Bill Explainer

SENATE · S 756 119 CONGRESS

Freedom to Invest in Tomorrow’s Workforce Act

INTRODUCED

February 26, 2025

POLICY AREA

Taxation

STATUS

Read twice and referred to the Committee on Finance.

SOURCE

Congress.gov ↗

Bill Summary

What this bill does in plain terms: The Freedom to Invest in Tomorrow’s Workforce Act would expand what families can pay for, tax-free, from a 529 education savings account. Under current law, 529 plans mainly cover “qualified higher education expenses” at eligible colleges and universities (and, after recent reforms, some apprenticeship-related costs, certain K–12 tuition, and limited student loan repayment). This bill broadens that list to include a wide range of nondegree, career-oriented credentials, licensing and certification testing fees, and required continuing education necessary to maintain a credential.

How it changes the tax code: The bill amends section 529 of the Internal Revenue Code so that “qualified higher education expenses” also include “qualified postsecondary credentialing expenses.” It creates a new subsection defining those expenses to cover:

- Tuition, fees, books, supplies, equipment, and comparable expenses for enrollment or attendance in a recognized postsecondary credential program. If a type of expense would already qualify at a traditional college (for example, required supplies or a laptop), it would also qualify when tied to an eligible credential program.

- Fees for testing if the test is required to obtain or maintain a recognized postsecondary credential (for example, professional licensing exams or industry certification tests).

- Fees for continuing education if that education is required to maintain a recognized postsecondary credential (for example, mandatory continuing legal education for attorneys or continuing medical education for clinicians).

What counts as a recognized program: The bill sets guardrails by tying eligibility to existing, vetted lists and oversight. A “recognized postsecondary credential program” must meet at least one of the following:

- Be on a state list under the Workforce Innovation and Opportunity Act’s eligible training provider system.

- Be listed in the Veterans Benefits Administration’s WEAMS directory (programs approved for GI Bill benefits).

- Be recognized by a widely respected credentialing organization that requires an examination and acknowledges the program as legitimate preparation for that exam.

- Be identified as reputable by the Treasury Secretary in consultation with the Labor Secretary.

What counts as a recognized credential: The bill recognizes several categories:

- Industry-recognized postsecondary employment credentials that are either accredited by well-known bodies (such as the National Commission on Certifying Agencies or ANSI), listed in the Department of Defense’s COOL directories, or otherwise designated by Treasury after consulting Labor.

- Certificates of completion from registered apprenticeships certified by the Department of Labor.

- Occupational or professional licenses issued or recognized by a state or the federal government, and any certification that is a condition for obtaining such a license.

- Credentials that meet the Workforce Innovation and Opportunity Act’s definition when offered through a program on a state WIOA list.

Examples of what would newly qualify: In addition to traditional college expenses, 529 funds could be used for tuition and fees for many state-approved coding bootcamps or healthcare technician programs, prep courses recognized by the relevant credentialing body, exam fees for licenses (like the bar exam or CPA exams), certification tests (such as CompTIA, PMI/PMP, or other ANSI/NCCA-accredited certifications), and required continuing education hours for licensed professions. Registered apprenticeship-related costs would also be clearly eligible, complementing prior law.

Implementation and oversight: The bill relies on established federal and state directories to reduce abuse and provide clarity. It also gives Treasury, after consulting Labor, limited authority to recognize reputable programs and industry credentials, creating a mechanism to keep pace with labor market changes. Families would still need to document that a program and expense qualify, and 529 program administrators and the IRS would likely issue guidance to interpret and operationalize the new categories.

Fiscal and policy impact: This is a tax-expenditure expansion rather than a direct spending program. It would likely result in some federal (and, depending on state conformity, state) revenue loss by allowing more tax-free withdrawals. The policy thrust is to elevate nondegree pathways, lower out-of-pocket costs for working-age adults seeking credentials, and make 529s more useful for lifelong learning and mid-career upskilling. The effective date applies to distributions after enactment, so families could immediately use 529 savings for covered credentialing costs once the law is in force.

