[House Report 113-526]
[From the U.S. Government Publishing Office]
113th Congress } { Report
2d Session } HOUSE OF REPRESENTATIVES { 113-526
=======================================================================
STUDENT AND FAMILY TAX SIMPLIFICATION ACT
_______
July 17, 2014.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 3393]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 3393) to amend the Internal Revenue Code of 1986 to
consolidate certain tax benefits for educational expenses, and
for other purposes, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................5
A. Purpose and Summary................................. 5
B. Background and Need for Legislation................. 5
C. Legislative History................................. 6
II. EXPLANATION OF THE BILL..........................................6
A. Modification of Tax Benefits For Tuition and Tax
Treatment of Certain Scholarships (secs. 25A, 117,
222 and 6050S of the Code)......................... 6
III. VOTES OF THE COMMITTEE..........................................12
IV. BUDGET EFFECTS OF THE BILL......................................12
A. Committee Estimate of Budgetary Effects............. 12
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 15
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 15
D. Macroeconomic Impact Analysis....................... 18
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......18
A. Committee Oversight Findings and Recommendations.... 18
B. Statement of General Performance Goals and
Objectives......................................... 18
C. Information Relating to Unfunded Mandates........... 18
D. Applicability of House Rule XXI 5(b)................ 18
E. Tax Complexity Analysis............................. 18
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 19
G. Duplication of Federal Programs..................... 19
H. Disclosure of Directed Rule Makings................. 19
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........19
VII. DISSENTING VIEWS................................................38
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Student and Family Tax Simplification
Act''.
SEC. 2. CONSOLIDATION OF CERTAIN TAX BENEFITS FOR EDUCATIONAL EXPENSES.
(a) American Opportunity Tax Credit.--Section 25A of the Internal
Revenue Code of 1986 is amended to read as follows:
``SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.
``(a) In General.--In the case of an individual, there shall be
allowed as a credit against the tax imposed by this chapter for the
taxable year, with respect to each eligible student, an amount equal to
the sum of--
``(1) 100 percent of so much of the qualified tuition and
related expenses paid by the taxpayer during the taxable year
(for education furnished to the eligible student during any
academic period beginning in such taxable year) as does not
exceed $2,000, plus
``(2) 25 percent of so much of such expenses so paid as
exceeds the dollar amount in effect under paragraph (1) but
does not exceed twice such dollar amount.
``(b) Portion of Credit Refundable.--So much of the credit allowable
under subsection (a) with respect to each eligible student (determined
without regard to this subsection and section 26(a) and after
application of all other provisions of this section) as does not exceed
$1,500 shall be treated as a credit allowable under subpart C (and not
under this part). The preceding sentence shall not apply to any
taxpayer for any taxable year if such taxpayer is a child to whom
section 1(g) applies for such taxable year.
``(c) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--The amount allowable as a credit under
subsection (a) for any taxable year shall be reduced (but not
below zero) by an amount which bears the same ratio to the
amount so allowable (determined without regard to this
subsection and subsection (b) but after application of all
other provisions of this section) as--
``(A) the excess of--
``(i) the taxpayer's modified adjusted gross
income for such taxable year, over
``(ii) $80,000 (twice such amount in the case
of a joint return), bears to
``(B) $10,000 (twice such amount in the case of a
joint return).
``(2) Modified adjusted gross income.--For purposes of this
subsection, the term `modified adjusted gross income' means the
adjusted gross income of the taxpayer for the taxable year
increased by any amount excluded from gross income under
section 911, 931, or 933.
``(d) Other Limitations.--No credit shall be allowed under this
section with respect to any eligible student for any taxable year if--
``(1) such student was taken into account in determining the
credit allowed under this section (by the taxpayer or any other
individual) for any 4 prior taxable years, or
``(2) such student has completed (before the beginning of
such taxable year) the first 4 years of postsecondary education
at an eligible educational institution.
``(e) Definitions.--For purposes of this section--
``(1) Eligible student.-- The term `eligible student' means,
with respect to any academic period, a student who--
``(A) meets the requirements of section 484(a)(1) of
the Higher Education Act of 1965 (20 U.S.C.
1091(a)(1)), as in effect on August 5, 1997, and
``(B) is carrying at least \1/2\ the normal full-time
work load for the course of study the student is
pursuing.
``(2) Qualified tuition and related expenses.--
``(A) In general.--The term `qualified tuition and
related expenses' means tuition, fees, and course
materials, required for enrollment or attendance of--
``(i) the taxpayer,
``(ii) the taxpayer's spouse, or
``(iii) any dependent of the taxpayer with
respect to whom the taxpayer is allowed a
deduction under section 151,
at an eligible educational institution for courses of
instruction of such individual at such institution.
``(B) Exception for education involving sports,
etc.--Such term does not include expenses with respect
to any course or other education involving sports,
games, or hobbies, unless such course or other
education is part of the individual's degree program.
``(C) Exception for nonacademic fees.--Such term does
not include student activity fees, athletic fees,
insurance expenses, or other expenses unrelated to an
individual's academic course of instruction.
``(3) Eligible educational institution.--The term `eligible
educational institution' means an institution--
``(A) which is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088), as in effect on
August 5, 1997, and
``(B) which is eligible to participate in a program
under title IV of such Act.
``(f) Special Rules.--
``(1) Identification requirement.--No credit shall be allowed
under subsection (a) to a taxpayer with respect to the
qualified tuition and related expenses of an individual unless
the taxpayer includes the name and taxpayer identification
number of such individual, and the employer identification
number of any institution to which such expenses were paid, on
the return of tax for the taxable year.
``(2) Adjustment for certain scholarships, etc.--
``(A) In general.--The amount of qualified tuition
and related expenses otherwise taken into account under
subsection (a) with respect to an individual for an
academic period shall be reduced (before the
application of subsection (c)) by the sum of any
amounts paid for the benefit of such individual which
are allocable to such period as--
``(i) a qualified scholarship which is
excludable from gross income under section 117,
``(ii) an educational assistance allowance
under chapter 30, 31, 32, 34, or 35 of title
38, United States Code, or under chapter 1606
of title 10, United States Code, and
``(iii) a payment (other than a gift,
bequest, devise, or inheritance within the
meaning of section 102(a)) for such
individual's educational expenses, or
attributable to such individual's enrollment at
an eligible educational institution, which is
excludable from gross income under any law of
the United States.
``(B) Coordination with pell grants not used for
qualified tuition and related expenses.--For purposes
of subparagraph (A), the amount of any Federal Pell
Grant under section 401 of the Higher Education Act of
1965 (20 U.S.C. 1070a) shall be reduced (but not below
zero) by the amount of expenses (other than qualified
tuition and related expenses) which are taken into
account in determining the cost of attendance (as
defined in section 472 of the Higher Education Act of
1965, as in effect on the date of the enactment of this
paragraph) of such individual at an eligible
educational institution for the academic period for
which the credit under this section is being
determined.
``(3) Treatment of expenses paid by dependent.--If a
deduction under section 151 with respect to an individual is
allowed to another taxpayer for a taxable year beginning in the
calendar year in which such individual's taxable year begins--
``(A) no credit shall be allowed under subsection (a)
to such individual for such individual's taxable year,
and
``(B) qualified tuition and related expenses paid by
such individual during such individual's taxable year
shall be treated for purposes of this section as paid
by such other taxpayer.
``(4) Treatment of certain prepayments.--If qualified tuition
and related expenses are paid by the taxpayer during a taxable
year for an academic period which begins during the first 3
months following such taxable year, such academic period shall
be treated for purposes of this section as beginning during
such taxable year.
``(5) Denial of double benefit.--No credit shall be allowed
under this section for any amount for which a deduction is
allowed under any other provision of this chapter.
``(6) No credit for married individuals filing separate
returns.--If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if the
taxpayer and the taxpayer's spouse file a joint return for the
taxable year.
``(7) Nonresident aliens.--If the taxpayer is a nonresident
alien individual for any portion of the taxable year, this
section shall apply only if such individual is treated as a
resident alien of the United States for purposes of this
chapter by reason of an election under subsection (g) or (h) of
section 6013.
``(g) Inflation Adjustment.--
``(1) In general.--In the case of a taxable year beginning
after 2018, the $2,000 amount in subsection (a)(1), the $1,500
amount in subsection (b), and the $80,000 amount in subsection
(c)(1)(A)(ii) shall each be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 2017' for `calendar year 1992' in
subparagraph (B) thereof.
``(2) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $100 ($1,000 in the case of the amount
in subsection (c)(1)(A)(ii)), such amount shall be rounded to
the next lowest multiple of $100 ($1,000 in the case of the
amount in subsection (c)(1)(A)(ii)).
``(h) Regulations.--The Secretary may prescribe such regulations or
other guidance as may be necessary or appropriate to carry out this
section, including regulations providing for a recapture of the credit
allowed under this section in cases where there is a refund in a
subsequent taxable year of any amount which was taken into account in
determining the amount of such credit.''.
(b) Requirement to Report Tuition Paid Rather Than Tuition Billed.--
Section 6050S(b)(2)(B)(i) is amended by striking ``or the aggregate
amount billed''.
(c) Repeal of Deduction for Qualified Tuition and Related Expenses.--
Part VII of subchapter B of chapter 1 of such Code is amended by
striking section 222 (and by striking the item relating to such section
in the table of sections for such part).
