,,ii  #aag? ,,congress  #a/ ,session    
,s4 #cjha  ,,9 ,,! ,,s5ate ,,( ,,!      
,,unit$ ,,/ates  ,octob] #bg1 #bjba,mr4 
,paul introduc$ ! foll[+ bill2 :i* 0    
read twice & ref]r$ to ! ,committee on  
,f9ance  ,a ,,bill  ,to am5d ! ,int]nal 
,rev5ue ,code ( #aihf to p]mit )drawals 
f c]ta9 retirem5t plans = repaym5t (    
/ud5t loan debt1 & = o!r purposes4  #a4 
,%ort title ,?is ,act may be cit$ z !   
,tax ,free ,education ,act ( #bjba4  #b4
 ,)drawals = high] education exp5ses    
7a7 #dja7k7 plans ,p>agraph 7#ad7 (     
section #dja7k7 ( ! ,int]nal ,rev5ue    
,code ( #aihf is am5d$ by add+ at ! end 
! foll[+ new subp>agraph3  7,c7         
,di/ributions = qualifi$ education      
exp5ses  7i7 ,9 g5]al ,a di/ribution    
%all be treat$ z made ^u h>d%ip ( !     
employee to ! ext5t t ! aggregate am\nt 
( su* di/ributions dur+ ! taxable ye>   
does n exce$ ! less] (-- 7,i7 ! am\nt   
paid by ! taxpay] = qualifi$ education  
exp5ses = any individual dur+ su*       
taxable ye>1 or  7,,ii7 #e1bej4  7ii7   

,di/ribution mu/ be o!rwise disall[$    
,clause 7i7 %all n apply to any         
di/ribution :i* is p]missible "u        
p>agraph 7#b77;,b77i7 7includ+          
di/ributions :i* w\ld be treat$ z made  
^u h>d%ip ( ! employee )\t reg>d to ?is 
subp>agraph74  7iii7 ,no requirem5t to  
demon/rate h>d%ip ,clause 7i7 %all apply
 )\t reg>d to any requirem5t to         
demon/rate f9ancial ne$ or h>d%ip1 or to
 demon/rate t o!r assets are n available
 to pay ! qualifi$ education exp5ses4   
7iv7 ,additional tax "u section #gb7t7 n
 to apply ,no tax %all be impos$ "u     
section #gb7t7 on any am\nt treat$ z a  
h>d%ip di/ribution by reason ( clause   
7i74  7v7 ,qualifi$ education exp5ses ,=
 purposes ( ?is subp>agraph1 ! t]m      
qualifi$ education exp5ses has ! mean+  
giv5 su* t]m by section                 
#ecj7;b77#b77;,a71 appli$ )\t reg>d to  
subp>agraph 7,b7 ( section #ecj7;b77#b74
  4  7b7 #djc7;b7 plans ,p>agraph 7#aa7 
( section #djc7;b7 ( ! ,int]nal ,rev5ue 
,code ( #aihf is am5d$ by add+ at ! end 

! foll[+3 ,"u rules simil> to ! rules ( 
section #dja7k77#ad77;,c71 a di/ribution
 %all be treat$ z made ^u h>d%ip ( !    
employee to ! ext5t t ! aggregate am\nt 
( su* di/ributions dur+ ! taxable ye>   
does n exce$ ! less] ( ! am\nt paid by !
 taxpay] = qualifi$ education exp5ses   
dur+ su* taxable ye>1 or #e1bej44  7c7  
#deg plans ,p>agraph 7#a7 ( section     
#deg7;d7 ( ! ,int]nal ,rev5ue ,code (   
#aihf is am5d$ by add+ at ! end !       
foll[+3 ,"u rules simil> to ! rules (   
section #dja7k77#ad77;,c7 7& )\t reg>d  
to :e!r ! exp5ses are un=ese571 a       
di/ribution %all be treat$ z made by    
reason ( un=ese5 em]g5cy to ! ext5t t ! 
aggregate am\nt ( su* di/ributions dur+ 
! taxable ye> does n exce$ ! less] ( !  
am\nt paid by ! taxpay] = qualifi$      
education exp5ses dur+ su* taxable ye>1 
or #e1bej44  7d7 ,effective date ,!     
am5dm5ts made by ?is section %all apply 
to di/ributions made aft] ,decemb] #ca1 
#bjba4  #c4 ,)drawals = /ud5t loan      
exp5ses  7a7 ,i,r,as ,p>agraph 7#g7 (   

