article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Higher Education Savings Plan Act of 1993''. SEC. 2. PENALTY FREE WITHDRAWALS FROM ANNUITIES FOR HIGHER EDUCATION EXPENSES. (a) In General.--Paragraph (2) of section 72(q) of the Internal Revenue Code of 1986 (relating to 10-percent penalty for premature distributions from annuity contracts) is amended by striking ``or'' at the end of subparagraph (I), by striking the period at the end of subparagraph (J) and inserting ``, or'', and by inserting after subparagraph (J) the following new subparagraph: ``(K) which is a qualified higher education expense distribution (as defined in paragraph (4)).'' (b) Qualified Higher Education Expense Distribution.--Subsection (q) of section 72 of such Code is amended by adding at the end thereof the following new paragraph: ``(4) Qualified higher education expense distribution.-- ``(A) In general.--For purposes of paragraph (2)(K), the term `qualified higher education expense distribution' means any distribution from a designated higher education expense annuity to the taxpayer if such distribution is used within 90 days of the date of the distribution to pay qualified tuition and related expenses (as defined in section 117(b)) required for the enrollment or attendance of such taxpayer, the taxpayer's spouse, or a child (as defined in section 151(c)(3)) or grandchild of such taxpayer at an eligible educational institution (as defined in section 135(c)(3)); except that such expenses shall be reduced by any amount excluded from gross income under section 135 by reason of such expenses. ``(B) Designated higher education expense annuity.-- ``(i) In general.--The term `designated higher education expense annuity' means any annuity purchased after December 31, 1992, and designated for purposes of this paragraph by the purchaser at the time of purchase as an annuity to which this paragraph applies. ``(ii) Certain annuities received in an exchange not eligible.--Such term shall not include any annuity acquired in an exchange to which section 1035 applies unless the annuity given up by the taxpayer in the exchange was a designated higher education expense annuity.'' (c) Gift Tax Treatment.--Subsection (e) of section 2503 of such Code is amended by adding at the end thereof the following new paragraph: ``(3) Treatment of premiums paid under designated higher education expense annuities.-- ``(A) In general.--Any premium paid for a designated higher education expense annuity shall not be treated as transfer of property by gift for purposes of this chapter. ``(B) Recapture rules.--If any premium paid by any person for a designated higher education expense annuity is not treated as a taxable gift solely by reason of subparagraph (A)-- ``(i) Lifetime distributions not used for educational purposes.--Any disqualified lifetime distribution from the portion of any annuity attributable to such premium shall be treated as a transfer by gift by such person. ``(ii) Inclusion in gross estate.--The gross estate of such person shall include the value (as of the date of the decedent's death or applicable valuation date set forth in section 2032) of the portion of any annuity attributable to such premium. ``(C) Disqualified lifetime distribution.--For purposes of subparagraph (B), the term `disqualified lifetime distribution' means any distribution which is not a qualified higher education distribution and which is made during the life of the person referred to in subparagraph (B) to or for the benefit of another person. ``(D) Other definitions.--For purposes of this paragraph, the terms `designated higher education expense annuity' and `qualified higher education expense distribution' have the respective meanings given such terms by section 72(q)(4).'' (d) Effective Date.--The amendments made by this section shall take effect on January 1, 1994.
summary: Higher Education Savings Plan Act of 1993 - Amends the Internal Revenue Code to exempt distributions from a higher education expenses annuity contract from the ten-percent penalty on premature distributions from annuity contracts. Excludes the premium to purchase such a contract from gift tax liability.