(d) Conforming Amendments.--
(1) Section 62(a) of such Code is amended by striking
paragraph (18).
(2) Section 72(t)(7)(B) of such Code is amended by striking
``section 25A(g)(2)'' and inserting ``section 25A(f)(2)''.
(3) Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A),
199(d)(2)(A), 219(g)(3)(A)(ii), and 221(b)(2)(C)(i) of such
Code are each amended by striking ``222,''.
(4) Section 469(i)(3)(F)(iii) of such Code is amended by
striking ``221, and 222'' and inserting ``and 221''.
(5) Section 529(c)(3)(B)(v)(I) of such Code is amended by
striking ``section 25A(g)(2)'' and inserting ``section
25A(f)(2)''.
(6) Section 529(e)(3)(B)(i) of such Code is amended by
striking ``section 25A(b)(3)'' and inserting ``section
25A(d)''.
(7) Section 530(d)(2)(C) of such Code is amended--
(A) by striking ``section 25A(g)(2)'' in clause
(i)(I) and inserting ``section 25A(f)(2)'', and
(B) by striking ``Hope and lifetime learning
credits'' in the heading and inserting ``American
opportunity tax credit''.
(8) Section 530(d)(4)(B)(iii) of such Code is amended by
striking ``section 25A(g)(2)'' and inserting ``section
25A(d)(4)(B)''.
(9) Section 6050S(e) of such Code is amended by striking
``subsection (g)(2)'' and inserting ``subsection (f)(2)''.
(10) Section 6211(b)(4)(A) of such Code is amended by
striking ``subsection (i)(6)'' and inserting ``subsection
(b)''.
(11) Section 6213(g)(2)(J) of such Code is amended by
striking ``TIN required under section 25A(g)(1)'' and inserting
``TIN, and employer identification number, required under
section 25A(f)(1)''.
(12) Section 1004(c) of division B of the American Recovery
and Reinvestment Tax Act of 2009 is amended--
(A) in paragraph (1)--
(i) by striking ``section 25A(i)(6)'' each
place it appears and inserting ``section
25A(b)'',
(ii) by striking ``with respect to taxable
years beginning after 2008 and before 2018'' in
subparagraph (A) and inserting ``with respect
to each taxable year'', and
(iii) by striking ``for taxable years
beginning after 2008 and before 2018'' in
subparagraph (B) and inserting ``for each
taxable year'',
(B) in paragraph (2), by striking ``Section
25A(i)(6)'' and inserting ``Section 25A(b)'', and
(C) in paragraph (3)(C), by striking ``subsection
(i)(6)'' and inserting ``subsection (b)''.
(13) The table of sections for subpart A of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of 1986
is amended by striking the item relating to section 25A and
inserting the following new item:
``Sec. 25A. American opportunity tax credit.''.
(e) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after December 31, 2014.
SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM GROSS INCOME.
(a) In General.--Paragraph (1) of section 117(b) of the Internal
Revenue Code of 1986 is amended--
(1) by striking the period at the end and inserting ``, or'',
(2) by striking ``received by an individual as a
scholarship'' and inserting the following: ``received by an
individual--
``(A) as a scholarship'', and
(3) by adding at the end the following new subparagraph:
``(B) as a Federal Pell Grant under section 401 of
the Higher Education Act of 1965 (20 U.S.C. 1070a).''.
(b) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after December 31, 2014.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
Similar to a provision contained in the discussion draft of
the ``Tax Reform Act of 2014'' released on February 26, 2014,
the bill, H.R. 3393, reported by the Committee on Ways and
Means, provides a permanent, partially refundable tax credit of
up to $2,500 per student per year for qualified higher
education expenses, replacing four overlapping education tax
benefits, while making other improvements to help those
students most in need and to promote greater compliance. One of
the education tax benefits that would be consolidated under the
legislation expired for tax years beginning after December 31,
2013, while another is scheduled to expire for tax years
beginning after December 31, 2017.
B. Background and Need for Legislation
While the Committee continues actively to pursue
comprehensive tax reform as a critical means of promoting
economic growth, job creation, and tax simplification, the
Committee also believes that it is important to act immediately
to simplify and consolidate the current, complicated array of
education-related tax benefits, while providing students and
their families permanent tax relief to help them better afford
the rising costs of higher education. By making permanent and
increasing the larger credit amount available under the
American Opportunity Tax Credit, H.R. 3393 would preserve and
expand an important benefit for taxpayers pursuing higher
education. This bipartisan proposal--developed by Reps. Diane
Black (R-TN) and Danny Davis (D-IL) as a result of their work
on the Committee's 2013 Tax Reform Working Group on Education
and Family Benefits--would streamline and simplify four complex
and overlapping education-related tax benefits available under
present law. Additionally, by improving the tax treatment of
Pell Grants and the interaction of those grants with other
benefits, H.R. 3393 would especially help those most in need
cope with the increasing costs of higher education.
Furthermore, by improving the reporting requirements for higher
education institutions, H.R. 3393 would help ensure that
education-related tax benefits are administered correctly.
According to testimony received by the Committee, streamlining
and consolidating the definitions, eligibility, and income
phaseouts for the current patchwork of education benefits on a
permanent basis would provide critical certainty and stability
to students and their families.
C. Legislative History
Background
H.R. 3393 was introduced on October 30, 2013, and was
referred to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 3393, the
``Student and Family Tax Simplification Act,'' on June 25,
2014, and ordered the bill, as amended, favorably reported
(with a quorum being present).
Committee hearings
The need for a workable, permanent higher education tax
credit was discussed at no fewer than three hearings during the
112th and 113th Congresses:
Full Committee hearing on How the Tax Code's
Burdens on Individuals and Families Demonstrate the Need for
Comprehensive Tax Reform (April 13, 2011).
Oversight Subcommittee hearing on Improper
Payments in the Administration of Refundable Tax Credits (May
25, 2011).
Full Committee hearing on the President's Fiscal
Year 2015 Budget Proposal with the U.S. Department of the
Treasury Secretary Jacob J. Lew (Mar. 6, 2014).
II. EXPLANATION OF THE BILL
A. Modification of Tax Benefits For Tuition and Tax Treatment of
Certain Scholarships (secs. 25A, 117, 222 and 6050S of the Code)
PRESENT LAW
Tax credits for qualified tuition and related expenses
Hope credit and American Opportunity credit
For taxable years beginning before 2009 and after 2017, an
individual may claim a tax credit, the Hope credit, for
qualified tuition and related expenses paid for the first two
years of the student's post-secondary education in a degree or
certificate program.\1\ Although temporarily superseded by the
American Opportunity tax credit (described below), the Hope
credit in 2014, if it were in effect, would be 100 percent on
the first $1,300 of qualified tuition and related expenses, and
50 percent on the next $1,300 of qualified tuition and related
expenses, for up to $1,950 per eligible student per year.\2\
These dollar amounts are indexed for inflation, with the amount
rounded down to the next lowest multiple of $100.\3\ Thus, for
example, the Hope credit for a taxpayer who incurs $1,300 of
qualified tuition and related expenses for an eligible student
(subject to the modified adjusted gross income (``MAGI'')
phaseout described below) would be $1,300. If a taxpayer incurs
$2,600 of qualified tuition and related expenses for an
eligible student, then the Hope credit would be $1,950.
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\1\Sec. 25A(a)(1). Unless otherwise stated, all section references
are to the Internal Revenue Code of 1986, as amended (the ``Code'').
\2\Sec. 25A(b)(1). The $1,300 amount, determined by the staff of
the Joint Committee on Taxation, is the statutory amount of $1,000,
indexed for inflation from 2001.
\3\Sec. 25A(h).
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The Hope credit that a taxpayer may otherwise claim is
phased out ratably for taxpayers with MAGI between $55,000 and
$65,000 ($110,000 and $130,000 for married taxpayers filing a
joint return) for 2014.\4\ MAGI includes certain otherwise
excludable income earned by U.S. citizens or residents living
abroad or in certain U.S. territories.\5\ The beginning points
of the MAGI phaseout ranges are indexed for inflation, with the
amount rounded down to the next lowest multiple of $1,000. The
size of the phaseout ranges for single and married taxpayers
are always $10,000 and $20,000 respectively.\6\
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\4\Based on inflation adjustments determined by the staff of the
Joint Committee on Taxation.
\5\Sec. 25A(d)(3).
\6\Sec. 25A(d)(2)(B).
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A taxpayer may not claim the Hope credit with respect to
qualified tuition and related expenses for the enrollment or
attendance of a student, if the student has been convicted of a
Federal or State felony offense consisting of the possession or
distribution of a controlled substance before the end of the
taxable year.\7\ Additionally, a taxpayer must include the name
and taxpayer identification number of the student on whose
behalf the qualified tuition and related expenses were paid in
order to be eligible for the credit.\8\
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\7\Sec. 25A(b)(2)(D).
\8\Sec. 25A(g)(1).
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The credit is allowable against both the regular tax and
the alternative minimum tax (``AMT'').
For taxable years beginning after December 31, 2008, and
before January 1, 2018, an individual may claim the American
Opportunity tax credit (``AOTC''), which is a modified version
of the Hope credit.\9\ The maximum allowable AOTC is $2,500 per
eligible student per year for qualified tuition and related
expenses paid for each of the first four years of the student's
post-secondary education in a degree or certificate program.