section #gb7t7 ( ! ,int]nal ,rev5ue     
,code ( #aihf is am5d$ by add+ at ! end 
! foll[+ new subp>agraph3  7,c7 ,/ud5t  
loans ,su* t]m %all include am\nts paid 
9 repaym5t ( any loan made to an        
individual describ$ 9 subp>agraph 7,a7  
to assi/ ! individual 9 att5d+ an       
educational organization describ$ 9     
section #agj7;b77#a77;,a77ii74  4  7b7  
#dja7k7s ,clause 7v7 ( section          
#dja7k77#ad77;,c71 z add$ by section #b1
 is am5d$-- 7#a7 by /rik+ appli$ )\t    
reg>d & ins]t+ appli$-- 7,i7 )\t reg>d  
2  7#b7 by /rik+ ! p]iod at ! end &     
ins]t+ 1 &2 &  7#c7 by add+ at ! end !  
foll[+ new subclause3  7,,ii7 by treat+ 
am\nts describ$ 9 section               
#gb7t77#g77;,c7 z qualifi$ high]        
education exp5ses4  4  7c7 ,effective   
date ,! am5dm5t made by ?is section %all
 apply to di/ributions made aft]        
,decemb] #ca1 #bjba4  #d4 ,exclusion (  
di/ributions = educational exp5ses  7a7 
,9 g5]al ,section #djb ( ! ,int]nal     
,rev5ue ,code ( #aihf is am5d$ by add+  

at ! end ! foll[+ new subsection3  7m7  
,di/ributions = qualifi$ education      
exp5ses  7#a7 ,9 g5]al ,gross income = !
 taxable ye> does n include-- 7,a7 any  
di/ribution f a qualifi$ ca% or def]r$  
arrangem5t 7z def9$ 9 section           
#dja7k77#b771 an annuity contract       
describ$ 9 section #djc7;b71 or an      
eligible def]r$ comp5sation plan        
describ$ 9 section #deg7;b7 :i* is      
ma9ta9$ by an eligible employ] describ$ 
9 section #deg7;e77#a77;,a71 :i* is     
treat$ z made ^u h>d%ip ( ! employee by 
reason ( section #dja7k77#ad77;,c71 !   
la/ s5t5ce ( section #djc7;b77#aa71 or !
 la/ s5t5ce ( section #deg7;d77#a71 or  
7,b7 any di/ribution f an individual    
retirem5t acc\nt 7z def9$ 9 section     
#djh7;a77 to :i* section #gb7t77#b77;,e7
 applies4  7#b7 ,di/ributions mu/       
o!rwise be includible  7,a7 ,9 g5]al ,an
 am\nt %all be treat$ z describ$ 9      
p>agraph 7#a7 only to ! ext5t t su*     
am\nt w\ld be includible 9 gross income 
)\t reg>d to su* p>agraph4  7,b7        

,application ( section #gb ,9 det]m9+   
:e!r a di/ribution w\ld be includible 9 
gross income b = ?is subsection1 rules  
simil> to ! rules ( subsection          
7l77#c77;,b7 %all apply 7by tak+ into   
acc\nt all retirem5t plans 9 :i* !      
taxpay] is a p>ticipant74  4  7b7       
,coord9ation ) d$uctions & cr$its  7#a7 
,coord9ation ) ,am]ican ,opportunity &  
,lifetime ,le>n+ cr$its  7,a7 ,9 g5]al  
,p>agraph 7#b7 ( section #be;,a7g7 ( !  
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
by r$esignat+ subp>agraph 7,c7 z        
subp>agraph 7,d71 by /rik+ & at ! end ( 
subp>agraph 7,b71 & by ins]t+ aft]      
subp>agraph 7,b7 ! foll[+ new           
subp>agraph3  7,c7 a di/ribution f a    
qualifi$ ca% or def]r$ arrangem5t 7z    
def9$ 9 section #dja7k77#b771 an annuity
 contract describ$ 9 section #djc7;b71  
an eligible def]r$ comp5sation plan     
describ$ 9 section #deg7;b7 :i* is      
ma9ta9$ by an eligible employ] describ$ 
9 section #deg7;e77#a77;,a71 or an      
individual retirem5t acc\nt 7z def9$ 9  

