115 STAT. 60 PUBLIC LAW 107-16^JUNE 7, 2001 (ii) by striking "CREDIT OR DEDUCTION" in the heading and inserting "DEDUCTION, CREDIT, OR EXCLU- SION". 26 USC 4973. (D) Section 4973(e)(1) is amended by adding "and" at the end of subparagraph (A), by striking subparagraph (B), and by redesignating subparagraph (C) as subparagraph (B). Applicability. (h) EFFECTIVE DATE.— The amendments made by this section 26 USC 25A note, shall apply to taxable years beginning after December 31, 2001. SEC. 402. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS. (a) ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO MAIN- TAIN QUALIFIED TUITION PROGRAMS.— (1) IN GENERAL.— Section 529(b)(1) (defining qualified State tuition program) is amended— (A) by inserting "or by 1 or more eligible educational institutions" after "maintained by a State or agency or instrumentality thereof" in the matter preceding subparagraph (A), and (B) by adding at the end the following new flush sentence: "Except to the extent provided in regulations, a program established and maintained by 1 or more eligible educational institutions shall not be treated as a qualified tuition program unless such program provides that amounts are held in a qualified trust and such program has received a ruling or determination that such program meets the applicable requirements for a qualified tuition program. For purposes of the preceding sentence, the term 'qualified trust' means a trust which is created or organized in the United States for the exclusive benefit of designated beneficiaries and with respect to which the requirements of paragraphs (2) and (5) of section 408(a) are met.". (2) PRIVATE QUALIFIED TUITION PROGRAMS LIMITED TO BEN- EFIT PLANS. —Clause (ii) of section 529(b)(1)(A) is amended by inserting "in the case of a program established and maintained by a State or agency or instrumentality thereof," before "may make". (3) ADDITIONAL TAX ON NONQUALIFIED WITHDRAWALS. —Section 529 is amended— (A) by striking paragraph (3) of subsection (b) and by redesignating paragraphs (4), (5), (6), and (7) of such subsection as paragraphs (3), (4), (5), and (6), respectively, and (B) by adding at the end of subsection (c) the following new paragraph: "(6) ADDITIONAL TAX.— The tax imposed by section 530(d)(4) shall apply to any payment or distribution from a qualified tuition program in the same manner as such tax applies to a payment or distribution from an education individual retirement account. This paragraph shall not apply to any payment or distribution in any taxable year beginning before January 1, 2004, which is includible in gross income but used for qualified higher education expenses of the designated beneficiary.". (4) CONFORMING AMENDMENTS. — (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are amended by
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