The AOTC rate is 100 percent on the first $2,000 of qualified
tuition and related expenses, and 25 percent on the next $2,000
of qualified tuition and related expenses.\10\ For purposes of
the AOTC, the definition of qualified tuition and related
expenses is expanded to include course materials. Forty percent
of a taxpayer's otherwise allowable AOTC is refundable. The
AOTC that a taxpayer may otherwise claim is phased out ratably
for taxpayers with MAGI between $80,000 and $90,000 ($160,000
and $180,000 for married taxpayers filing a joint return).\11\
Neither the credit rate nor the phaseout thresholds are indexed
for inflation.
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\9\Sec. 25A(i).
\10\Sec. 25A(i)(1).
\11\Sec. 25A(i)(5).
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Lifetime Learning credit
An individual taxpayer may claim a nonrefundable tax
credit, the Lifetime Learning credit, equal to 20 percent of
qualified tuition and related expenses incurred during the
taxable year on behalf of the taxpayer, the taxpayer's spouse,
or any dependents.\12\ Up to $10,000 of qualified tuition and
related expenses per taxpayer return are eligible for the
Lifetime Learning credit (i.e., the maximum credit per taxpayer
return is $2,000). In contrast with the Hope credit, the
maximum credit amount is not indexed for inflation.
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\12\Sec. 25A(c).
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In contrast to the Hope and American Opportunity tax
credits, a taxpayer may claim the Lifetime Learning credit for
an unlimited number of taxable years.\13\ Also in contrast to
the Hope and American Opportunity tax credits, the maximum
amount of the Lifetime Learning credit that may be claimed on a
taxpayer's return does not vary based on the number of students
in the taxpayer's family--that is, the Hope credit is computed
on a per student basis while the Lifetime Learning credit is
computed on a family-wide basis. The Lifetime Learning credit
amount that a taxpayer may otherwise claim is phased out
ratably for taxpayers with MAGI between $55,000 and $65,000
($110,000 and $130,000 for married taxpayers filing a joint
return) in 2014. These phaseout ranges are the same as those
for the Hope credit as it applies for tax years beginning
before 2009 and after 2017, and are similarly indexed for
inflation.
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\13\Sec. 25A(a)(2).
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Deduction for qualified tuition and related expenses
For taxable years ending prior to January 1, 2014, an
individual who has not elected to take the above-described
credits is allowed an above-the-line deduction for qualified
tuition and related expenses for higher education paid by the
individual during the taxable year.\14\ Qualified tuition
includes tuition and fees required for the enrollment or
attendance by the taxpayer, the taxpayer's spouse, or any
dependent of the taxpayer with respect to whom the taxpayer may
claim a personal exemption, at an eligible institution of
higher education for courses of instruction of such individual
at such institution. The expenses must be in connection with
enrollment at an institution of higher education during the
taxable year, or with an academic term beginning during the
taxable year or during the first three months of the next
taxable year. The deduction is not available for tuition and
related expenses paid for elementary or secondary education.
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\14\Sec. 222(a).
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The maximum deduction is $4,000 for an individual whose AGI
for the taxable year does not exceed $65,000 ($130,000 in the
case of a joint return), or $2,000 for other individuals whose
AGI does not exceed $80,000 ($160,000 in the case of a joint
return).\15\ No deduction is allowed for an individual whose
AGI exceeds the relevant AGI limitations, for a married
individual who does not file a joint return, or for an
individual with respect to whom a personal exemption deduction
may be claimed by another taxpayer for the taxable year.\16\
The deduction is not available for taxable years beginning
after December 31, 2013.
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\15\Sec. 222(b)(2)(B).
\16\See secs. 222(c) and (d).
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Additionally, a taxpayer must include the name and taxpayer
identification number of the student on whose behalf the
qualified tuition and related expenses were paid in order to be
eligible to claim the deduction.\17\
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\17\Sec. 222(d)(2).
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Tax treatment of qualified scholarships
Present law provides an exclusion from gross income and
wages for amounts received as a qualified scholarship by an
individual who is a candidate for a degree at a qualifying
educational organization.\18\ Generally, the exclusion does not
apply to amounts received by a student that represent payment
for teaching, research, or other services by the student as a
condition for receiving the scholarship.\19\
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\18\Secs. 117(a) and 3121(a)(20).
\19\Sec. 117(c).
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In general, a qualified scholarship is any amount received
by such an individual as a scholarship or fellowship grant if
the amount is used for qualified tuition and related
expenses.\20\ Qualified tuition and related expenses include
tuition and fees required for enrollment or attendance, or for
fees, books, supplies, and equipment required for courses of
instruction, at the qualifying educational organization.\21\
This definition does not include regular living expenses, such
as room and board. Thus, for example, the portion of a Federal
Pell Grant under section 401 of the Higher Education Act of
1965\22\ (``Pell Grant'') that is not attributed to qualified
tuition and related expenses is not a qualified scholarship and
is included in an individual's gross income. A qualifying
educational organization is an educational organization which
normally maintains a regular faculty and curriculum and
normally has a regularly enrolled body of pupils or students in
attendance at the place where its educational activities are
regularly carried on.\23\
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\20\Sec. 117(b)(1).
\21\Sec. 117(b)(2).
\22\20 U.S.C. sec. 1070(a).
\23\Sec. 117(b)(2)(A).
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Coordination of tax benefits for qualified tuition and scholarships
The amount of qualified tuition and related expenses paid,
for purposes of computing the value of the Hope, American
Opportunity, or Lifetime Learning credits, as well as the
deduction for qualified tuition and related expenses, generally
includes only out-of-pocket expenses. Qualified tuition and
related expenses do not include expenses covered by employer-
provided educational assistance and scholarships that are not
required to be included in the gross income of either the
student or the taxpayer claiming the credit. Thus, total
qualified tuition and related expenses are reduced by any
scholarship or fellowship grants excludable from gross income
under section 117 and any other tax-free educational benefits
received by the student (or the taxpayer claiming the credit)
during the taxable year.
Reporting requirements for eligible institutions
Section 6050S imposes reporting requirements, related to
higher education tax benefits, on eligible educational
institutions if the institution receives payments for qualified
tuition and related expenses with respect to any individual for
any calendar year. The information an institution subject to
the reporting requirements is required to provide includes
providing either the aggregate amount of payments received or
the aggregate amount billed for qualified tuition and related
expenses during the calendar year period.\24\
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\24\Sec. 6050S(b)(2)(B)(i).
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REASONS FOR CHANGE
The Committee believes that, with the cost of post-
secondary education increasing at a rate in excess of the rate
of inflation for nearly 30 years, it is appropriate to help
mitigate the burden on individuals wishing to pursue a college
education. The Committee believes that the AOTC is an important
means by which to accomplish this goal. The Committee believes
that permanently extending this provision will provide
taxpayers with the certainty necessary to plan for college, and
that indexing both the credit rate and the phaseout thresholds
for inflation is necessary to ensure that the assistance
provided by the credit is not diluted over time. Furthermore,
the Committee believes that by consolidating the Hope, AOTC,
Lifetime Learning credit and deduction for tuition and related
expenses into one consolidated credit, simplification is
provided in an area where tax benefits have grown increasingly
complex.
By increasing the maximum portion of the AOTC that is
refundable from $1,000 to $1,500, the Committee believes the
AOTC will become a more effective means by which the government
can provide assistance to low-income taxpayers without tax
liability who wish to attend college.
The Committee believes that Pell Grants should be excluded
from taxable income, without regard to whether those funds were
used for tuition or other non-tuition expenses while attending
school. Because Pell Grants in particular serve students with
the greatest financial need, excluding the entirety of Pell
Grant funds from taxation is an appropriate means by which to
assist low-income students wishing to pursue a college
education. Furthermore, the Committee believes it is
appropriate to coordinate Pell Grant funds and the AOTC such
that a student may receive the maximum benefit of the AOTC
without regard to whether the Pell Grant funds were used for
tuition or non-tuition costs of college attendance.
Finally, the Committee believes that the reporting
requirements on the Form 1098-T should be modified to more
accurately reflect the basis of the AOTC. Because the AOTC is
based on tuition paid by a student to an educational
institution (and not the amount of tuition billed to that
student), reporting the tuition that the student has actually
paid to the institution provides both the student and the
Internal Revenue Service with the relevant information for
computing the credit.
EXPLANATION OF PROVISION
Consolidation and modification of tuition credits and deduction
The provision permanently replaces the Hope credit with a
modified version of the AOTC, and repeals both the Lifetime
Learning credit and the now-expired deduction for qualified
tuition expenses. As under present law, the credit is claimed
on a per-student basis and the credit rate is 100 percent on
the first $2,000 of qualified tuition and related expenses, and
25 percent on the next $2,000 of qualified tuition and related
expenses, for a maximum credit of $2,500. Under the proposal,
the taxpayer's credit for the first $1,500 of qualified tuition
and related expenses is refundable.
The provision retains the phaseout range of the AOTC (i.e.,
the credit will continue to be phased out ratably for taxpayers
with MAGI between $80,000 and $90,000 ($160,000 and $180,000
for married taxpayers filing a joint return). The provision
provides that both the credit amounts and the phaseout ranges
are indexed for inflation for taxable years beginning after
2018.
The provision does not retain the rule that denies the
credit with respect to qualified tuition and related expenses
for the enrollment or attendance of any student who has been
convicted of a felony offense consisting of the possession or
distribution of a controlled substance.
