PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1895 "(III) any adjustment to the basis of a participant's interest in the common trust fund as a result of the gain so recognized shall be treated as occurring immediately before the exchange referred to in paragraph (1)(B). If the transfer referred to in paragraph (1)(A) is to two or more regulated investment companies, the basis increase under subclause (II) shall be allocated among such companies on the basis of the respective fair market values of the assets received by each of such companies. "(ii) ASSUMED LIABILITIES.— For purposes of clause (i), the term 'assumed liabilities' means the aggregate of— "(I) any liability of the common trust fund assumed by any regulated investment company in connection with the transfer referred to in paragraph (1)(A), and "(ID any liability to which property so transferred is subject. "(4) COMMON TRUST FUND MUST MEET DIVERSIFICATION RULES. —Th is subsection shall not apply to any common trust fund which would not meet the requirements of section 368(a)(2)(F)(ii) if it were a corporation. For purposes of the preceding sentence. Government securities shall not be treated as securities of an issuer in applying the 25-percent and 50- percent test and such securities shall not be excluded for purposes of determining total assets under clause (iv) of section 368(a)(2)(F). ". (b) EFFECTIVE DATE. —The amendment made by subsection (a) 26 USC 584 note. shall apply to transfers after December 31, 1995. SEC. 1806. QUALIFIED STATE TUITION PROGRAMS. (a) IN GENERAL.— Subchapter F of chapter 1 (relating to exempt organizations) is amended by adding at the end the following new part: "PART VIII—QUALIFIED STATE TUITION PROGRAMS "Sec. 529. Qualified State tuition programs. "SEC. 529. QUALIFIED STATE TUITION PROGRAMS. "(a) GENERAL RULE. —^A qualified State tuition program shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). "(b) QUALIFIED STATE TUITION PROGRAM.— For purposes of this section— "(1) IN GENEIL\L.— The term 'quaUfied State tuition program' means a program established and maintained by a State or agency or instrumentality thereof— "(A) under which a person— "(i) may purchase tuition credits or certificates on behalf of a designated beneficiary which entitle the beneficiary to the waiver or payment of qualified higher education expenses of the beneficiary, or
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