section #djh7;a77 :i* is exclud$ f gross
 income ( ! di/ributee "u section       
#djb7m7 7o!r ?an any portion ( su* a    
di/ribution :i* is attributable to !    
repaym5t ( a loan describ$ 9 section    
#gb7t77#g77;,c771 &  4  7,b7            
,coord9ation ) waiv] ( p5alty           
,subp>agraph 7,b7 ( section #gb7t77#g7  
is am5d$ by ins]t+ 7)\t reg>d to        
subp>agraph 7,c7 !re(7 be=e ! p]iod4    
7#b7 ,d$uction = int]e/ on education    
loans ,! fir/ s5t5ce ( p>agraph 7#a7 (  
section #bba7;e7 ( su* ,code is am5d$-- 
7,a7 by /rik+ or2 &  7,b7 by ins]t+ be=e
 ! p]iod at ! end ! foll[+3 1 or = any  
am\nt paid ) a di/ribution :i* is       
exclud$ f gross income "u section       
#djb7m74  7c7 ,effective date ,! am5dm5t
 made by ?is section %all apply to      
di/ributions made aft] ,decemb] #ca1    
#bjba4  #e4 ,modification ( inclusion ( 
employ] /ud5t loan paym5ts 9 educational
 assi/ance programs  7a7 ,9 g5]al       
,subp>agraph 7,b7 ( section #abg7;c77#a7
 ( ! ,int]nal ,rev5ue ,code ( #aihf is  

am5d$ to read z foll[s3  7,b7 ! paym5t1 
by an employ]1 ( am\nts 9 repaym5t ( any
 loan made to ! employee to assi/ !     
employee 9 att5d+ an educational        
organization describ$ 9 section         
#agj7;b77#a77;,a77ii71 &  4  7b7 ,d5ial 
( d\ble b5efit ,p>agraph 7#a7 ( section 
#bba7;e7 ( ! ,int]nal ,rev5ue ,code (   
#aihf1 z am5d$ by section #d1 is fur!r  
am5d$ by /rik+ any indebt$ness on a     
qualifi$ education loan ( ! taxpay] &   
ins]t+ am\nts 9 repaym5t ( any loan     
describ$ 9 section #abg7;c77#a77;,b74   
7c7 ,effective date ,! am5dm5ts made by 
?is section %all apply to taxable ye>s  
beg9n+ aft] ,decemb] #ca1 #bjba4  #f4   
,repeal ( cap on d$uction = int]e/ on   
education loans  7a7 ,9 g5]al ,section  
#bba ( ! ,int]nal ,rev5ue ,code ( #aihf 
is am5d$ by /rik+ subsections 7b7 & 7f74
  7b7 ,c>ryov] ( excess int]e/ ,section 
#bba ( ! ,int]nal ,rev5ue ,code ( #aihf1
 z s am5d$1 is am5d$ by ins]t+ aft]     
subsection 7a7 ! foll[+ new subsection3 
7b7 ,c>ryov] ,if ! am\nt ( ! d$uction   

all[able "u subsection 7a7 exce$s !     
taxable income ( ! taxpay] = ! taxable  
ye> 7det]m9$ )\t reg>d to ?is section71 
!n an am\nt equal to su* excess %all be 
treat$ z int]e/ paid by ! taxpay] 9 !   
succe$+ taxable ye> on a qualifi$       
education loan4  4  7c7 ,effective date 
,! am5dm5ts made by ?is section %all    
apply to taxable ye>s beg9n+ aft] ! date
 ( ! enactm5t ( ?is ,act4  #g4 ,employ] 
,ro? contributions  7a7 ,9 g5]al        
,subsection 7a7 ( section #djb;,a ( !   
,int]nal ,rev5ue ,code ( #aihf is       
am5d$-- 7#a7 by /rik+ & at ! end (      
p>agraph 7#a72  7#b7 by r$esignat+      
p>agraph 7#b7 z p>agraph 7#c72 &  7#c7  
by ins]t+ aft] p>agraph 7#a7 ! foll[+   
new p>agraph3  7#b7 9 ! case ( a        
qualifi$ ca% or def]r$ arrangem5t 7z    
def9$ 9 section #dja7k77#b771 any       
designat$ ,ro? employ] contribution made
 pursuant to ! arrangem5t %all be treat$
 = purposes ( ?is *apt] 9 ! same mann] z
 contributions describ$ 9 section       
#dja7k77#c77;,d77ii71 except t su*      

