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00-6: Congress and 529 - Here We Go Again
Thursday, March 2nd 2000
In 1998 Congress passed a tax bill that would make 529 plan earnings tax exempt, as long as withdrawals were used for qualifying college costs. The bill was vetoed by President Clinton. Same thing happened last year. Now the bill is at the plate for the third time. The Affordable Education Act has been resurrected by the Senate Finance Committee and passed by the full Senate in a 61-37 vote on March 2.
Besides granting exemption to earnings in a 529 plan, the Act would expand education IRAs in two ways. First it would increase the annual contribution cap from $500 to $2,000, and second, it would allow them to be used to pay for primary and secondary school costs. The Act would also allow educational institutions to establish their own prepaid tuition plans under section 529. To get more details about these provisions, all you have to do is look at the inaugural issue of our newsletter The 529 Plan Report at http://www.savingforcollege.com/Newsletter/third99.htm.
It's the part about using education IRAs for primary and secondary schools that faces the strongest objections from the White House. Further lessening its chances is the fact that the long road this bill has taken has given Treasury more time to question the other provisions in the Act, including the section 529 earnings exemption. The House has yet to take up consideration of the Affordable Education Act. Even if it passes there, the bill faces a likelihood of veto by the President if it remains in its current form.
Three strikes you're out?
» 05-4: The 529 marshals have arrived - 08/30/05
» Our 5.29th-year anniversary - 06/29/05
» 05-2: 529s and the new Bankruptcy Act - 04/28/05
» 05-1: Reform or Deform? - 02/27/05
» 04-6: Perspectives on the 529 debate - 12/28/04
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