To amend the Internal Revenue Code of 1986 to permit qualified distributions from section 529 plans for certain transportation and parking expenses.

Bill Number

H.R. 3574

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-05-23: Referred to the House Committee on Ways and Means.

Last Updated

2025-06-10T22:51:56Z

AI-Generated Summary

Purpose

This legislation aims to expand the tax benefits of section 529 plans—savings accounts designed for education expenses—by allowing tax-free withdrawals for certain transportation and parking costs related to attending eligible educational institutions or participating in apprenticeship programs.

Key Provisions

• Amendment to Qualified Higher Education Expenses: Adds transportation (including parking) as a qualified expense under section 529(e)(3)(A) of the Internal Revenue Code (IRC). These expenses must be reasonable and not exceed the transportation allowance included in a student's "cost of attendance" (a federally defined budget for education costs, as outlined in the Higher Education Act of 1965).
• Extension to Apprenticeship Programs: Modifies section 529(c)(8) of the IRC to include reasonable transportation (including parking) expenses for individuals participating in qualified apprenticeship programs.
• Effective Date: Applies to distributions (withdrawals) made after the date the bill is enacted into law.

Significant Changes to Existing Law

• Previously, section 529 plans allowed tax-free distributions only for tuition, fees, books, supplies, equipment, and room and board (with limits). This bill adds transportation and parking as eligible expenses for the first time, broadening the scope beyond direct classroom or housing costs.
• For apprenticeships, which were already covered under 529 plans since 2019, this extends coverage to travel-related costs, which were not explicitly included before.

Potential Impacts

• On Citizens: Families and students using 529 plans could save on taxes for commuting costs to school or work-based training, making education more affordable and encouraging savings in these accounts. This might increase enrollment in higher education or apprenticeships by reducing out-of-pocket expenses.
• On Government Agencies: The Internal Revenue Service (IRS) would need to update guidance, forms, and enforcement to verify these new qualified expenses, potentially increasing administrative workload but also boosting tax-advantaged savings overall. No direct impact on international relations.
• Broader Effects: Could lead to higher contributions to 529 plans, supporting long-term financial planning for education without significantly affecting federal revenue, as the change aligns with existing cost-of-attendance frameworks.

Main Stakeholders Affected

• Students and Families: Primary beneficiaries, as they can use pre-tax savings for travel costs without penalties.
• Educational Institutions and Apprenticeship Programs: Indirectly benefit from potentially higher attendance or participation due to reduced financial barriers.
• Taxpayers and Savers: Anyone contributing to or benefiting from 529 plans, including parents, guardians, and adult learners.
• IRS and Treasury Department: Responsible for implementing and overseeing the expanded tax rules.

Notable Legal, Constitutional, or Political Implications

• Legal: Aligns 529 plans more closely with federal student aid definitions (e.g., cost of attendance), ensuring consistency without creating new tax loopholes. No challenges to constitutionality anticipated, as it modifies existing tax code provisions.
• Political: Represents a bipartisan effort to enhance education affordability amid rising costs, potentially appealing to voters focused on workforce development and higher education access. It builds on prior expansions of 529 plans (e.g., for apprenticeships in 2019) without introducing controversial elements like new spending or mandates.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. McClellan, Jennifer L. [D-VA-4]

Cosponsors (1)

Rep. Sánchez, Linda T. [D-CA-38]

Recent Actions

• 2025-05-23: Referred to the House Committee on Ways and Means.
• 2025-05-23: Introduced in House
• 2025-05-23: Introduced in House

Bill Versions

• To amend the Internal Revenue Code of 1986 to permit qualified distributions from section 529 plans for certain transportation and parking expenses. — issued 2025-05-23 — PDF (2 pages)