Bottom line: The bill makes 529s more flexible by explicitly covering industry-recognized credentials, required exams, and required continuing education, using existing workforce and veterans’ approval systems as guardrails. It aims to align tax policy with a modern, skills-based labor market while attempting to prevent low-quality programs from slipping in through clear definitions and curated lists. The trade-offs include forgone tax revenue and the reality that 529 benefits disproportionately accrue to households with the means to save, even as the expansion could help more nontraditional learners, veterans, and apprentices access credentials without incurring taxable withdrawals.

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Where Each Party Stands

MIGHT SUPPORT

+Promotes nondegree and skills-based pathways that can quickly connect workers to in-demand jobs, supporting inclusive workforce development beyond traditional four-year colleges.

+Explicitly covers registered apprenticeships and state-vetted programs, aligning with long-standing Democratic support for apprenticeships and union-affiliated training.

+Allows tax-free payment of required continuing education for licensed workers (nurses, teachers, social workers, etc.), reducing maintenance costs for essential professions.

+Uses WIOA eligible training provider lists and VA/DoD directories as quality guardrails, reducing the risk of predatory or low-value programs compared to an open-ended expansion.

+Helps veterans and transitioning service members by aligning with WEAMS and DoD COOL, smoothing pathways into civilian careers.

+Encourages lifelong learning and mid-career reskilling, which can help displaced workers adapt to automation and sectoral shifts.

+Bipartisan coalition suggests pragmatic, workable policy rather than partisan symbolism, improving prospects for implementation and stability.

+No new bureaucracy or direct outlays; leverages existing programs and lists, which can make the change easier to administer.

MIGHT OPPOSE

−529 tax benefits skew to higher-income households with the capacity to save, so the expansion could widen inequities unless paired with need-based supports like Pell Grants or workforce grants.

−Foregone federal (and potentially state) tax revenue could crowd out or complicate funding for direct investments in public higher education and job training that more equitably reach low-income learners.

−Quality risks remain: accreditation by NCCA/ANSI or inclusion on a list is not a perfect proxy for value or wage gains; some for-profit providers could still exploit the system.

−Covers costly professional testing and required continuing education that employers or professional associations arguably should fund, potentially subsidizing already advantaged professions (e.g., law, finance).

−Administrative complexity and confusion for families and plan administrators may persist, requiring IRS guidance and raising compliance risks.

−Does not address upfront affordability for those without savings; expanding allowable uses doesn’t help workers who cannot fund a 529 at all.

−Treasury’s discretionary authority, while useful, may be insufficiently transparent without robust reporting and guardrails to prevent industry capture.

MIGHT SUPPORT

+Expands educational choice and flexibility without creating a new federal program; individuals decide how to use their own savings.

+Supports workforce readiness, trades, and apprenticeships—priorities often emphasized by Republicans as alternatives to four-year degrees.

+No direct federal spending; relies on private saving and existing infrastructure, limiting government footprint while promoting upskilling.

+Reduces barriers to entry for licensed occupations by allowing tax-free payment of required exams and continuing education.

+Leverages established lists (WIOA, WEAMS, DoD COOL) and industry accreditation rather than building new regulatory frameworks.

+Benefits veterans and military families by aligning with recognized credentialing directories, improving transitions to civilian work.

+Encourages lifelong learning that can keep the labor force agile and meet employer demand for specific skills.

+Bipartisan sponsorship (Klobuchar, Marshall, Welch, Collins) signals broad appeal and practical design likely to withstand political shifts.

MIGHT OPPOSE

−Broadening tax-favored uses erodes the tax base and adds complexity to the code, a concern for fiscal conservatives who prefer base-broadening and lower rates.

−Delegates discretion to the Treasury Department (after consulting Labor) to recognize programs and credentials, raising fears of bureaucratic overreach or politicization.

−By recognizing and subsidizing licensing-related costs, the bill could unintentionally entrench occupational licensing regimes that many Republicans view as excessive barriers to work.

−Compliance burdens for 529 administrators and families may increase, and small errors could trigger penalties, contrary to simplification goals.

−Still picks winners by relying on specific lists and accrediting bodies; quality programs outside these lists could be excluded, distorting the education marketplace.

−Expands eligibility to some high-earning professions’ expenses (e.g., bar or CPA exam fees), which may not align with targeting relief to those most in need.

History

Feb 26, 2025