Investing in Student Success Act of 2014 - Declares that income share agreements that meet this Act's requirements are valid, binding, and enforceable contracts that are not subject to state usury laws or state laws regulating assignments of future income.
Defines an "income share agreement" as an agreement between an individual and any other person under which the individual commits to pay a specified percentage of the individual's future income, for a specified period of time, in exchange for payments to or on behalf of such individual for postsecondary education, workforce development, or other purposes.
Requires such an agreement to:
Requires individuals, before entering into such an agreement, to be provided with a document that clearly and simply discloses: (1) the terms of the agreement, (2) that the agreement is not a debt instrument, (3) that such individual may be required to pay more or less than the amount received, and (4) that an individual's obligations under the agreement are not dischargeable in bankruptcy.
Prohibits such agreements from being construed as giving the contract holder any rights over an individual's actions.
Excludes payments that are made under an income share agreement from the individual's gross income for tax purposes.
Amends the Internal Revenue Code to include income share agreements as qualified education loans, but denies the deduction for interest paid on such loans.
Prohibits amounts individuals receive for entering into an income share agreement from being included as income or assets in the computation of the expected family contribution for any program funded under the Higher Education Act of 1965.
Amends the Investment Company Act of 1940 to exclude any person from being treated as an investment company if substantially all of that person's business is confined to making income share agreements.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4436 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 4436
To provide the legal framework necessary for the growth of innovative
private financing options for students to fund postsecondary education,
and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 9, 2014
Mr. Petri introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committees on
Education and the Workforce and Financial Services, 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 provide the legal framework necessary for the growth of innovative
private financing options for students to fund postsecondary education,
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 ``Investing in Student Success Act of
2014''.
TITLE I--AUTHORIZATION OF INCOME SHARE AGREEMENTS
SEC. 101. PURPOSE; LAWFULNESS OF INSTRUMENTS; PREEMPTION OF STATE LAW.
(a) Purpose.--It is the purpose of this title to authorize
individuals to enter into income share agreements for the purposes of
obtaining funds in exchange for agreeing to pay to the holder of the
contract a specified percentage of the individual's future income.
(b) Lawfulness of Contracts; Preemption.--Any income share
agreement that complies with the requirements of section 102 shall be a
valid, binding, and enforceable contract notwithstanding any State law
limiting or otherwise regulating assignments of future wages or other
income.
SEC. 102. TERMS AND CONDITIONS OF INCOME SHARE AGREEMENT CONTRACTS.
(a) Definition of Income Share Agreement.--For purposes of this
title, the term ``income share agreement'' means an agreement between
an individual and any other person under which the individual commits
to pay a specified percentage of the individual's future income, for a
specified period of time, in exchange for payments to or on behalf of
such individual for postsecondary education, workforce development, or
other purposes.
(b) Terms and Conditions of Agreements.--An income share agreement
complies with the requirements of this section if the contract complies
with each of the following conditions:
(1) Specified percentage of income.--An income share
agreement shall specify the percentage of future income which
the individual will be obligated to pay, except that the
contract shall exempt, at a minimum, the first $10,000
(adjusted each year to reflect changes in the Consumer Price
Index for All Urban Consumers published by the Bureau of Labor
Statistics of the Department of Labor for the most recent 12-
month period for which such data are available) of an
individual's income when determining the individual's
obligation for a given year.
(2) Definition of income.--An income share agreement shall
specify the definition of income to be used for purposes of
calculating an individual's obligation under the contract.
(3) Aggregate limitation on obligation.--No eligible
individual may enter into any income share agreement if the
total percentage of such individual's future income that the
individual agrees to pay under that contract, and any other
income share agreements of such individual, exceeds 15 percent
of such future income.
(4) Specified duration; extension of period.--An income
share agreement shall specify the maximum period of time during
which the individual will be obligated to pay a portion of the
individual's future income, except that--
(A) except as provided in subparagraph (B), such
period may not exceed 360 months; and
(B) such contract may provide that such period may
be extended by the number of years during which the
individual's income is below the exemption amount
specified in the agreement under paragraph (1).
(5) Early termination.--An income share agreement shall
specify the terms and conditions by which the individual may
extinguish the individual's obligations under the contract
before the end of the payment period specified in the
agreement, based on the remaining term of such period.