The provision adds a requirement that a taxpayer must
include the employer identification number of the institution
to which qualified tuition and related expenses was paid.
Coordination of Pell Grants with credit for tuition
The provision alters the determination of qualified tuition
and related expenses for students who are recipients of Pell
Grants. Under the provision, for purposes of reducing the
amount of qualified tuition and related expenses owing to
receipt of scholarships, the recipient of the Pell Grant may
disregard an amount of the Pell Grant equaling the amount of
expenses (other than qualified tuition and related expenses)
that are taken into account in determining the cost of
attendance (as defined in section 472 of the Higher Education
Act of 1965). That is, the student may first apply the Pell
Grant to certain living expenses before any excess is deemed to
reduce the amount of tuition and related expenses eligible for
the AOTC. For example, under present law, if a student had
$2,000 in tuition and related expenses, $4,000 in living
expenses related to the cost of attendance, and received a
$3,000 Pell Grant, if that student had applied the Pell Grant
towards his or her tuition first, the student would not be
eligible for any AOTC because the qualified tuition and related
expenses ($2,000) is reduced by the amount of the Pell Grant
($3,000), leaving no qualified tuition and related expenses.
Under the provision, the $3,000 Pell Grant is disregarded to
the extent of living expenses related to the cost of attendance
($4,000), thus leaving the full $2,000 in qualified tuition and
related expenses eligible for the AOTC.
Modification of treatment of Pell Grant scholarships
The provision modifies the exclusion for qualified
scholarships by providing that Pell Grants are excluded from
gross income, without regard to whether the grant is used for
qualified tuition and related expenses.
Modification of reporting requirements
The provision modifies present-law reporting requirements,
such that an eligible educational institution may only report
the aggregate amount of tuition received with respect to any
individual during the calendar year period.
EFFECTIVE DATE
The provision applies to taxable years beginning after
December 31, 2014.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 3393, the Student and Family Tax
Simplification Act, on June 25, 2014.
The bill, H.R. 3393, was ordered favorably reported as
amended by a roll call vote of 22 yeas to 13 nays (with a
quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Rangel....... ........ ........ .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Ryan....................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Tiberi..................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Gerlach.................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Price...................... X ........ ......... Mr. Kind......... ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Pascrell..... ........ ........ .........
Mr. Smith...................... X ........ ......... Mr. Crowley...... ........ ........ .........
Mr. Schock..................... X ........ ......... Ms. Schwartz..... ........ X .........
Ms. Jenkins.................... X ........ ......... Mr. Davis........ ........ X .........
Mr. Paulsen.................... X ........ ......... Ms. Sanchez...... ........ X .........
Mr. Marchant................... X ........ ......... .................
Ms. Black...................... X ........ .........
Mr. Reed....................... ........ ........ .........
Mr. Young...................... X ........ .........
Mr. Kelly...................... X ........ .........
Mr. Griffin.................... X ........ .........
Mr. Renacci.................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 3393, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal budget receipts for fiscal years 2014-2024
(with no effect on such receipts in fiscal year 2014):
FISCAL YEARS
[Billions of Dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Item 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-19 2015-24
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues[\1\]................................... [\2\] -1.0 -0.9 -1.5 -14.5 -14.4 -15.5 -15.5 -15.9 -17.1 -18.1 -96.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-19 2015-24
[\1\] Estimate contains the following outlay .......... 3.4 3.2 3.2 10.2 10.1 10.8 10.7 10.8 11.5 19.9 73.7
effects........................................
[\2\] Loss of less than $50 million
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves new or increased budget authority. The Committee
further states that the revenue-reducing tax provisions involve
increased tax expenditures. (See amounts in table in Part IV.A,
above.)
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 7, 2014.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3393, the Student
and Family Tax Simplification Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Logan
Timmerhoff.
Sincerely,
Peter A. Fontaine
(For Douglas W. Elmendorf, Director)
Enclosure.
H.R. 3393--Student and Family Tax Simplification Act
H.R. 3393 would amend certain education-related provisions
of the Internal Revenue Code. The bill would permanently
extend, in modified form, the American Opportunity Tax Credit
(AOTC) for tuition and related post-secondary expenses that is
currently scheduled to expire at the end of 2017. Modifications
to the credit would include increasing the refundable portion
(starting in 2015) and indexing the credit and income phaseout
amounts for inflation (starting in 2019). The Hope tax credit,
which is scheduled to come back into effect in 2018 when the
AOTC expires, would be replaced by the AOTC, and the Lifetime
Learning tax credit would be repealed. In addition, for Pell
grant recipients, the bill would increase the amount of
expenses that potentially qualify for the AOTC, and Pell grant
amounts that exceeded certain education expenses would no
longer be considered taxable income. The bill would also modify
the information-reporting requirements on higher educational
institutions.
The staff of the Joint Committee on Taxation (JCT)
estimates that enacting H.R. 3393 would increase direct
spending over the 2014-2024 period by about $73.7 billion, and
reduce revenues over that period by about $22.7 billion. JCT
therefore estimates that enacting the legislation would
increase federal budget deficits by about $96.5 billion over
the 2014-2024 period.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending and revenues. Because enacting H.R. 3393 would
affect revenues and direct spending, pay-as-you-go procedures
apply. The net changes in revenues and outlays that are subject
to pay-as-you-go procedures are shown in the following table.
JCT has determined that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Logan
Timmerhoff. The estimate was approved by David Weiner,
Assistant Director for Tax Analysis.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3393, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JUNE 25, 2014
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------------------------------------------------------------
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Effects............ 0 45 1,038 936 1,519 14,531 14,354 15,492 15,515 15,941 17,082 18,068 96,453
Memorandum:
Changes in Outlays..................... 0 0 3,350 3,215 3,162 10,152 10,085 10,766 10,743 10,806 11,462 19,879 73,740
Changes in Revenues.................... 0 -45 2,312 2,279 1,643 -4,379 -4,269 -4,726 -4,772 -5,135 -5,620 1,811 -22,713
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation
Note: Components may not sum to totals because of rounding.
D. Macroeconomic Impact Analysis
In compliance with clause 3(h)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made by the Joint Committee on Taxation with respect to the
provisions of the bill amending the Internal Revenue Code of
1986: the effects of the bill on economic activity are so small
as to be incalculable within the context of a model of the
aggregate economy.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the provisions of H.R. 3393 that the
Committee concluded that it is appropriate to report the bill,
as amended, favorably to the House of Representatives with the
recommendation that the bill do pass.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 requires the staff of the
Joint Committee on Taxation (in consultation with the Internal
Revenue Service and the Treasury Department) to provide a tax
complexity analysis. The complexity analysis is required for
all legislation reported by the Senate Committee on Finance,
the House Committee on Ways and Means, or any committee of
conference if the legislation includes a provision that
directly or indirectly amends the Code and has widespread
applicability to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Code and that
have ``widespread applicability'' to individuals or small
businesses, within the meaning of the rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with sec. 3(j)(2) of H. Res. 5 (113th
Congress), the Committee states that the Government
Accountability Office has included the American Opportunity Tax
Credit and Form 1098-T (the form on which educational
institutions report tuition-related information) in reports to
Congress pursuant to section 21 of Public Law 111-139. The
Committee also states that the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169), identified programs related to the American
Opportunity Tax Credit.
H. Disclosure of Directed Rule Makings
In compliance with sec. 3(k) of H. Res. 5 (113th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter A--Determination of Tax Liability
* * * * * * *
PART IV--CREDITS AGAINST TAX
* * * * * * *
Subpart A--Nonrefundable Personal Credits
* * * * * * *
[Sec. 25A. Hope and Lifetime Learning credits.]
Sec. 25A. American opportunity tax credit.
* * * * * * *
[SEC. 25A. HOPE AND LIFETIME LEARNING CREDITS.
[(a) Allowance of Credit.--In the case of an individual,
there shall be allowed as a credit against the tax imposed by
this chapter for the taxable year the amount equal to the sum
of--
[(1) the Hope Scholarship Credit, plus
[(2) the Lifetime Learning Credit.
[(b) Hope Scholarship Credit.--
[(1) Per student credit.--In the case of any eligible
student for whom an election is in effect under this
section for any taxable year, the Hope Scholarship
Credit is an amount equal to the sum of--
[(A) 100 percent of so much of the qualified
tuition and related expenses paid by the
taxpayer during the taxable year (for education
furnished to the eligible student during any
academic period beginning in such taxable year)
as does not exceed $1,000, plus
[(B) 50 percent of such expenses so paid as
exceeds $1,000 but does not exceed the
applicable limit.
[(2) Limitations applicable to hope scholarship
credit.--
[(A) Credit allowed only for 2 taxable
years.--An election to have this section apply
with respect to any eligible student for
purposes of the Hope Scholarship Credit under
subsection (a)(1) may not be made for any
taxable year if such an election (by the
taxpayer or any other individual) is in effect
with respect to such student for any 2 prior
taxable years.
[(B) Credit allowed for year only if
individual is at least 1/2 time student for
portion of year.--The Hope Scholarship Credit
under subsection (a)(1) shall not be allowed
for a taxable year with respect to the
qualified tuition and related expenses of an
individual unless such individual is an
eligible student for at least one academic
period which begins during such year.
