To amend the Internal Revenue Code of 1986 to permit qualified distributions from section 529 plans for certain transportation and parking expenses.
Summary
HB3574 would amend the Internal Revenue Code to expand what counts as a qualified distribution from a section 529 education savings plan. Under the bill, 529 funds could be used not only for existing higher-education expenses, but also for reasonable transportation costs, including parking, for attendance at an eligible educational institution, subject to the institution’s transportation allowance included in the student’s cost of attendance. The bill also extends similar treatment to apprenticeship programs by allowing 529 distributions for reasonable transportation and parking expenses connected to participation in such programs.
The bill applies prospectively to distributions made after enactment. In practical terms, it would give families and students more flexibility in using tax-advantaged education savings to cover commuting-related costs that are often part of attending school or an apprenticeship, while keeping those expenses capped by the institution’s cost-of-attendance allowance.
Impact
The bill would amend section 529 of the Internal Revenue Code of 1986, changing federal tax law governing education savings plans. It would broaden the definition of qualified higher-education expenses and apprenticeship-related expenses to include transportation and parking, thereby allowing tax-free 529 withdrawals for those costs if they meet the bill’s limits. The change would affect account owners, students, apprenticeship participants, and educational institutions that determine transportation allowances for cost-of-attendance purposes.
Sentiment
No committee transcripts or votes were provided, and the bill was only referred to the House Committee on Ways and Means. Based on the text alone, the measure appears targeted and relatively narrow, with an emphasis on reducing out-of-pocket education-related costs. The available record does not show recorded opposition or support, but the proposal is framed as a practical expansion of existing education savings rules rather than a major policy overhaul.
Contention
The main policy question is whether 529 plans should be expanded beyond tuition, fees, and other traditional education expenses to cover commuting-related costs such as transportation and parking. Potential points of contention include the revenue impact of broadening tax-preferred withdrawals, whether the new eligible expenses could be difficult to administer or verify, and whether the transportation allowance cap is sufficient to prevent abuse. Any debate would likely center on balancing flexibility for students and apprentices against preserving the original scope of 529 plans.
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