WASHINGTON The House passed a bill on Wednesday that expands the benefits of 529 college savings plans.
The legislation, H.R. 529, was approved by a bipartisan vote of 401-20. It had been introduced by Reps. Lynn Jenkins, R-Kan., and Ron Kind, D-Wis. and was approved by the House Ways and Means Committee earlier this month.
States establish these plans under Section 529 of the Internal Revenue Code to allow parents or others to invest money that can be used to pay the higher education expenses of beneficiaries.
Under the federal securities laws, the interests the adults place in the trusts established by states are considered to be municipal securities. As a result, the Municipal Securities Rulemaking Board regulates firms that market 529 plans and some 529 program disclosure documents must be disclosed on the MSRB’s EMMA system.
The bill would allow distributions from savings plans used for computer technology or equipment, Internet access and related services to receive favorable tax treatment. It also would also eliminate a rule that Jenkins called unnecessary, and would provide that if a beneficiary receives a refund of higher education expenses from a college or university, a distribution from a savings plan used to pay the refunded expenses will not be taxed if the beneficiary recontributes the refunded amount back to the savings plan within 60 days of receiving it.
“529s are a great way to save for an education, and we should strengthen these important tools, not tax them away,” House Ways and Means Committee Chairman Paul Ryan, R-Wis., said in a news release. “This bill will make it easier for families to use these accounts and give them a greater sense of control over their future.”
The National Association of State Treasurers praised the passage of the bill.
“We applaud the House of Representatives for their aggressive action in passing H.R. 529 and encourage the quick passage of the Senate’s companion bill S. 335, so American families from across the economic spectrum can benefit from these changes to college savings plans,” the group said in a statement.
The bill in the Senate has been referred to the Senate Finance Committee. It was introduced by Sen. Chuck Grassley, R-Iowa and is cosponsored by several Democrats and Republicans.