[(C) Credit allowed only for first 2 years of
post-secondary education.--The Hope Scholarship
Credit under subsection (a)(1) shall not be
allowed for a taxable year with respect to the
qualified tuition and related expenses of an
eligible student if the student has completed
(before the beginning of such taxable year) the
first 2 years of postsecondary education at an
eligible educational institution.
[(D) Denial of credit if student convicted of
a felony drug offense.--The Hope Scholarship
Credit under subsection (a)(1) shall not be
allowed for qualified tuition and related
expenses for the enrollment or attendance of a
student for any academic period if such student
has been convicted of a Federal or State felony
offense consisting of the possession or
distribution of a controlled substance before
the end of the taxable year with or within
which such period ends.
[(3) Eligible student.--For purposes of this
subsection, the term ``eligible student'' means, with
respect to any academic period, a student who--
[(A) meets the requirements of section
484(a)(1) of the Higher Education Act of 1965
(20 U.S.C. 1091(a)(1)), as in effect on the
date of the enactment of this section, and
[(B) is carrying at least 1/2 the normal
full-time work load for the course of study the
student is pursuing.
[(4) Applicable limit.--For purposes of paragraph
(1)(B), the applicable limit for any taxable year is an
amount equal to 2 times the dollar amount in effect
under paragraph (1)(A) for such taxable year.
[(c) Lifetime Learning Credit.--
[(1) Per taxpayer credit.--The Lifetime Learning
Credit for any taxpayer for any taxable year is an
amount equal to 20 percent of so much of the qualified
tuition and related expenses paid by the taxpayer
during the taxable year (for education furnished during
any academic period beginning in such taxable year) as
does not exceed $10,000 ($5,000 in the case of taxable
years beginning before January 1, 2003).
[(2) Special rules for determining expenses.--
[(A) Coordination with hope scholarship.--The
qualified tuition and related expenses with
respect to an individual who is an eligible
student for whom a Hope Scholarship Credit
under subsection (a)(1) is allowed for the
taxable year shall not be taken into account
under this subsection.
[(B) Expenses eligible for lifetime learning
credit.--For purposes of paragraph (1),
qualified tuition and related expenses shall
include expenses described in subsection (f)(1)
with respect to any course of instruction at an
eligible educational institution to acquire or
improve job skills of the individual.
[(d) Limitation Based on Modified Adjusted Gross Income.--
[(1) In general.--The amount which would (but for
this subsection) be taken into account under subsection
(a) for the taxable year shall be reduced (but not
below zero) by the amount determined under paragraph
(2).
[(2) Amount of reduction.--The amount determined
under this paragraph is the amount which bears the same
ratio to the amount which would be so taken into
account as--
[(A) the excess of--
[(i) the taxpayer's modified adjusted
gross income for such taxable year,
over
[(ii) $40,000 ($80,000 in the case of
a joint return), bears to (B) $10,000
($20,000 in the case of a joint
return).
[(3) Modified adjusted gross income.--The term
``modified adjusted gross income'' means the adjusted
gross income of the taxpayer for the taxable year
increased by any amount excluded from gross income
under section 911, 931, or 933.
[(e) Election Not to Have Section Apply.--A taxpayer may
elect not to have this section apply with respect to the
qualified tuition and related expenses of an individual for any
taxable year.
[(f) Definitions.--For purposes of this section--
[(1) Qualified tuition and related expenses.--
[(A) In general.--The term ``qualified
tuition and related expenses'' means tuition
and fees required for the enrollment or
attendance of--
[(i) the taxpayer,
[(ii) the taxpayer's spouse, or
[(iii) any dependent of the taxpayer
with respect to whom the taxpayer is
allowed a deduction under section 151,
at an eligible educational institution for
courses of instruction of such individual at
such institution.
[(B) Exception for education involving
sports, etc.--Such term does not include
expenses with respect to any course or other
education involving sports, games, or hobbies,
unless such course or other education is part
of the individual's degree program.
[(C) Exception for nonacademic fees.--Such
term does not include student activity fees,
athletic fees, insurance expenses, or other
expenses unrelated to an individual's academic
course of instruction.
[(2) Eligible educational institution.--The term
``eligible educational institution'' means an
institution--
[(A) which is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C. 1088),
as in effect on the date of the enactment of
this section, and
[(B) which is eligible to participate in a
program under title IV of such Act.
[(g) Special Rules.--
[(1) Identification requirement.--No credit shall be
allowed under subsection (a) to a taxpayer with respect
to the qualified tuition and related expenses of an
individual unless the taxpayer includes the name and
taxpayer identification number of such individual on
the return of tax for the taxable year.
[(2) Adjustment for certain scholarships, etc..--The
amount of qualified tuition and related expenses
otherwise taken into account under subsection (a) with
respect to an individual for an academic period shall
be reduced (before the application of subsections (b),
(c), and (d)) by the sum of any amounts paid for the
benefit of such individual which are allocable to such
period as--
[(A) a qualified scholarship which is
excludable from gross income under section 117,
[(B) an educational assistance allowance
under chapter 30, 31, 32, 34, or 35 of title
38, United States Code, or under chapter 1606
of title 10, United States Code, and
[(C) a payment (other than a gift, bequest,
devise, or inheritance within the meaning of
section 102(a)) for such individual's
educational expenses, or attributable to such
individual's enrollment at an eligible
educational institution, which is excludable
from gross income under any law of the United
States.
[(3) Treatment of expenses paid by dependent.--If a
deduction under section 151 with respect to an
individual is allowed to another taxpayer for a taxable
year beginning in the calendar year in which such
individual's taxable year begins--
[(A) no credit shall be allowed under
subsection (a) to such individual for such
individual's taxable year, and
[(B) qualified tuition and related expenses
paid by such individual during such
individual's taxable year shall be treated for
purposes of this section as paid by such other
taxpayer.
[(4) Treatment of certain prepayments.--If qualified
tuition and related expenses are paid by the taxpayer
during a taxable year for an academic period which
begins during the first 3 months following such taxable
year, such academic period shall be treated for
purposes of this section as beginning during such
taxable year.
[(5) Denial of double benefit.--No credit shall be
allowed under this section for any expense for which a
deduction is allowed under any other provision of this
chapter.
[(6) No credit for married individuals filing
separate returns.--If the taxpayer is a married
individual (within the meaning of section 7703), this
section shall apply only if the taxpayer and the
taxpayer's spouse file a joint return for the taxable
year.
[(7) Nonresident aliens.--If the taxpayer is a
nonresident alien individual for any portion of the
taxable year, this section shall apply only if such
individual is treated as a resident alien of the United
States for purposes of this chapter by reason of an
election under subsection (g) or (h) of section 6013.
[(h) Inflation Adjustments.--
[(1) Dollar limitation on amount of credit.--
[(A) In general.--In the case of a taxable
year beginning after 2001, each of the $1,000
amounts under subsection (b)(1) shall be
increased by an amount equal to--
[(i) such dollar amount, multiplied
by
[(ii) the cost-of-living adjustment
determined under section 1(f)(3) for
the calendar year in which the taxable
year begins, determined by substituting
``calendar year 2000'' for ``calendar
year 1992'' in subparagraph (B)
thereof.
[(B) Rounding.--If any amount as adjusted
under subparagraph (A) is not a multiple of
$100, such amount shall be rounded to the next
lowest multiple of $100.
[(2) Income limits.--
[(A) In general.--In the case of a taxable
year beginning after 2001, the $40,000 and
$80,000 amounts in subsection (d)(2) shall each
be increased by an amount equal to--
[(i) such dollar amount, multiplied
by
[(ii) the cost-of-living adjustment
determined under section 1(f)(3) for
the calendar year in which the taxable
year begins, determined by substituting
``calendar year 2000'' for ``calendar
year 1992'' in subparagraph (B)
thereof.
[(B) Rounding.--If any amount as adjusted
under subparagraph (A) is not a multiple of
$1,000, such amount shall be rounded to the
next lowest multiple of $1,000.
[(i) American Opportunity Tax Credit.--In the case of any
taxable year beginning after 2008 and before 2018--
[(1) Increase in credit.--The Hope Scholarship Credit
shall be an amount equal to the sum of--
[(A) 100 percent of so much of the qualified
tuition and related expenses paid by the
taxpayer during the taxable year (for education
furnished to the eligible student during any
academic period beginning in such taxable year)
as does not exceed $2,000, plus
[(B) 25 percent of such expenses so paid as
exceeds $2,000 but does not exceed $4,000.
[(2) Credit allowed for first 4 years of post-
secondary education.--Subparagraphs (A) and (C) of
subsection (b)(2) shall be applied by substituting
``4'' for ``2''.
[(3) Qualified tuition and related expenses to
include required course materials.--Subsection
(f)(1)(A) shall be applied by substituting ``tuition,
fees, and course materials'' for ``tuition and fees''.
[(4) Increase in agi limits for hope scholarship
credit.--In lieu of applying subsection (d) with
respect to the Hope Scholarship Credit, such credit
(determined without regard to this paragraph) shall be
reduced (but not below zero) by the amount which bears
the same ratio to such credit (as so determined) as--
[(A) the excess of--
[(i) the taxpayer's modified adjusted
gross income (as defined in subsection
(d)(3)) for such taxable year, over
[(ii) $80,000 ($160,000 in the case
of a joint return), bears to (B)
$10,000 ($20,000 in the case of a joint
return).