(c) Required Disclosures.--An income share agreement does not
comply with the requirements of this section unless the individual who
is committing to pay future income is provided, before entry into such
agreement, a disclosure document that clearly and simply discloses
that--
(1) the agreement is not a debt instrument, and that the
amount the individual will be required to pay under the
agreement--
(A) may be more or less than the amount provided to
the individual; and
(B) will vary in proportion to the individual's
future income;
(2) the obligations of the individual under the agreement
are not dischargeable under bankruptcy law;
(3) whether the obligations of the individual under the
agreement may be extinguished by accelerating payments, and, if
so, under what terms;
(4) the duration of the individual's obligations under the
agreement (absent such accelerating payments), including any
circumstances under which the contract would be extended;
(5) the percentage of income the individual is committing
to pay and the amount of income that is exempt from the
calculation of the individual's obligation; and
(6) the definition of income to be used for purposes of
calculating the individual's obligation.
(d) Non-Interference.--An income share agreement shall not be
construed to give the contract holder any rights over an individual's
actions--it simply represents an obligation by the individual pay the
specific percentage of future income.
SEC. 103. DEFINITIONS.
As used in this title:
(1) State.--The term ``State'' includes, in addition to the
several States of the Union, the Commonwealth of Puerto Rico,
the District of Columbia, Guam, American Samoa, the Virgin
Islands, the government of the Northern Mariana Islands, and
the Trust Territory of the Pacific Islands.
(2) State law.--The term ``State law'' means any law,
decision, rule, regulation, or other action having the effect
of a law of any State or any political subdivision of a State,
or any agency or instrumentality of a State or political
subdivision of a State, except that a law of the United States
applicable only to the District of Columbia shall be treated as
a State law (rather than a law of the United States).
SEC. 104. PREEMPTION OF STATE LAW WITH RESPECT TO USURY.
Income share agreements shall not be subject to State usury laws.
TITLE II--TAX TREATMENT OF INCOME SHARE AGREEMENTS
SEC. 201. TAX TREATMENT OF INCOME SHARE AGREEMENTS.
(a) Exclusion From Gross Income of Income Share Agreement
Proceeds.--Payments made under an income share agreement to or on
behalf of the individual who commits to pay a specified percentage of
such individual's future income to another person under such agreement
shall not be includible in the gross income of such individual for
purposes of the Internal Revenue Code of 1986.
(b) Treatment of Payments of Future Income.--Payments of future
income received by another person under an income share agreement shall
be treated for purposes of the Internal Revenue Code of 1986--
(1) first, with respect to so much of such payments as does
not exceed the amount of the payments to which subsection (a)
applies with respect to such agreement, as a repayment of
investment in the contract which reduces the holder's basis in
such agreement, and
(2) second, as interest which is includible in gross
income.
(c) Income Share Agreement.--For purposes of this title, the term
``income share agreement'' has the meaning given such term under title
I.
TITLE III--QUALIFIED EDUCATION LOAN
SEC. 301. QUALIFIED EDUCATION LOAN.
(a) In General.--Paragraph (1) of section 221(d) of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
``Such term includes any income share agreement (as defined in section
102 of the Investing in Student Success Act of 2014), except that
payments made by the taxpayer during the taxable year to meet an income
share agreement obligation shall not be taken into account under
subsection (a).''.
(b) Information Reporting Not Required.--Subsection (e) of section
6050S of such Code is amended by inserting ``(without regard to the
last sentence thereof)'' after ``section 221(d)(1)''.
TITLE IV--FEDERAL INDIVIDUAL ASSISTANCE TREATMENT OF INCOME SHARE
AGREEMENTS
SEC. 401. AMOUNTS RECEIVED NOT TREATED AS INCOME IN CALCULATION OF
FINANCIAL NEED UNDER THE HIGHER EDUCATION ACT OF 1965.
No portion of any amounts received by an individual for entering
into an income share agreement (as such term is defined in title I)
shall be included as income or assets in the computation of expected
family contribution for any program funded in whole or in part under
the Higher Education Act of 1965.
TITLE V--INVESTMENT COMPANY TREATMENT
SEC. 501. BUSINESSES MAKING INCOME SHARE AGREEMENTS EXCLUDED FROM
INVESTMENT COMPANY TREATMENT.
Section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a-
3(c)) is amended--
(1) in paragraph (4), by inserting after ``industrial
banking,'' the following: ``income share agreements (as defined
under section 102 of the Investing in Student Success Act of
2014),''; and
(2) in paragraph (5), by inserting ``, including income
share agreements'' after ``services'' each place such term
appears.
<all>
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E558)
Referred to the Committee on Ways and Means, and in addition to the Committees on Education and the Workforce, and Financial Services, 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 Committees on Education and the Workforce, and Financial Services, 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 Committees on Education and the Workforce, and Financial Services, 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 Subcommittee on Higher Education and Workforce Training.
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