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Obama drops plan to end tax breaks for popular college savings accounts

President Obama has dropped his plan to end tax breaks for popular college savings accounts known as 529s, sources told Fox News on Tuesday.
The decision comes in the wake of stern criticism from Republicans and pleas from top Democrats, including House Minority Leader Nancy Pelosi, to drop the plan.
The 529s, which allow college savings to grow tax-free, mostly are used by upper-middle- and middle-class families. Low-income families typically don’t have thousands of dollars saved up for college, while very wealthy families are more likely to have trust funds in place for their children’s education.
Administration officials had claimed last week that they were going after the 529 accounts because they unfairly benefit high-income people. Under the proposed change, Americans eventually would have had to pay taxes on the earnings when they were withdrawn.
A White House official told Fox News late Tuesday afternoon that the 529 provision was a "very small component" of Obama's plan to cut taxes for the middle class.
"Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support, as well as the President’s broader package of tax relief for childcare and working families," the official said.
Earlier Tuesday, House Speaker John Boehner called on Obama to drop his plan, and highlighted new legislation that he said would protect and expand on the 529s. In a statement, he applauded Obama's decision.
"I’m glad President Obama has decided to listen to the American people and withdraw his tax hike on college savings," Boehner said. "This tax would have hurt middle-class families already struggling to get ahead."
Democrats also were uncomfortable with Obama's proposal and lobbied for him to ditch the plan. Rep. Chris Van Hollen, D-Md., the ranking Democrat on the House budget committee, joined Pelosi in pressing Obama, with the latter making her case aboard Air Force One during Obama's recent trip to India.
The tax-free 529 accounts were introduced as part of then-President George W. Bush’s 2001 tax-cut package.
The 529 college savings plans, which are named after the Internal Revenue Service code that created them, are among the most popular ways for families to save for college.
The move to strip 529s of the key tax break would have allowed the administration to offset the cost of other changes, including an expansion of the American Opportunity Tax Credit, which provides tax relief for higher-education expenses of up to $2,500 per student. The president also is pushing a costly program to provide two years of free community college to students who keep up their grades.
According to the Investment Company Institute, there are close to 12 million 529 accounts open, with an average balance of $21,000. In all, Americans accumulated $245 billion in 529 plans in 2014.
The 529 college savings plans allow families to invest without the earnings being taxed as long as the money goes toward paying for college expenses. Had the president’s plan gone through, the earnings on new contributions would have been viewed as ordinary income which would have been subject to taxes when withdrawn.

Ex-military intel officer says White House delaying announcement of Bergdahl desertion charge

A former military intelligence officer claimed Tuesday that the White House was delaying the announcement of its decision to file desertion charges against Sgt. Bowe Bergdahl, who was released by Taliban-aligned militants last year in exchange for five Guantanamo prisoners.
In defending claims he originally made Monday on "The O'Reilly Factor" that Bergdahl would be charged, retired Lt. Col. Tony Shaffer told Bill O'Reilly that there was "no doubt" the White House was dragging out its decision.
That accusation had resulted in a strong denial from the Pentagon earlier in the day.
"They said there's no time limit on this decision. (Pentagon spokesman Rear Adm. John) Kirby even said there's no pressure ... Of course, the moment you say that, there's pressure," said Shaffer, who works at the London Center for Policy Research. "What they didn't say was more compelling than their denial."
Shaffer, who believes the White House's alleged decision to delay its announcement is politically motivated, added that he stands by "all of those facts," referring to his report on Monday that Bergdahl's lawyer has been given a statement of charges.
Maj. Gen. Ronald F. Lewis, the Army's chief of public affairs, put out a statement Tuesday afternoon calling the reports, including a similar one by NBC News, "patently false."
"To be clear there have been no actions or decisions on the Sgt. Bergdahl investigation," he said. "The investigation is still with the commanding general of U.S. Army Forces Command who will determine appropriate action -- which ranges from no further action to convening a court martial."
Kirby also said Bergdahl "has not been charged," and no charges have been referred.   
"No decision has been made with respect to the case of Sgt. Bergdahl, none," he said. "And there is no timeline to make that decision." He said he would not "speculate" about what might happen in the future.
On Tuesday's broadcast, O'Reilly said Kirby had been invited to appear on the "Factor," but it was not clear if the admiral would accept. Eugene Fidell, Bergdahl's lawyer, did not comment when reached by Fox News earlier Tuesday.
Shaffer said Monday that Bergdahl's attorney has been given a "charge sheet" outlining the section of the military justice code Bergdahl allegedly violated.
"As a corporate entity, the Army has decided that they want to pursue Bergdahl for this violation," Shaffer said.
Shaffer said there's a "huge battle" going on inside the Obama administration, as some try to "suppress" this development. "This is shaping up to be a titanic struggle behind the scenes," he said.
Shaffer said the Army "wants to do the right thing," but the White House "wants this to go away."
He said: "The White House, because of the political narrative, President Obama cozying up to the parents and because of he, President Obama, releasing the five Taliban ... The narrative is what the White House does not want to have come out."
Bergdahl was held for five years before his release was secured in 2014.
But while the president joined with Bergdahl's parents in the Rose Garden at the time in celebrating his return home, the prisoner swap swiftly became a matter of severe controversy. Fellow soldiers accused Bergdahl of deserting his post on a base in Afghanistan in 2009. And the trade itself, of his freedom for five Guantanamo prisoners, drew criticism in Congress from lawmakers who said it sent a troubling signal.
On Monday, former diplomat Richard Grenell claimed the administration has "sent the message" that the U.S. will negotiate on such matters. He cited an alleged offer, made around the same time as Bergdahl's release, by the Qatari government to trade two Americans held in Qatar for an Al Qaeda agent held in a U.S. federal prison. The Obama administration denies there was any deal. Those prisoners were ultimately released over the past two months.