[(5) Portion of credit made refundable.--40 percent
of so much of the credit allowed under subsection (a)
as is attributable to the Hope Scholarship Credit
(determined after application of paragraph (4) and
without regard to this paragraph and section 26(a))
shall be treated as a credit allowable under subpart C
(and not allowed under subsection (a)). The preceding
sentence shall not apply to any taxpayer for any
taxable year if such taxpayer is a child to whom
subsection (g) of section 1 applies for such taxable
year.
[(6) Coordination with midwestern disaster area
benefits.--In the case of a taxpayer with respect to
whom section 702(a)(1)(B) of the Heartland Disaster Tax
Relief Act of 2008 applies for any taxable year, such
taxpayer may elect to waive the application of this
subsection to such taxpayer for such taxable year.
[(j) Regulations.--The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations providing for a recapture
of the credit allowed under this section in cases where there
is a refund in a subsequent taxable year of any amount which
was taken into account in determining the amount of such
credit.]
SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.
(a) In General.--In the case of an individual, there shall be
allowed as a credit against the tax imposed by this chapter for
the taxable year, with respect to each eligible student, an
amount equal to the sum of--
(1) 100 percent of so much of the qualified tuition
and related expenses paid by the taxpayer during the
taxable year (for education furnished to the eligible
student during any academic period beginning in such
taxable year) as does not exceed $2,000, plus
(2) 25 percent of so much of such expenses so paid as
exceeds the dollar amount in effect under paragraph (1)
but does not exceed twice such dollar amount.
(b) Portion of Credit Refundable.--So much of the credit
allowable under subsection (a) with respect to each eligible
student (determined without regard to this subsection and
section 26(a) and after application of all other provisions of
this section) as does not exceed $1,500 shall be treated as a
credit allowable under subpart C (and not under this part). The
preceding sentence shall not apply to any taxpayer for any
taxable year if such taxpayer is a child to whom section 1(g)
applies for such taxable year.
(c) Limitation Based on Modified Adjusted Gross Income.--
(1) In general.--The amount allowable as a credit
under subsection (a) for any taxable year shall be
reduced (but not below zero) by an amount which bears
the same ratio to the amount so allowable (determined
without regard to this subsection and subsection (b)
but after application of all other provisions of this
section) as--
(A) the excess of--
(i) the taxpayer's modified adjusted
gross income for such taxable year,
over
(ii) $80,000 (twice such amount in
the case of a joint return), bears to
(B) $10,000 (twice such amount in the case of
a joint return).
(2) Modified adjusted gross income.--For purposes of
this subsection, the term ``modified adjusted gross
income'' means the adjusted gross income of the
taxpayer for the taxable year increased by any amount
excluded from gross income under section 911, 931, or
933.
(d) Other Limitations.--No credit shall be allowed under this
section with respect to any eligible student for any taxable
year if--
(1) such student was taken into account in
determining the credit allowed under this section (by
the taxpayer or any other individual) for any 4 prior
taxable years, or
(2) such student has completed (before the beginning
of such taxable year) the first 4 years of
postsecondary education at an eligible educational
institution.
(e) Definitions.--For purposes of this section--
(1) Eligible student.-- The term ``eligible student''
means, with respect to any academic period, a student
who--
(A) meets the requirements of section
484(a)(1) of the Higher Education Act of 1965
(20 U.S.C. 1091(a)(1)), as in effect on August
5, 1997, and
(B) is carrying at least \1/2\ the normal
full-time work load for the course of study the
student is pursuing.
(2) Qualified tuition and related expenses.--
(A) In general.--The term ``qualified tuition
and related expenses'' means tuition, fees, and
course materials, required for enrollment or
attendance of--
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any dependent of the taxpayer
with respect to whom the taxpayer is
allowed a deduction under section 151,
at an eligible educational institution for
courses of instruction of such individual at
such institution.
(B) Exception for education involving sports,
etc.--Such term does not include expenses with
respect to any course or other education
involving sports, games, or hobbies, unless
such course or other education is part of the
individual's degree program.
(C) Exception for nonacademic fees.--Such
term does not include student activity fees,
athletic fees, insurance expenses, or other
expenses unrelated to an individual's academic
course of instruction.
(3) Eligible educational institution.--The term
``eligible educational institution'' means an
institution--
(A) which is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C. 1088),
as in effect on August 5, 1997, and
(B) which is eligible to participate in a
program under title IV of such Act.
(f) Special Rules.--
(1) Identification requirement.--No credit shall be
allowed under subsection (a) to a taxpayer with respect
to the qualified tuition and related expenses of an
individual unless the taxpayer includes the name and
taxpayer identification number of such individual, and
the employer identification number of any institution
to which such expenses were paid, on the return of tax
for the taxable year.
(2) Adjustment for certain scholarships, etc.--
(A) In general.--The amount of qualified
tuition and related expenses otherwise taken
into account under subsection (a) with respect
to an individual for an academic period shall
be reduced (before the application of
subsection (c)) by the sum of any amounts paid
for the benefit of such individual which are
allocable to such period as--
(i) a qualified scholarship which is
excludable from gross income under
section 117,
(ii) an educational assistance
allowance under chapter 30, 31, 32, 34,
or 35 of title 38, United States Code,
or under chapter 1606 of title 10,
United States Code, and
(iii) a payment (other than a gift,
bequest, devise, or inheritance within
the meaning of section 102(a)) for such
individual's educational expenses, or
attributable to such individual's
enrollment at an eligible educational
institution, which is excludable from
gross income under any law of the
United States.
(B) Coordination with pell grants not used
for qualified tuition and related expenses.--
For purposes of subparagraph (A), the amount of
any Federal Pell Grant under section 401 of the
Higher Education Act of 1965 (20 U.S.C. 1070a)
shall be reduced (but not below zero) by the
amount of expenses (other than qualified
tuition and related expenses) which are taken
into account in determining the cost of
attendance (as defined in section 472 of the
Higher Education Act of 1965, as in effect on
the date of the enactment of this paragraph) of
such individual at an eligible educational
institution for the academic period for which
the credit under this section is being
determined.
(3) Treatment of expenses paid by dependent.--If a
deduction under section 151 with respect to an
individual is allowed to another taxpayer for a taxable
year beginning in the calendar year in which such
individual's taxable year begins--
(A) no credit shall be allowed under
subsection (a) to such individual for such
individual's taxable year, and
(B) qualified tuition and related expenses
paid by such individual during such
individual's taxable year shall be treated for
purposes of this section as paid by such other
taxpayer.
(4) Treatment of certain prepayments.--If qualified
tuition and related expenses are paid by the taxpayer
during a taxable year for an academic period which
begins during the first 3 months following such taxable
year, such academic period shall be treated for
purposes of this section as beginning during such
taxable year.
(5) Denial of double benefit.--No credit shall be
allowed under this section for any amount for which a
deduction is allowed under any other provision of this
chapter.
(6) No credit for married individuals filing separate
returns.--If the taxpayer is a married individual
(within the meaning of section 7703), this section
shall apply only if the taxpayer and the taxpayer's
spouse file a joint return for the taxable year.
(7) Nonresident aliens.--If the taxpayer is a
nonresident alien individual for any portion of the
taxable year, this section shall apply only if such
individual is treated as a resident alien of the United
States for purposes of this chapter by reason of an
election under subsection (g) or (h) of section 6013.
(g) Inflation Adjustment.--
(1) In general.--In the case of a taxable year
beginning after 2018, the $2,000 amount in subsection
(a)(1), the $1,500 amount in subsection (b), and the
$80,000 amount in subsection (c)(1)(A)(ii) shall each
be increased by an amount equal to--
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in
which the taxable year begins, determined by
substituting ``calendar year 2017'' for
``calendar year 1992'' in subparagraph (B)
thereof.
(2) Rounding.--If any amount as adjusted under
paragraph (1) is not a multiple of $100 ($1,000 in the
case of the amount in subsection (c)(1)(A)(ii)), such
amount shall be rounded to the next lowest multiple of
$100 ($1,000 in the case of the amount in subsection
(c)(1)(A)(ii)).
(h) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out this section, including regulations
providing for a recapture of the credit allowed under this
section in cases where there is a refund in a subsequent
taxable year of any amount which was taken into account in
determining the amount of such credit.
* * * * * * *
Subchapter B--Computation of Taxable Income
* * * * * * *
PART I--DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC
* * * * * * *
SEC. 62. ADJUSTED GROSS INCOME DEFINED.
(a) General Rule.--For purposes of this subtitle, the term
``adjusted gross income'' means, in the case of an individual,
gross income minus the following deductions:
(1) * * *
* * * * * * *
[(18) Higher education expenses.--The deduction
allowed by section 222.]
* * * * * * *
PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
* * * * * * *
SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE INSURANCE
CONTRACTS.
(a) * * *
* * * * * * *
(t) 10-Percent Additional Tax on Early Distributions from
Qualified Retirement Plans.--
(1) * * *
* * * * * * *
(7) Qualified higher education expenses.--For
purposes of paragraph (2)(E)--
(A) * * *
(B) Coordination with other benefits.--The
amount of qualified higher education expenses
for any taxable year shall be reduced as
provided in [section 25A(g)(2)] section
25A(f)(2).
* * * * * * *
SEC. 86. SOCIAL SECURITY AND TIER 1 RAILROAD RETIREMENT BENEFITS.
