Sponsors (2)
Official title: Amend the Internal Revenue Code of 1986 to provide for lifelong learning accounts, and for other purposes.
Introduced November 19, 2025 by Amy Klobuchar · Last progress November 19, 2025
The bill expands Coverdell accounts to more fully support workforce training and incentivizes employer-funded upskilling, improving access to credentialing and reducing some out-of-pocket costs, while increasing federal revenue costs, adding compliance complexity, and imposing new limits and penalties that could restrict some savers.
Students and adult learners (age 16+) can use tax-favored Coverdell accounts to pay for career training and skill-development, expanding affordable education and retraining options.
Employers (including small businesses) gain a new 25% tax credit for nonelective contributions to employee Coverdell accounts, lowering the employer cost of funding employee training and encouraging employer-sponsored upskilling.
Beneficiaries can use account funds for technology, testing, transportation, and certification tied to training, reducing out-of-pocket barriers to obtaining credentials and participating in programs.
Taxpayers may face higher federal revenue costs from expanded tax-preferred uses and the new employer credit, which could increase deficits or require offsets elsewhere in the budget.
Account custodians, employers, and the IRS will face increased administrative complexity and compliance burdens due to new definitions, cross-references, and links to multiple workforce statutes.
Higher penalties and excise tax changes (e.g., increasing certain penalties from 10% to 20%) raise costs for individuals with nonqualified distributions or excess contributions, deterring some account use or imposing greater losses on mistakes.
Based on analysis of 2 sections of legislative text.
Renames Coverdell education savings accounts to Coverdell lifelong learning accounts and expands qualified tax‑favored distributions to include certain skill development expenses.
Renames Coverdell education savings accounts throughout the tax code to "Coverdell lifelong learning accounts," treats existing accounts opened before January 1, 2026 as if so designated, and expands the list of qualified tax‑favored distributions to include specified "qualified educational or skill development expenses." The changes are largely nomenclature/conforming amendments together with a targeted expansion of permitted distributions under the account rules.