contribution %all n be excludable f     
gross income1 &  4  7b7 ,con=m+ am5dm5ts
  7#a7 ,p>agraph 7#a7 ( section         
#djb;,a7b7 ( ! ,int]nal ,rev5ue ,code ( 
#aihf is am5d$-- 7,a7 by /rik+ may elect
 to make & ins]t+ 8may elect--  7,a7 to 
make  2  7,b7 by /rik+ ! p]iod at ! end 
& ins]t+ 1 &2 &  7,c7 by add+ at ! end !
 foll[+ new subp>agraph3  7,b7 9 ! case 
( a qualifi$ ca% or def]r$ arrangem5t 7z
 def9$ 9 section #dja7k77#b771 to h !   
employee's employ] make designat$ ,ro?  
employ] contributions 9 lieu ( all or a 
portion ( ! mat*+ or nonelective        
contributions ! employee is o!rwise     
eligible to receive "u ! arrangem5t4  4 
7#b7 ,p>agraph 7#b77;,a7 ( section      
#djb;,a7b7 ( su* ,code is am5d$ by /rik+
 ( ea* employee & ins]t+ & designat$    
,ro? employ] contributions ) respect to 
ea* employee4  7#c7 ,subp>agraph 7,b7 ( 
section #djb;,a7d77#b7 ( su* ,code is   
am5d$ by ins]t+ 1 or elect$ to h made a 
designat$ ,ro? employ] contribution1    
aft] designat$ ,ro? contribution bo?    

places x appe>s 9 clauses 7i7 & 7ii74   
7c7 ,designat$ ,ro? employ] contribution
 ,subsection 7c7 ( section #djb;,a ( !  
,int]nal ,rev5ue ,code ( #aihf is       
am5d$-- 7#a7 by ins]t+ & designat$ ,ro? 
employ] contributions aft] designat$    
,ro? contributions 9 ! head+1 &  7#b7 by
 add+ at ! end ! foll[+ new p>agraph3   
7#e7 ,designat$ ,ro? employ]            
contribution  7,a7 ,9 g5]al ,! t]m      
designat$ ,ro? employ] contribution     
means any contribution describ$ 9       
subp>agraph 7,b7 made "u a qualifi$ ca% 
or def]r$ arrangem5t 7z def9$ 9 section 
#dja7k77#b77 :i*-- 7i7 is excludable f  
gross income ( an employee )\t reg>d to 
?is section1 &  7ii7 ! employee         
designates 7at su* "t & 9 su* mann] z ! 
,secret>y may prescribe7 z n be+ s      
excludable4  7,b7 ,contributions        
describ$ ,! contributions describ$ 9 ?is
 subp>agraph are-- 7i7 mat*+            
contributions 7z def9$ 9 section        
#dja7m77#d77;,a77 :i* meet ! requirem5ts
 ( subp>agraphs 7,b7 & 7,c7 ( section   