(a) * * *
(b) Taxpayers to Whom Subsection (a) Applies.--
(1) * * *
(2) Modified adjusted gross income.--For purposes of
this subsection, the term ``modified adjusted gross
income'' means adjusted gross income--
(A) determined without regard to this section
and sections 135, 137, 199, 221, [222,] 911,
931, and 933, and
* * * * * * *
PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
* * * * * * *
SEC. 117. QUALIFIED SCHOLARSHIPS.
(a) * * *
(b) Qualified Scholarship.--For purposes of this section--
(1) In general.--The term ``qualified scholarship''
means any amount [received by an individual as a
scholarship] received by an individual--
(A) as a scholarship or fellowship grant to
the extent the individual establishes that, in
accordance with the conditions of the grant,
such amount was used for qualified tuition and
related expenses[.], or
(B) as a Federal Pell Grant under section 401
of the Higher Education Act of 1965 (20 U.S.C.
1070a).
* * * * * * *
SEC. 135. INCOME FROM UNITED STATES SAVINGS BONDS USED TO PAY HIGHER
EDUCATION TUITION AND FEES.
(a) * * *
* * * * * * *
(c) Definitions.--For purposes of this section--
(1) * * *
* * * * * * *
(4) Modified adjusted gross income.--The term
``modified adjusted gross income'' means the adjusted
gross income of the taxpayer for the taxable year
determined--
(A) without regard to this section and
sections 137, 199, 221, [222,] 911, 931, and
933, and
* * * * * * *
SEC. 137. ADOPTION ASSISTANCE PROGRAM.
(a) * * *
(b) Limitations.--
(1) * * *
* * * * * * *
(3) Determination of adjusted gross income.--For
purposes of paragraph (2), adjusted gross income shall
be determined--
(A) without regard to this section and
sections 199, 221, [222,] 911, 931, and 933,
and
* * * * * * *
PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
* * * * * * *
SEC. 199. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES.
(a) * * *
* * * * * * *
(d) Definitions and Special Rules.--
(1) * * *
(2) Application to individuals.--In the case of an
individual, subsections (a)(1)(B) and (d)(9)(A)(iii)
shall be applied by substituting ``adjusted gross
income'' for ``taxable income''. For purposes of the
preceding sentence, adjusted gross income shall be
determined--
(A) after application of sections 86, 135,
137, 219, 221, [222,] and 469, and
* * * * * * *
PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
Sec. 211. Allowance of deductions.
* * * * * * *
[Sec. 222. Qualified tuition and related expenses.]
* * * * * * *
SEC. 219. RETIREMENT SAVINGS.
(a) * * *
* * * * * * *
(g) Limitation on Deduction for Active Participants in
Certain Pension Plans.--
(1) * * *
* * * * * * *
(3) Adjusted gross income; applicable dollar
amount.--For purposes of this subsection--
(A) Adjusted gross income.--Adjusted gross
income of any taxpayer shall be determined--
(i) * * *
(ii) without regard to sections 135,
137, 199, 221, [222,] and 911 or the
deduction allowable under this section.
* * * * * * *
SEC. 221. INTEREST ON EDUCATION LOANS.
(a) * * *
(b) Maximum Deduction.--
(1) * * *
(2) Limitation based on modified adjusted gross
income.--
(A) * * *
* * * * * * *
(C) Modified adjusted gross income.--The term
``modified adjusted gross income'' means
adjusted gross income determined--
(i) without regard to this section
and sections 199, [222,] 911, 931, and
933, and
* * * * * * *
[SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.
[(a) Allowance of Deduction.--In the case of an individual,
there shall be allowed as a deduction an amount equal to the
qualified tuition and related expenses paid by the taxpayer
during the taxable year.
[(b) Dollar Limitations.--
[(1) In general.--The amount allowed as a deduction
under subsection (a) with respect to the taxpayer for
any taxable year shall not exceed the applicable dollar
limit.
[(2) Applicable dollar limit.--
[(A) 2002 and 2003.--In the case of a taxable
year beginning in 2002 or 2003, the applicable
dollar limit shall be equal to--
[(i) in the case of a taxpayer whose
adjusted gross income for the taxable
year does not exceed $65,000 ($130,000
in the case of a joint return), $3,000,
and--
[(ii) in the case of any other
taxpayer, zero.
[(B) After 2003.--In the case of any taxable
year beginning after 2003, the applicable
dollar amount shall be equal to--
[(i) in the case of a taxpayer whose
adjusted gross income for the taxable
year does not exceed $65,000 ($130,000
in the case of a joint return), $4,000,
[(ii) in the case of a taxpayer not
described in clause (i) whose adjusted
gross income for the taxable year does
not exceed $80,000 ($160,000 in the
case of a joint return), $2,000, and
[(iii) in the case of any other
taxpayer, zero.
[(C) Adjusted gross income.--For purposes of
this paragraph, adjusted gross income shall be
determined--
[(i) without regard to this section
and sections 199, 911, 931, and 933,
and
[(ii) after application of sections
86, 135, 137, 219, 221, and 469.
[(c) No Double Benefit.--
[(1) In general.--No deduction shall be allowed under
subsection (a) for any expense for which a deduction is
allowed to the taxpayer under any other provision of
this chapter.
[(2) Coordination with other education incentives.--
[(A) Denial of deduction if credit elected.--
No deduction shall be allowed under subsection
(a) for a taxable year with respect to the
qualified tuition and related expenses with
respect to an individual if the taxpayer or any
other person elects to have section 25A apply
with respect to such individual for such year.
[(B) Coordination with exclusions.--The total
amount of qualified tuition and related
expenses shall be reduced by the amount of such
expenses taken into account in determining any
amount excluded under section 135, 529(c)(1),
or 530(d)(2). For purposes of the preceding
sentence, the amount taken into account in
determining the amount excluded under section
529(c)(1) shall not include that portion of the
distribution which represents a return of any
contributions to the plan.
[(3) Dependents.--No deduction shall be allowed under
subsection (a) to any individual with respect to whom a
deduction under section 151 is allowable to another
taxpayer for a taxable year beginning in the calendar
year in which such individual's taxable year begins.
[(d) Definitions and Special Rules.--For purposes of this
section--
[(1) Qualified tuition and related expenses.--The
term ``qualified tuition and related expenses'' has the
meaning given such term by section 25A(f). Such
expenses shall be reduced in the same manner as under
section 25A(g)(2).
[(2) Identification requirement.--No deduction shall
be allowed under subsection (a) to a taxpayer with
respect to the qualified tuition and related expenses
of an individual unless the taxpayer includes the name
and taxpayer identification number of the individual on
the return of tax for the taxable year.
[(3) Limitation on taxable year of deduction.--
[(A) In general.--A deduction shall be
allowed under subsection (a) for qualified
tuition and related expenses for any taxable
year only to the extent such expenses are in
connection with enrollment at an institution of
higher education during the taxable year.
[(B) Certain prepayments allowed.--
Subparagraph (A) shall not apply to qualified
tuition and related expenses paid during a
taxable year if such expenses are in connection
with an academic term beginning during such
taxable year or during the first 3 months of
the next taxable year.
[(4) No deduction for married individuals filing
separate returns.--If the taxpayer is a married
individual (within the meaning of section 7703), this
section shall apply only if the taxpayer and the
taxpayer's spouse file a joint return for the taxable
year.
[(5) Nonresident aliens.--If the taxpayer is a
nonresident alien individual for any portion of the
taxable year, this section shall apply only if such
individual is treated as a resident alien of the United
States for purposes of this chapter by reason of an
election under subsection (g) or (h) of section 6013.
[(6) Regulations.--The Secretary may prescribe such
regulations as may be necessary or appropriate to carry
out this section, including regulations requiring
recordkeeping and information reporting.
[(e) Termination.--This section shall not apply to taxable
years beginning after December 31, 2013.]
* * * * * * *
Subchapter E--Accounting Periods and Methods of Accounting
* * * * * * *
PART II--METHODS OF ACCOUNTING
* * * * * * *
Subpart C--Taxable Year for Which Deductions Taken
* * * * * * *
SEC. 469. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED.
(a) * * *
* * * * * * *
(i) $25,000 offset for rental real estate activities
(1) * * *
* * * * * * *
(3) Phase-out of exemption.--
(A) * * *
* * * * * * *
(F) Adjusted gross income.--For purposes of
this paragraph, adjusted gross income shall be
determined without regard to--
(i) * * *
* * * * * * *
(iii) the amounts allowable as a
deduction under sections 199, 219,
[221, and 222] and 221, and
* * * * * * *
Subchapter F--Exempt Organizations
* * * * * * *
PART VIII--HIGHER EDUCATION SAVINGS ENTITIES
SEC. 529. QUALIFIED TUITION PROGRAMS.
(a) * * *
* * * * * * *
(c) Tax Treatment of Designated Beneficiaries and
Contributors.--
(1) * * *
* * * * * * *
(3) Distributions.--
(A) * * *
(B) Distributions for qualified higher
education expenses.--For purposes of this
paragraph--
(i) * * *
* * * * * * *
(v) Coordination with Hope and
Lifetime Learning credits.--The total
amount of qualified higher education
expenses with respect to an individual
for the taxable year shall be reduced--
(I) as provided in [section
25A(g)(2)] section 25A(f)(2),
and
* * * * * * *
(e) Other Definitions and Special Rules.--For purposes of
this section--
(1) * * *
* * * * * * *
(3) Qualified higher education expenses.--
(A) * * *
(B) Room and board included for students who
are at least half-time.--
(i) In general.--In the case of an
individual who is an eligible student
(as defined in [section 25A(b)(3)]
section 25A(d)) for any academic
period, such term shall also include
reasonable costs for such period (as
determined under the qualified tuition
program) incurred by the designated
beneficiary for room and board while
attending such institution. For
purposes of subsection (b)(6), a
designated beneficiary shall be treated
as meeting the requirements of this
clause.
