article: 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.
summary: 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.