text: SECTION 1. SHORT TITLE; COORDINATION WITH TAXPAYER RELIEF ACT OF 1997.
  
      (a) Short Title.--This Act may be cited as the ``Higher Education 
  Affordability and Availability Act''.
      (b) Coordination With Taxpayer Relief Act of 1997.--Any reference 
  in this Act to any section of the Internal Revenue Code of 1986 amended 
  or added by the Taxpayer Relief Act of 1997 shall be a reference to 
  such section as so amended or added.
  
  SEC. 2. EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM 
                QUALIFIED TUITION PROGRAMS; COVERAGE OF PRIVATE PROGRAMS.
  
      (a) Exclusion.--
              (1) In general.--Subparagraph (B) of section 529(c)(3) of 
          the Internal Revenue Code of 1986 (relating to distributions) 
          is amended to read as follows:
                      ``(B) Distributions for qualified higher education 
                  expenses.--If a distributee elects the application of 
                  this subparagraph for any taxable year--
                              ``(i) no amount shall be includible in 
                          gross income by reason of a distribution which 
                          consists of providing a benefit to the 
                          distributee which, if paid for by the 
                          distributee, would constitute payment of a 
                          qualified higher education expense, and
                              ``(ii) the amount which (but for the 
                          election) would be includible in gross income 
                          by reason of any other distribution shall not 
                          be so includible in an amount which bears the 
                          same ratio to the amount which would be so 
                          includible as the amount of the qualified 
                          higher education expenses of the distributee 
                          bears to the amount of the distribution.''
              (2) Additional tax on amounts not used for higher education 
          expenses.--Section 529 of such Code is amended by adding at the 
          end the following new subsection:
      ``(f) Additional Tax for Distributions Not Used for Educational 
  Expenses.--
              ``(1) In general.--The tax imposed by section 530(d)(4) 
          shall apply to payments and distributions from qualified 
          tuition programs in the same manner as such tax applies to 
          education individual retirement accounts.
              ``(2) Excess contributions returned before due date of 
          return.--Paragraph (1) shall not apply to the distribution to a 
          contributor of any contribution paid during a taxable year to a 
          qualified tuition program to the extent that such contribution 
          exceeds the limitation in section 4973(e) if such distribution 
          (and the net income with respect to such excess contribution) 
          meets requirements comparable to the requirements of clauses 
          (i) and (ii) of section 530(d)(4)(C).''
              (3) Coordination with education credits.--Section 25A(e)(2) 
          of such Code is amended by inserting ``529(c)(3)(B) or'' before 
          ``530(d)(2)''.
              (4) Effective date.--The amendments made by this subsection 
          shall apply to distributions after December 31, 1997, for 
          education furnished in academic periods beginning after such 
          date.
      (b) Eligible Educational Institutions Permitted To Maintain 
  Qualified Tuition Programs.--
              (1) In general.--Paragraph (1) of section 529(b) of such 
          Code (defining qualified State tuition program) is amended by 
          inserting ``or by one or more eligible educational 
          institutions'' after ``maintained by a State or agency or 
          instrumentality thereof''.
              (2) Limitation on contributions to qualified tuition 
          programs not maintained by a state.--Subsection (b) of section 
          529 of such Code is amended by adding at the end the following 
          new paragraph:
              ``(8) Limitation on contributions to qualified tuition 
          programs not maintained by a state.--In the case of a program 
          not maintained by a State or agency or instrumentality thereof, 
          such program shall not be treated as a qualified tuition 
          program unless it limits the annual contribution to the program 
          on behalf of a designated beneficiary to $5,000.''
              (3) Tax on excess contributions.--
                      (A) In general.--Subsection (a) of section 4973 of 
                  such Code is amended by striking ``or'' at the end of 
                  paragraph (3), by redesignating paragraph (4) as 
                  paragraph (5), and by inserting after paragraph (3) the 
                  following new paragraph:
              ``(4) a qualified tuition program (as defined in section 
          529) not maintained by a State or any agency or instrumentality 
          thereof, or''.
                      (B) Excess contributions defined.--Section 4973(e) 
                  of such Code is amended to read as follows:
      ``(e) Excess Contributions to Private Qualified Tuition Program and 
  Education Individual Retirement Accounts.--For purposes of this 
  section--
              ``(1) In general.--In the case of private education 
          investment accounts maintained for the benefit of any 1 
          beneficiary, the term `excess contributions' means the amount 
          by which the amount contributed for the taxable year to such 
          accounts exceeds $5,000.
              ``(2) Private education investment account.--For purposes 
          of paragraph (1), the term `private education investment 
          account' means--
                      ``(A) a qualified tuition program (as defined in 
                  section 529) not maintained by a State or any agency or 
                  instrumentality thereof, and
                      ``(B) an education individual retirement account 
                  (as defined in section 530).
              ``(3) Special rules.--For purposes of paragraph (1), the 
          following contributions shall not be taken into account:
                      ``(A) Any contribution which is distributed out of 
                  the education individual retirement account in a 
                  distribution to which section 530(d)(4)(C) applies.
                      ``(B) Any contribution to a qualified tuition 
                  program (as so defined) described in section 
                  530(b)(2)(B) from any such account.
                      ``(C) Any rollover contribution.''
              (4) Conforming amendments.--
                      (A) Paragraph (2) of section 26(b) of such Code is 
                  amended by redesignating subparagraphs (E) through (Q) 
                  as subparagraphs (F) through (R), respectively, and by 
                  inserting after subparagraph (D) the following new 
                  subparagraph:
                      ``(E) section 529(f) (relating to additional tax on 
                  certain distributions from qualified tuition 
                  programs),''.
                      (B) The text and headings of sections 529 and 530 
                  of such Code are amended by striking ``qualified State 
                  tuition program'' each place it appears and inserting 
                  ``qualified tuition program''.
                      (C)(i) The section heading of section 529 of such 
                  Code is amended to read as follows:
  
  ``SEC. 529. QUALIFIED TUITION PROGRAMS.''
  
                      (ii) The item relating to section 529 of such Code 
                  in the table of sections for part VIII of subchapter F 
                  of chapter 1 is amended by striking ``State''.
              (5) Effective date.--The amendments made by this subsection 
          shall take effect on January 1, 1998.
      (c) Change of Qualified Tuition Program or of Designated 
  Beneficiary.--
              (1) In general.--Clause (i) of section 529(c)(3)(C) of such 
          Code is amended by inserting ``to another qualified tuition 
          program for the benefit of the designated beneficiary or'' 
          after ``transferred''.
              (2) Inclusion of siblings as member of family.--Paragraph 
          (e)(2) of section 529(e) of such Code is amended by inserting 
          before the period at the end the following: ``, except that 
          such term shall include any sibling (whether by the whole or 
          half blood) of the designated beneficiary''.
              (3) Effective date.--The amendments made by this subsection 
          shall take effect on January 1, 1998.
target: Higher Education Affordability and Availability Act - Amends the Internal Revenue Code (as revised by the Taxpayer Relief Act of 1997) to exclude from income distributions from qualified tuition programs used for qualifying higher education expenses. 
  Includes within the definition of "qualified State tuition program" programs maintained by eligible educational institutions.  Requires such non-State programs to limit annual contributions on behalf of a designated beneficiary to $5,000. 
  Sets forth related excess contribution provisions.
feat_title: Higher Education Affordability and Availability Act