#dja7k77#b71 &  7ii7 qualifi$           
nonelective contributions 7)9 ! mean+ ( 
section #dja7m77#d77;,c774  7,c7        
,designation limits ,! am\nt ( mat*+    
contributions & qualifi$ nonelective    
contributions :i* an employee may       
designate "u subp>agraph 7,a7 %all n    
exce$ ! excess 7if any7 (-- 7i7 !       
maximum am\nt ( su* contributions       
excludable f gross income ( ! employee =
 ! taxable ye> 7)\t reg>d to ?is        
section71 ov]  7ii7 ! aggregate am\nt ( 
su* contributions ) respect to !        
employee = ! taxable ye> :i* ! employee 
does n designate "u subp>agraph 7,a74  4
  7d7 ,effective date ,! am5dm5ts made  
by ?is section %all apply to            
contributions made 9 taxable ye>s beg9n+
 aft] ,decemb] #ca1 #bjba4  #h4 ,maximum
 contributions  7a7 ,elective def]rals  
7#a7 ,9 g5]al ,subp>agraph 7,b7 (       
section #djb7;g77#a7 ( ! ,int]nal       
,rev5ue ,code ( #aihf is am5d$ by /rik+ 
#ae1jjj & ins]t+ #be1jjj4  7#b7         
,co/-(-liv+ adju/m5t ,p>agraph 7#d7 (   

section #djb7;g7 ( su* ,code is am5d$-- 
7,a7 by /rik+ #ae1jjj & ins]t+ #be1jjj2 
7,b7 by /rik+ ,decemb] #ca1 #bjjf &     
ins]t+ ,decemb] #ca1 #bjbb2 &  7,c7 by  
/rik+ ,july #a1 #bjje & ins]t+ ,july #a1
 #bjba4  7#c7 ,con=m+ am5dm5t ,clause   
7ii7 ( section #djb7;g77#g77;,a7 ( su*  
,code is am5d$ by /rik+ #ae1jjj & ins]t+
 #be1jjj4  7b7 #deg plans  7#a7 ,9 g5]al
 ,subp>agraph 7,a7 ( section            
#deg7;e77#ae7 ( ! ,int]nal ,rev5ue ,code
 ( #aihf is am5d$ by /rik+ #ae1jjj &    
ins]t+ #be1jjj4  7#b7 ,co/-(-liv+       
adju/m5t ,subp>agraph 7,b7 ( section    
#deg7;e77#ae7 ( su* ,code is am5d$--    
7,a7 by /rik+ #ae1jjj & ins]t+ #be1jjj2 
7,b7 by /rik+ ,decemb] #ca1 #bjjf &     
ins]t+ ,decemb] #ca1 #bjbb2 &  7,c7 by  
/rik+ ,july #a1 #bjje & ins]t+ ,july #a1
 #bjba4  7c7 ,employ$ individual        
#dja7k7s ,subsection 7k7 ( section #dja 
( ! ,int]nal ,rev5ue ,code ( #aihf is   
am5d$ by add+ at ! end ! foll[+ new     
p>agraph3  7#af7 ,employ$ individual    
arrangem5t  7,a7 ,9 g5]al ,a ca% or     

def]r$ arrangem5t %all n be treat$ z    
fail+ to meet any requirem5t ( ?is      
subsection solely because1 "u !         
arrangem5t1 an employee may elect to    
make additional elective def]rals :i*   
are n subject to1 & are n tak5 into     
acc\nt "u1 p>agraph 7#c7 to a sep>ate   
acc\nt f o!r contributions made on      
behalf ( ! employee "u ! arrangem5t1    
if-- 7i7 all employees eligible to      
p>ticipate 9 ! arrangem5t are eligible  
to make su* election1  7ii7 ! aggregate 
( all elective def]rals made by !       
employee "u ! arrangem5t does n exce$ ! 
limitation ( section #djb7;g71 &  7iii7 
no mat*+ or nonelective contributions   
may be made to su* acc\nt or ) respect  
to elective def]rals contribut$ to su*  
acc\nt4  7,b7 ,di/ribution1 etc4 rules  
to apply ,! rules ( ?is subsection1 o!r 
?an p>agraph 7#c71 %all apply to any    
acc\nt e/abli%$ "u subp>agraph 7,a74    
7,c7 ,elective def]ral ,= purposes ( ?is
 p>agraph1 ! t]m elective def]ral means 
any employ] contribution "u a qualifi$  