Senate to start AG confirmation hearings on Lynch, with immigration, IRS questions expected

Senate hearings begin Wednesday on whether to confirm U.S. Attorney Loretta Lynch as President Obama’s next attorney general, with Judiciary Committee members set to question her aggressively on such issues as immigration law and potential overreaches by the IRS and federal law enforcement.
The hearings in the GOP-led Senate Judiciary Committee are expected to begin with Republican members asking Lynch, the U.S. attorney for the Eastern District of New York, about whether she thinks Obama has overstepped his executive authority by deferring deportation for millions of illegal immigrants.
“It will be a long first day, because my approach … is to allow for as many questions as necessary to ensure that members have a chance to receive answers in person if they’d like,” said committee Chairman Sen. Chuck Grassley, R-Iowa.
Other first-up questions will likely be about whether the IRS broke the law when targeting Tea Party groups and other conservative organizations when they applied for tax-exempt status several years ago.
The Justice Department under outgoing Attorney General Eric Holder, whom Lynch would replace, is apparently still investigating the incidents. The agency did not return a call Tuesday seeking confirmation.
The 55-year-old Lynch -- a black, Harvard-educated lawyer -- is also expected to address the issue of states legalizing the sale and possession of marijuana. The Justice Department’s position is that this violates federal law, but the agency has so far taken a hands-off approach to prosecution.
Obama nominated Lynch in November 2014 when Democrats controlled the Senate through the end of the year. However, Republicans were able to hold off the confirmation process until they took charge of the Senate in January, as a result of the elections, arguing committee members from both sides needed more time to prepare.
Grassley has attempted to assure the public that Republicans didn’t stall the process until they took control of the upper chamber.
“She’ll receive a fair but thorough hearing,” he said earlier this month. “And I expect that she’ll be forthright in return.”
Though Lynch is expected to face tough questions, she is generally expected to be confirmed. She is widely respected in the legal community, and her personal and professional records appear scandal free.
The full Senate also must approve Lynch’s appointment. She will need 51 votes to win confirmation, and a final vote is not expected until at least late February.
Her biggest challenge could be explaining her support and participation in civil forfeitures, a legal process in which law enforcement agencies can seize money and other assets without charging or convicting the owners and that Holder recently scaled back, amid widespread criticism.
Lynch last January said her office collected more than $904 million in criminal and civil actions in fiscal 2013.
The policy generates money for law-enforcement efforts and lessens the burden on taxpayers, but critics say it is “an abuse of due process.”
Just days before Lynch’s confirmation hearings, Holder announced significant changes to the policy, including that federal agencies will no longer be able to accept or "adopt" assets seized by local and state law enforcement agencies -- unless the property includes firearms, ammunitions, explosives, child pornography or other materials concerning public safety.
Holder described the changes as the "first step in a comprehensive review."
Earlier, he said the Justice Department collected roughly $8.1 billion in civil and criminal actions in fiscal 2013 -- roughly three times the appropriated $2.76 billion budget for the 94 U.S. attorney’s offices and the main litigating divisions, in the same period.
Despite Holder’s changes, Capitol Hill Republicans on Tuesday reintroduced legislation to tighten restrictions.
"The federal government has made it far too easy for government agencies to take and profit from the property of those who have not been convicted of a crime,” said Sen. Rand Paul, R-Ky., whose FAIR, or Fifth Amendment Integrity Restoration Act, is also being reintroduced in the House by Rep.Tim Walberg, R-Mich.
Other concerns raised about Lynch include her decision to protect details of a federal case related to a stock-fraud scheme.
The defendant pleaded guilty in 1998, before Lynch started working at the Eastern District office.
But critics, including lawyers who fought to have more details of the case made public, say the defendant should have paid roughly $40 million in forfeitures and restitution, not the $25,000 fine he received.
And they suggested Lynch tried to block efforts to further expose the case, which could have helped plaintiffs recover some of their losses.
The defendant’s lawyers have said their client helped in a major national security probe.
If confirmed, Lynch, a North Carolina native, would become the first black woman to serve as U.S. attorney general, replacing Holder, the first black man to hold the position.
Last week, the Senate committee released a Justice Department review of Lynch in which she received mostly high ratings for her management skills.
But the review also identified areas for improvement, including the office’s responsiveness to public records requests made under the federal Freedom of Information Act.
Supporters of Lynch praised her Tuesday.
Former FBI Director Louis Freeh said Lynch works in the “most complicated criminal justice forum” in the country and that she has gotten “tremendous accolades and praise” from federal agents.
“That’s high praise,” he said. “She’s efficient and fair.”
New York City Police Commissioner William Bratton said he worked with Lynch on two occasions -- in 1994 and again in 1996. Bratton said he found Lynch “collegial, very approachable and well prepared.”
Lynch has since 2010 been the top prosecutor for a district that includes Brooklyn, Queens, Staten Island and Long Island, having also held that role from 1999 to 2001.
As a prosecutor, she was best known for her prosecution of the four New York police officers charged with violating the civil rights of Abner Louima, a Haitian immigrant who was beaten and sodomized while in custody.
A second confirmation hearing in the Judiciary Committee is scheduled for Thursday and will include testimony from former CBS investigative reporter Sharyl Attkisson, who filed a lawsuit against the Obama administration claiming it hacked into her computer. Lynch is not scheduled to testify.