To amend the Internal Revenue Code of 1986 to allow a lump sum contribution to Coverdell education savings accounts whenever the contribution limit is increased.

January 6, 2005

Mr. BRADLEY of New Hampshire introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow a lump sum contribution to Coverdell education savings accounts whenever the contribution limit is increased.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Enhancing Resources Utilized in Developing Investments for Tuition Expenditures Act of 2003'.

SEC. 2. LUMP SUM CONTRIBUTION TO COVERDELL EDUCATION SAVINGS ACCOUNTS.

(a) In General- Clause (iii) of section 530(b)(1)(A) of the Internal Revenue Code of 1986 is amended by inserting `and new limit lump sum contributions' after `rollover contributions'.

(b) New Limit Lump Sum Contributions- Subsection (b) of section 530 of such Code is amended by adding at the end the following new paragraph:

`(6) NEW LIMIT LUMP SUM CONTRIBUTIONS- The amount of the new limit lump sum contribution for any taxable year may not exceed the excess of--

`(A) $250 multiplied by a fraction--

`(i) the numerator of which is the amount in effect for the taxable year under paragraph (1)(A)(iii), and

`(ii) the denominator of which is $250 or, if the beneficiary of the Coverdell education savings account was born after December 31, 1997, the amount in effect under paragraph (1)(A)(iii) on the date of such birth, over

`(B) the aggregate of the amounts determined under subparagraph (A) with respect to such contributions for all previous taxable years.'.

(c) Tax on Excess Contributions-

(1) IN GENERAL- Subsection (e) of section 4973 of such Code is amended by adding at the end the following new paragraph:

`(3) RULE FOR NEW LIMIT LUMP SUM CONTRIBUTION- In the case of new limit lump sum contributions to Coverdell education savings accounts maintained for the benefit of any one beneficiary, the term `excess contributions' means the sum of--

`(A) the amount by which the amount contributed for the taxable year to such accounts exceeds the dollar amount in effect under section 530(b)(6) (or, if less, the sum of the maximum amounts permitted to be contributed under section 530(c) by the contributors to such accounts for such year), and

`(B) the amount determined under this subsection for the preceding taxable year, reduced by the sum of--

`(i) the distributions out of the accounts for the taxable year (other than rollover distributions and contributions to which paragraph (1) applies), and

`(ii) the excess (if any) of the maximum new limit lump sum contribution which may be contributed to the accounts for the taxable year over the new limit lump sum contribution contributed to the accounts for the taxable year.'.

(2) EXCEPTION TO ANNUAL RULE- Paragraph (2) of section 4973(e) of such Code is amended by adding after subparagraph (B) the following new subparagraph:

`(C) Any new limit lump sum contribution (as defined in section 530(b)(6)).'.

(d) Effective Date- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

END