ca% or def]r$ arrangem5t to ! ext5t n   
includible 9 gross income = ! taxable   
ye> "u section #djb7;e77#c7 7det]m9$ )\t
 reg>d to section #djb7;g774  4  7d7    
,effective date ,! am5dm5ts made by ?is 
section %all apply to contributions made
 9 taxable ye>s beg9n+ aft] ,decemb]    
#ca1 #bjba4  #i4 ,d$uction = qualifi$   
education exp5ses  7a7 ,9 g5]al ,"p     
,,vii ( sub*apt] ,b ( *apt] #a ( !      
,int]nal ,rev5ue ,code ( #aihf is       
am5d$-- 7#a7 by r$esignat+ section #bbd 
z section #bbe2 &  7#b7 by ins]t+ aft]  
section #bbc ! foll[+ new section3      
#bbd4 ,qualifi$ education exp5ses  7a7  
,d$uction all[$ ,9 ! case ( an          
individual1 !re %all be all[$ z a       
d$uction = ! taxable ye> an am\nt equal 
to ! qualifi$ education exp5ses paid or 
incurr$ dur+ su* taxable ye> = ! taxpay]
 or any o!r individual4  7b7 ,qualifi$  
education exp5ses ,= purposes ( ?is     
section1 ! t]m qualifi$ education       
exp5ses means-- 7#a7 qualifi$ education 
exp5ses z def9$ 9 section               

#ecj7;b77#b77;,a71 appli$ )\t reg>d to  
subp>agraph 7,b7 ( section #ecj7;b77#b71
 &  7#b7 am\nts paid 9 repaym5t ( any   
loan made to an individual to assi/ !   
individual 9 att5d+ an educational      
organization describ$ 9 section         
#agj7;b77#a77;,a77ii74  7c7 ,d5ial (    
d\ble b5efit ,= purposes ( subsection   
7a71 ! qualifi$ education exp5ses )     
respect to any taxpay] %all be r$uc$    
by-- 7#a7 ! am\nt ( any di/ribution f a 
qualifi$ ca% or def]r$ arrangem5t 7z    
def9$ 9 section #dja7k77#b771 an annuity
 contract describ$ 9 section #djc7;b71  
an eligible def]r$ comp5sation plan     
describ$ 9 section #deg7;b7 :i* is      
ma9ta9$ by an eligible employ] describ$ 
9 section #deg7;e77#a77;,a71 or an      
individual retirem5t acc\nt 7z def9$ 9  
section #djh7;a77 :i* is exclud$ f gross
 income ( ! taxpay] "u section #djb7m7  
7o!r ?an any portion ( su* a di/ribution
 :i* is attributable to ! repaym5t ( a  
loan describ$ 9 section                 
#gb7t77#g77;,c771 &  7#b7 ! am\nt ( any 

su* exp5ses tak5 into acc\nt 9 det]m9+  
any cr$it or any o!r d$uction "u any o!r
 provision ( ?is *apt]4  7d7 ,c>ry=w>d (
 unus$ am\nt ,if any portion ( !        
d$uction all[$ by subsection 7a7 = !    
taxable ye> is disall[$ by reason ( any 
limitation 7includ+ ! am\nt ( income ( !
 taxpay]71 su* portion %all be treat$ z 
a d$uction all[able "u subsection 7a7 9 
! succe$+ taxable ye>4  4  7b7 ,d$uction
 all[$ above ! l9e ,subsection 7a7 (    
section #fb ( ! ,int]nal ,rev5ue ,code (
 #aihf is am5d$ by ins]t+ aft] p>agraph 
#ba ! foll[+ new p>agraph3  7#bb7       
,qualifi$ education exp5ses ,! d$uction 
all[$ by section #bbd4  4  7c7 ,cl]ical 
am5dm5t ,! table ( sections = "p ,,vii (
 sub*apt] ,b ( *apt] #a ( ! ,int]nal    
,rev5ue ,code ( #aihf is am5d$ by /rik+ 
! item relat+ to section #bbd & by      
ins]t+ aft] ! item relat+ to section    
#bbc ! foll[+ new items3  ,sec4 #bbd4   
,qualifi$ education exp5ses4,sec4 #bbe4 
,cross ref]5ce4  4  7d7 ,effective date 
,! am5dm5ts made by ?is section %all    

apply to taxable ye>s beg9n+ aft]       
,decemb] #ca1 #bjba4