United States 118th Congress Status: In Committee 1 R cosponsors

S 426 — Inflation-Adjusted Education Investment Act

Last action — Read twice and referred to the Committee on Finance.

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  1. ✓
    Introduced
  2. 2
    In Committee
  3. 3
    Passed Senate
  4. 4
    Passed House
  5. 5
    To Executive
  6. 6
    Enacted

This bill died with 118th Congress. It reached “In Committee” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.

This bill is no longer active — its legislative session has ended, so there is no live prognosis. It would have to be reintroduced in the current session to move again.

Summary

Inflation-Adjusted Education Investment Act This bill modifies provisions relating to qualified tuition programs (i.e., tax-exempt 529 plans). Specifically, it increases from $10,000 to $12,000 the limitation under such programs on payments for educational expenses, including expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. The bill provides for an annual inflation adjustment to the increased limitation amount for taxable years beginning after 2023.

Bill Text

Sections of law this bill changes

1 section in 1 law

From the bill's own amending language, matched to the official United States Code (current through Public Law 119-121).

Normal taxes and surtaxes · 26 U.S.C. ch. 1 1 section
  • § 529 Qualified tuition programs Amends

    26 U.S.C. § 529 — at 529(e)(3)(A) and 529(e)(3)

    The law today

    (a) General rule A qualified tuition program shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). (b) Qualified tuition program For purposes of this section— (1) In general The term “qualified tuition program” means a program established and maintained by a State or agency or instrumentality thereof or by 1 or more eligible educational institutions— (A) under which a person— (i) may purchase tuition credits or certificates on behalf of a designated beneficiary which entitle the beneficiary to the waiver or payment of qualified higher education expenses of the beneficiary, or (ii) in the case of a program established and maintained by a State or agency or instrumentality thereof, may make contributions to an account which is established for the purpose of meeting the qualified higher education expenses of the designated beneficiary of the account, and (B) which meets the other requirements of this subsection. Except to the extent provided in regulations, a program established and maintained by 1 or more eligible educational institutions shall not be treated as a qualified tuition program unless such program provides that amounts are held in a qualified trust and such program has received a ruling or determination that such program meets the applicable requirements for a qualified tuition program. For purposes of the preceding sentence, the term “qualified trust” means a trust which is created or organized in the United States for the exclusive benefit of designated beneficiaries and with respect to which the requirements of paragraphs (2) and (5) of section 408(a) are met. (2) Cash contributions A program shall not be treated as a qualified tuition program unless it provides that purchases or contributions may only be made in cash. (3) Separate accounting A program shall not be treated as a qualified tuition program unless it provides separate accounting for each designated beneficiary. (4) Limited investment direction A program shall not be treated as a qualified tuition program unless it provides that any contributor to, or designated beneficiary under, such program may, directly or indirectly, direct the investment of any contributions to the program (or any earnings thereon) no more than 2 times in any calendar year. (5) No pledging of interest as security A program shall not be treated as a qualified tuition program if it allows any interest in the program or any portion thereof to be used as security for a loan. (6) Prohibition on excess contributions A program shall not be treated as a qualified tuition program unless it provides adequate safeguards to prevent contributions on behalf of a designated beneficiary in excess of those necessary to provide for the qualified higher education expenses of the beneficiary. (c) Tax treatment of designated beneficiaries and contributors (1) In general Except as otherwise provided in this subsection, no amount shall be includible in gross income of— (A) a designated beneficiary under a qualified tuition program, or (B) a contributor to such program on behalf of a designated beneficiary, with respect to any distribution or earnings under such program. (2) Gift tax treatment of contributions For purposes of chapters 12 and 13— (A) In general Any contribution to a qualified tuition program on behalf of any designated beneficiary— (i) shall be treated as a completed gift to such beneficiary which is not a future interest in property, and (ii) shall not be treated as a qualified transfer under section 2503(e). (B) Treatment of excess contributions If the aggregate amount of contributions described in subparagraph (A) during the calendar year by a donor exceeds the limitation for such year under section 2503(b), such aggregate amount shall, at the election of the donor, be taken into account for ...

    103 other bills also change this section · Follow it → Official text at uscode.house.gov ↗

How this bill changes current law

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AI-generated reading aid from the bill's amendatory text — verify against the official bill.

The bill increases the existing limitation on distributions from qualified tuition programs for elementary and secondary tuition from $10,000 to $12,000 and introduces an inflation adjustment mechanism for future years.

  • 26 U.S.C. 529(e)(3)(A)

    $10,000 → $12,000

    Increases the limit on distributions for tuition from $10,000 to $12,000.

  • 26 U.S.C. 529(e)(3)

    (C) Inflation adjustment.-- ``(i) In general.--In the case of any taxable year beginning in a calendar year after 2023, the $12,000 amount in subparagraph (A) shall be increased by an amount equal to-- ``(I) such dollar amount, multiplied by ``(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2022' for `calendar year 2016' in subparagraph (A)(ii) thereof. ``(ii) Rounding.--Any increase determined under clause (i) shall be rounded to the nearest multiple of $500.

    Adds provisions for annual inflation adjustments to the $12,000 limit based on cost-of-living changes.

  • 26 U.S.C. 529(e)(3)

    Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

    Establishes that the new limits and adjustments will take effect for tax years starting after December 31, 2022.

Action History

  1. Introduced in Senate

  2. Read twice and referred to the Committee on Finance.

Sponsors

Sponsorship breakdown

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1 sponsors · 0 co-sponsors · 546 not signed on

Sponsors (1)

Co-sponsors (0)

None.

Not signed on (546)

546 members have not signed on to this bill.

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"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

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Subjects

taxation education
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Frequently asked questions

What does S 426 do?
Inflation-Adjusted Education Investment Act This bill modifies provisions relating to qualified tuition programs (i.e., tax-exempt 529 plans). Specifically, it increases from $10,000 to $12,000 the limitation under such programs on payments for educational expenses, including expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. The bill provides for an annual inflation adjustment to the increased limitation amount for taxable years beginning after 2023.
Who sponsors S 426?
S 426 is sponsored by Kennedy, John (Republican).
What is the current status of S 426?
This bill died with 118th Congress. It reached “In Committee” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
Where can I track S 426?
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