary is
spouse.--If the account beneficiary's surviving spouse
acquires such beneficiary's interest in a lifelong
learning account by reason of being the designated
beneficiary of such account at the death of the account
beneficiary, such lifelong learning account shall be
treated as if the spouse were the account beneficiary.
``(B) Other cases.--
``(i) In general.--If, by reason of the
death of the account beneficiary, any person
acquires the account beneficiary's interest in
a lifelong learning account in a case to which
subparagraph (A) does not apply--
``(I) such account shall cease to
be a lifelong learning account as of
the date of death, and
``(II) an amount equal to the fair
market value of the assets in such
account on such date shall be
includible if such person is not the
estate of such beneficiary, in such
person's gross income for the taxable
year which includes such date, or if
such person is the estate of such
beneficiary, in such beneficiary's
gross income for the last taxable year
of such beneficiary.
``(ii) Deduction for estate taxes.--An
appropriate deduction shall be allowed under
section 691(c) to any person (other than the
decedent or the decedent's spouse) with respect
to amounts included in gross income under
clause (i) by such person.
``(f) Reports.--The trustee of a lifelong learning account shall
make such reports regarding such account to the Secretary and to the
account beneficiary 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.''.
(b) Tax on Excess Contributions.--Section 4973 of the Internal
Revenue Code of 1986 is amended--
(1) by striking ``or'' at the end of subsection (a)(4), by
inserting ``or'' at the end of subsection (a)(5), and by
inserting after subsection (a)(5) the following new paragraph:
``(6) a lifelong learning account (within the meaning of
section 36(c)),'', and
(2) by adding at the end the following new subsection:
``(h) Excess Contributions to Lifelong Learning Accounts.--For
purposes of this section, in the case of lifelong learning accounts
(within the meaning of section 36(c)), the term `excess contributions'
means the sum of--
``(1) the aggregate amount contributed for the taxable year
to the accounts (other than rollover contributions described in
section 36(e)(5)) which is not taken into account for purposes
of determining the credit allowed under section 36(a) or the
amount excludable from the taxpayer's gross income under
section 36(b)(3), and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the accounts with
respect to which additional tax was imposed under
section 36(e)(2)(A) for the taxable year, and
``(B) the excess (if any) of--
``(i) the maximum amount of contributions
which may be taken into account under section
36(a) for the taxable year, over
``(ii) the amount contributed to the
accounts for the taxable year.
For purposes of this subsection, any contribution which
is distributed out of the lifelong learning account in
a distribution to which section 36(e)(5) applies shall
be treated as an amount not contributed.''.
(c) 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 subparagraph (G) as subparagraph (H),
by striking ``or'' at the end of subparagraph (F), and by
inserting after subparagraph (F) the following new
subparagraph:
``(G) a lifelong learning account described in
section 36(c), or''.
(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 36(d)(2) to such account.''.
(d) 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 36(f) (relating to lifelong learning
accounts), and''.
(e) Exclusion From Employment Taxes.--
(1) Federal insurance contributions act.--Subsection (a) of
section 3121 of the Internal Revenue Code of 1986 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 36(b)(3).''.
(2) Railroad retirement tax.--Subsection (e) of section
3231 of such Code is amended by adding at the end the following
new paragraph:
``(13) 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 36(b)(3).''.
(3) 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 36(b)(3).''.
(4) 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 36(b)(3).''.
(5) 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 learning account (as
defined in section 224) on behalf of such employee.''.
(6) Social security trust funds held harmless.--There is
hereby appropriated (out of any money in the Treasury not
otherwise appropriated) for each fiscal year to each fund under
the Social Security Act an amount equal to the reduction in the
transfers to such fund for such fiscal year by reason of the
amendment made by paragraph (1).
(f) Exemption From ERISA Requirements.--Subsection (b) of section 4
of the Employee Retirement Income Security Act of 1974 is amended by
striking ``or'' at the end of paragraph (4), by striking the period at
the end of paragraph (5) and inserting ``; or'', and by inserting after
paragraph (5) the following new paragraph:
``(6) such plan is maintained solely for the purposes of
establishing, and making contributions to, lifelong learning
accounts (as defined in section 36 of the Internal Revenue Code
of 1986) on behalf of employees.''.
(g) Conforming Amendments.--
(1) 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 redesignating the item relating to section 36 as
an item relating to section 37 and by inserting before such
item the following new item:
``Sec. 36. Contributions to lifelong learning accounts.''.
(2) Section 6211(b)(4)(A) of such Code is amended by
striking ``34,'' and all that follows through ``6428'' and
inserting ``34, 35, 36, 53(e), and 6428''.
(3) Section 1324(b)(2) of title 31, United States Code, is
amended by inserting ``, 36,'' after ``section 35''.
(h) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2008.
SEC. 3. CREDIT FOR EMPLOYER CONTRIBUTIONS TO LIFELONG LEARNING ACCOUNTS
AND ADMINISTRATIVE EXPENSES OF CERTAIN SMALL EMPLOYERS.
(a) 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. LIFELONG LEARNING ACCOUNTS CREDIT.
``(a) In General.--For purposes of section 38, the lifelong
learning accounts credit is the sum of--
``(1) the lifelong learning account contributions credit,
and
``(2) in the case of an eligible employer, the small
employer lifelong learning account administrative costs credit.
``(b) Lifelong Learning Account Contributions Credit.--
``(1) In general.--For purposes of this section, the term
`lifelong learning account contributions credit' means the
amount equal to 25 percent of the aggregate amount paid or
incurred by the taxpayer during the taxable year as
contributions to lifelong learning accounts (as defined in
section 36) of employees of the taxpayer.
``(2) Dollar limitation.--The amount of the contributions
taken into account under paragraph (1) with respect to any
employee for any taxable year shall not exceed $2,500.
``(c) Small Employer Lifelong Learning Account Administrative Costs
Credit.--
``(1) In general.--For purposes of this section, the term
`small employer lifelong learning account administrative costs
credit' means, in the case of an eligible employer, the amount
equal to 50 percent of the aggregate amount paid or incurred by
the taxpayer during the taxable year as administrative expenses
in carrying out a program to make payments to the lifelong
learning accounts (as defined in section 36) of employees of
the taxpayer.
``(2) Dollar limitation.--The amount of the credit
determined under this subsection for any taxable year shall not
exceed--
``(A) $500 for the first credit year and each of
the 2 taxable years immediately following the first
credit year, and
``(B) zero for any other taxable year.
``(3) Definitions.--For purposes of this subsection--
``(A) Eligible employer.--The term `eligible
employer' has the meaning given such term by section
408(p)(2)(C)(i).
``(B) First credit year.--The term `first credit
year' means the first taxable year for which the
taxpayer claims a credit under this section.
``(4) Special rules.--For purposes of this subsection,
rules similar to the rules of paragraphs (1), (2), and (3) of
section 45E(e) shall apply.''.
(b) 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 accounts credit determined
under section 45O.''.
(c) 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 lifelong learning accounts credit determined
under section 45O.''.
(d) 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. Lifelong learning accounts credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2008.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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