* * * * * * *
SEC. 530. COVERDELL EDUCATION SAVINGS ACCOUNTS.
(a) * * *
* * * * * * *
(d) Tax Treatment of Distributions.--
(1) * * *
(2) Distributions for qualified education expenses.--
(A) * * *
* * * * * * *
(C) Coordination with [hope and lifetime
learning credits] american opportunity tax
credit and qualified tuition programs.--For
purposes of subparagraph (A)--
(i) Credit coordination.--The total
amount of qualified education expenses
with respect to an individual for the
taxable year shall be reduced--
(I) as provided in [section
25A(g)(2)] section 25A(f)(2),
and
* * * * * * *
(4) Additional tax for distributions not used for
educational expenses.--
(A) * * *
(B) Exceptions.--Subparagraph (A) shall not
apply if the payment or distribution is--
(i) * * *
* * * * * * *
(iii) made on account of a
scholarship, allowance, or payment
described in [section 25A(g)(2)]
section 25A(d)(4)(B) received by the
designated beneficiary to the extent
the amount of the payment or
distribution does not exceed the amount
of the scholarship, allowance, or
payment,
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 61--INFORMATION AND RETURNS
* * * * * * *
Subchapter A--Returns and Records
* * * * * * *
PART III--INFORMATION RETURNS
* * * * * * *
Subpart B--Information Concerning Transactions with Other Persons
* * * * * * *
SEC. 6050S. RETURNS RELATING TO HIGHER EDUCATION TUITION AND RELATED
EXPENSES.
(a) * * *
(b) Form and Manner of Returns.--A return is described in
this subsection if such return--
(1) * * *
(2) contains--
(A) * * *
(B) the--
(i) aggregate amount of payments
received [or the aggregate amount
billed] for qualified tuition and
related expenses with respect to the
individual described in subparagraph
(A) during the calendar year,
* * * * * * *
(e) Definitions.--For purposes of this section, the terms
``eligible educational institution'' and ``qualified tuition
and related expenses'' have the meanings given such terms by
section 25A (without regard to [subsection (g)(2)] subsection
(f)(2) thereof), and except as provided in regulations, the
term ``qualified education loan'' has the meaning given such
term by section 221(d)(1).
* * * * * * *
CHAPTER 63--ASSESSMENT
* * * * * * *
Subchapter B--Deficiency Procedures in the Case of Income, Estate,
Gift, and Certain Excise Taxes
SEC. 6211. DEFINITION OF A DEFICIENCY.
(a) * * *
(b) Rules for Application of Subsection (a).--For purposes of
this section--
(1) * * *
* * * * * * *
(4) For purposes of subsection (a)--
(A) any excess of the sum of the credits
allowable under sections 24(d), 25A by reason
of [subsection (i)(6)] subsection (b) thereof,
32, 34, 35, 36, 36A, 36B, 53(e), 168(k)(4),
6428, and 6431 over the tax imposed by subtitle
A (determined without regard to such credits),
and
* * * * * * *
SEC. 6213. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX
COURT.
(a) * * *
* * * * * * *
(g) Definitions.--For purposes of this section--
(1) * * *
(2) Mathematical or clerical error.--The term
``mathematical or clerical error'' means--
(A) * * *
* * * * * * *
(J) an omission of a correct [TIN required
under section 25A(g)(1)] TIN, and employer
identification number, required under section
25A(f)(1) (relating to higher education tuition
and related expenses) to be included on a
return,
* * * * * * *
----------
SECTION 1004 OF THE AMERICAN RECOVERY AND REINVESTMENT TAX ACT OF 2009
SEC. 1004. AMERICAN OPPORTUNITY TAX CREDIT.
(a) * * *
* * * * * * *
(c) Treatment of Possessions.--
(1) Payments to possessions.--
(A) Mirror code possession.--The Secretary of
the Treasury shall pay to each possession of
the United States with a mirror code tax system
amounts equal to the loss to that possession by
reason of the application of [section
25A(i)(6)] section 25A(b) of the Internal
Revenue Code of 1986 (as added by this section)
[with respect to taxable years beginning after
2008 and before 2018] with respect to each
taxable year. Such amounts shall be determined
by the Secretary of the Treasury based on
information provided by the government of the
respective possession.
(B) Other possessions.--The Secretary of the
Treasury shall pay to each possession of the
United States which does not have a mirror code
tax system amounts estimated by the Secretary
of the Treasury as being equal to the aggregate
benefits that would have been provided to
residents of such possession by reason of the
application of [section 25A(i)(6)] section
25A(b) of such Code (as so added) [for taxable
years beginning after 2008 and before 2018] for
each taxable year if a mirror code tax system
had been in effect in such possession. The
preceding sentence shall not apply with respect
to any possession of the United States unless
such possession has a plan, which has been
approved by the Secretary of the Treasury,
under which such possession will promptly
distribute such payments to the residents of
such possession.
(2) Coordination with credit allowed against united
states income taxes.--[Section 25A(i)(6)] Section
25A(b) of such Code (as added by this section) shall
not apply to a bona fide resident of any possession of
the United States.
(3) Definitions and special rules.--
(A) * * *
* * * * * * *
(C) Treatment of payments.--For purposes of
section 1324(b)(2) of title 31, United States
Code, the payments under this subsection shall
be treated in the same manner as a refund due
from the credit allowed under section 25A of
the Internal Revenue Code of 1986 by reason of
[subsection (i)(6)] subsection (b) of such
section (as added by this section).
* * * * * * *
VII. DISSENTING VIEWS
Notwithstanding that there is strong support for
streamlining the education tax benefits, we opposed this bill
because it takes away benefits from certain students--graduate
students, lifetime learners, and non-traditional undergraduate
students--to pay for educational benefits available to a
narrower set of students--primarily, traditional undergraduate
students who complete their degrees in four years.
The bill will negatively impact many low-income and middle-
income students and families who benefit from the education tax
provisions under current law. By replacing the Hope Scholarship
Credit and repealing both the Lifetime Learning Credit (LLC)
and the now-expired deduction for qualified tuition expenses,
this bill will harm traditional middle-income undergraduates,
adult learners, and low-income and middle-income graduate
students. The bill appears to be based on outdated assumptions
about the typical student in higher education--the student who
enrolls in college full-time and completes a degree within four
years. While the median time to degree for all bachelor's
degree recipients is 4.3 years, the median time for adult
students (between ages 24-29) is 6.6 years. Thus, the bill's
four-year limit on benefits, in combination with the
elimination of the LLC and tuition deduction for which part-
time students are eligible, will cost many undergraduates much
needed financial assistance.
The bill also provides no educational benefits to lifetime
learners or graduate students. These learners are the primary
beneficiaries of the LLC. Many of these learners are low-income
and need assistance in pursuing additional skill development or
advanced degrees that employers require.
In addition to our substantive concerns with the bill, we
also believe that it should not be made permanent by adding to
the deficit without any revenue offset. In three short months,
Republicans on the Committee have approved 14 tax bills that
would add a stunning $825 billion to the deficit--and there
does not appear to be an end in sight. Chairman Camp's Tax
Reform Act of 2014 discussion draft (the ``Republican tax
reform plan'') was revenue neutral and did not add to the
deficit. These bills are going in the opposite direction. We
should be considering these bills in the context of a revenue-
neutral, bipartisan tax reform plan.
To put the combined $825 billion cost into context, it is
1.7 times the entire projected federal deficit for this year
and $241 billion more than what the total non-defense
discretionary spending (e.g., medical research, education,
veterans' pensions and health care, transportation, etc.) will
be in 2014. It is more than nine times what we spend annually
on education, job training, and social services. It is almost
14 times what we appropriate for veterans' health care and
benefits in a year, and it is 27 times more than we spend on
medical research. It is more than we spend to pay earned Social
Security benefits to 58 million Americans--one in four American
families--for a year. Unoffset tax cuts amounting to $825
billion mean $2,600 in debt for every man, woman, and child in
the United States.
Make no mistake, this is part of the Republicans' bigger
plan to force cuts in spending in response to the increased
deficit from their reckless tax cuts. Republicans already have
cut non-defense appropriations below the level needed to keep
up with inflation every year since 2011, putting us on a path
to the lowest level of domestic investment (as a percent of
GDP) since we began tracking it in 1962. By 2018, real non-
defense discretionary spending is projected to be 18 percent
lower than it was in 2010. Americans feel those cuts every day.
They result in overcrowded classrooms for our children, fewer
food safety inspections, slower progress on medical research to
fight deadly diseases, delays in highway repairs, waiting lists
for child care, early national park closings, reduced
investment in small businesses, and delays in awarding earned
Medicare and Social Security benefits.
We found it hypocritical that, six months ago, Republicans
let emergency unemployment insurance expire for more than 1.3
million Americans, a number that has now grown to 3 million, by
arguing that an adequate offset had yet to be proposed. In
early April, the Senate came to a bipartisan agreement on an
offset after months of painstaking negotiations. Yet House
Republicans still refuse to act.
Sander M. Levin.