text: SECTION 1. SHORT TITLE; AMENDMENT TO 1986 CODE.
  
      (a) Short Title.--This Act may be cited as the ``Education Savings 
  Account and School Excellence Act of 1999''.
      (b) Amendment of 1986 Code.--Except as otherwise expressly 
  provided, whenever in this title an amendment or repeal is expressed in 
  terms of an amendment to, or repeal of, a section or other provision, 
  the reference shall be considered to be made to a section or other 
  provision of the Internal Revenue Code of 1986.
  
  SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
  
      (a) Tax-Free Expenditures for Elementary and Secondary School 
  Expenses.--
              (1) In general.--Section 530(b)(2) (defining qualified 
          higher education expenses) is amended to read as follows:
              ``(2) Qualified education expenses.--
                      ``(A) In general.--The term `qualified education 
                  expenses' means--
                              ``(i) qualified higher education expenses 
                          (as defined in section 529(e)(3)); and
                              ``(ii) qualified elementary and secondary 
                          education expenses (as defined in paragraph 
                          (4)).
                  Such expenses shall be reduced as provided in section 
                  25A(g)(2).
                      ``(B) Qualified state tuition programs.--Such term 
                  shall include amounts paid or incurred to purchase 
                  tuition credits or certificates, or to make 
                  contributions to an account, under a qualified State 
                  tuition program (as defined in section 529(b)) for the 
                  benefit of the beneficiary of the account.''.
              (2) Qualified elementary and secondary education 
          expenses.--Section 530(b) (relating to definitions and special 
          rules) is amended by adding at the end the following new 
          paragraph:
              ``(4) Qualified elementary and secondary education 
          expenses.--
                      ``(A) In general.--The term `qualified elementary 
                  and secondary education expenses' means--
                              ``(i) expenses for tuition, fees, academic 
                          tutoring, special needs services, books, 
                          supplies, computer equipment (including related 
                          software and services), and other equipment 
                          which are incurred in connection with the 
                          enrollment or attendance of the designated 
                          beneficiary of the trust as an elementary or 
                          secondary school student at a public, private, 
                          or religious school; or
                              ``(ii) expenses for room and board, 
                          uniforms, transportation, and supplementary 
                          items and services (including extended day 
                          programs) which are required or provided by a 
  public, private, or religious school in connection with such enrollment 
  or attendance.
                      ``(B) Special rule for homeschooling.--Such term 
                  shall include expenses described in subparagraph (A)(i) 
                  in connection with education provided by homeschooling 
                  if the requirements of any applicable State or local 
                  law are met with respect to such education.
                      ``(C) School.--The term `school' means any school 
                  which provides elementary education or secondary 
                  education (kindergarten through grade 12), as 
                  determined under State law.''.
              (3) Special rules for applying exclusion to elementary and 
          secondary expenses.--Section 530(d)(2) (relating to 
          distributions for qualified higher education expenses) is 
          amended by adding at the end the following new subparagraph:
                      ``(E) Special rules for elementary and secondary 
                  expenses.--
                              ``(i) In general.--The aggregate amount of 
                          qualified elementary and secondary education 
                          expenses taken into account for purposes of 
                          this paragraph with respect to any education 
                          individual retirement account for all taxable 
                          years shall not exceed the sum of the aggregate 
                          contributions to such account for taxable years 
                          beginning after December 31, 1998, and before 
                          January 1, 2003, and earnings on such 
                          contributions.
                              ``(ii) Special operating rules.--For 
                          purposes of clause (i)--
                                      ``(I) the trustee of an education 
                                  individual retirement account shall 
                                  keep separate accounts with respect to 
                                  contributions and earnings described in 
                                  clause (i); and
                                      ``(II) if there are distributions 
                                  in excess of qualified elementary and 
                                  secondary education expenses for any 
                                  taxable year, such excess distributions 
                                  shall be allocated first to 
                                  contributions and earnings not 
                                  described in clause (i).''.
              (4) Conforming amendments.--Subsections (b)(1) and (d)(2) 
          of section 530 are each amended by striking ``higher'' each 
          place it appears in the text and heading thereof.
      (b) Maximum Annual Contributions.--
              (1) In general.--Section 530(b)(1)(A)(iii) (defining 
          education individual retirement account) is amended by striking 
          ``$500'' and inserting ``the contribution limit for such 
          taxable year''.
              (2) Contribution limit.--Section 530(b) (relating to 
          definitions and special rules), as amended by subsection 
          (a)(2), is amended by adding at the end the following new 
          paragraph:
              ``(5) Contribution limit.--The term `contribution limit' 
          means $500 ($2,000 in the case of any taxable year beginning 
          after December 31, 1998, and ending before January 1, 2003).''.
              (3) Conforming amendment.--Section 4973(e)(1)(A) is amended 
          by striking ``$500'' and inserting ``the contribution limit (as 
          defined in section 530(b)(5)) for such taxable year''.
      (c) Waiver of Age Limitations for Children With Special Needs.--
  Section 530(b)(1) (defining education individual retirement account) is 
  amended by adding at the end the following flush sentence:
          ``The age limitations in the preceding sentence shall not apply 
          to any designated beneficiary with special needs (as determined 
          under regulations prescribed by the Secretary).''.
      (d) Corporations Permitted To Contribute to Accounts.--Section 
  530(c)(1) (relating to reduction in permitted contributions based on 
  adjusted gross income) is amended by striking ``The maximum amount 
  which a contributor'' and inserting ``In the case of a contributor who 
  is an individual, the maximum amount the contributor''.
      (e) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 1998.
target: Education Savings Account and School Excellence Act of 1999 - Amends the Internal Revenue Code, with respect to education individual retirement accounts (IRAs), to: (1) permit distributions for qualified elementary and secondary education expenses, including home schooling expenses; and (2) increase (through December 31, 2002) the annual contribution limit from $500 to $2,000.  Waives the beneficiary age limitation (18) for contributions on behalf of special needs beneficiaries.  Permits corporations to contribute to education IRAs.
feat_title: Education Savings Account and School Excellence Act of 1999