To amend the Internal Revenue Code of 1986 to allow individuals a refundable credit for higher education expenses.

Summary: American Opportunity Tax Credit Act of 2009 - Amends the Internal Revenue Code to allow a refundable tax credit for higher education expenses up to $4,000.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Opportunity Tax Credit Act 
of 2009''.

SEC. 2. REFUNDABLE CREDIT FOR HIGHER EDUCATION EXPENSES.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by inserting after section 36 the following new section:

``SEC. 36A. HIGHER EDUCATION EXPENSES.

    ``(a) Allowance of Credit.--In the case of any eligible student for 
whom an election is in effect under this section for any taxable year, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to 100 percent of so much 
of the higher education expenses paid by the taxpayer during the 
taxable year (with respect to attendance of the eligible student at an 
eligible educational institution during any academic period beginning 
in such taxable year) as does not exceed $4,000.
    ``(b) Limitations.--
            ``(1) Higher education expense limitation.--The amount of 
        higher education expenses taken into account under subsection 
        (a) with respect to an individual for an academic period shall 
        not exceed the individual's 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 section) for such period 
        at the eligible educational institution with respect to which 
        such higher education expenses were paid.
            ``(2) Lifetime credit limitation.--The amount of the credit 
        allowed under subsection (a) for any taxable year with respect 
        to any eligible student shall not exceed the excess of--
                    ``(A) $28,000, over
                    ``(B) the aggregate credit allowed under subsection 
                (a) with respect to such eligible student for all prior 
                taxable years.
    ``(c) Definitions.--For purposes of this subsection--
            ``(1) Eligible student.--The term `eligible student' means, 
        with respect to any academic period, any individual who 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 the Taxpayer Relief Act of 1997.
            ``(2) Higher education expense.--The term `higher education 
        expense' means any expense of a type which is 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 section) of--
                    ``(A) the taxpayer,
                    ``(B) the taxpayer's spouse, or
                    ``(C) any dependent of the taxpayer with respect to 
                whom the taxpayer is allowed a deduction under section 
                151,
        at an eligible educational institution with respect to the 
        attendance of such individual at such institution for the 
        academic period for which the credit under this section is 
        being determined.
            ``(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, as in effect on the date 
                of the enactment of the Taxpayer Relief Act of 1997, 
                and
                    ``(B) which is eligible to participate in a program 
                under title IV of the Higher Education Act of 1965.
    ``(d) Special Rules.--
            ``(1) Identification requirement.--No credit shall be 
        allowed under subsection (a) to a taxpayer with respect to an 
        eligible student unless the taxpayer includes the name and 
        taxpayer identification number of such student on the return of 
        tax for the taxable year.
            ``(2) Adjustment for certain scholarships.--The amount of 
        higher education 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 
        (a) and (b)) 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 student'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) Coordination with section 25a.--The amount of higher 
        education 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 
        (a) and (b)) by the amount of such expenses which are taken 
        into account in determining the credit under section 25A.
            ``(4) 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) higher education 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.
            ``(5) Treatment of certain prepayments.--If higher 
        education expense is 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.
            ``(6) Denial of double benefit.--No credit shall be allowed 
        under this section for any expense for which deduction is 
        allowed under any other provision of this chapter.
            ``(7) 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.
            ``(8) 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.
    ``(e) Community Service Requirement.--
            ``(1) In general.--No credit shall be allowed under this 
        section for any taxable year with respect to the higher 
        education expenses of a student unless the student satisfies 
        the community service requirement of paragraph (2) for such 
        year. The community service requirement of paragraph (2) shall 
        be treated as satisfied only if such service is verified under 
        regulations prescribed by the Secretary of Education.
            ``(2) Requirement.--The community service requirement of 
        this paragraph is satisfied for any taxable year only if the 
        student completes at least 100 hours of volunteer service 
        during such year for--
                    ``(A) a governmental unit,
                    ``(B) a hospital, or
                    ``(C) an organization described in section 
                501(c)(3) and exempt from tax under section 501(a).
        For purposes of the preceding sentence, service shall not fail 
        to be treated as volunteer service by reason of receiving a 
        stipend for living expenses, but only if the aggregate stipends 
        for the year does not exceed $600.
            ``(3) Exception for death or disability.--Paragraph (1) 
        shall not apply if the failure to meet the community service 
        requirement of paragraph (2) is by reason of the death or 
        disability of the student.
    ``(f) Credit Paid Directly to Educational Institution.--The 
Secretary of Education shall prescribe regulations under which--
            ``(1) a taxpayer may certify, before making payment of a 
        higher education expense to an eligible educational 
        institution, that the taxpayer reasonably believes that credit 
        would be allowed under this section for such payment were it 
        made,
            ``(2) the amount of credit, were such payment made, shall 
        be paid to such institution and treated as payment of such 
        expense, and
            ``(3) amounts paid under this subsection in excess of the 
        proper amount of credit are recaptured from the taxpayer.
    ``(g) Election Not To Have Section Apply.--A taxpayer may elect not 
to have this section apply with respect to the higher education 
expenses of an individual for any taxable year.
    ``(h) 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 expense which was taken into account in determining the amount 
of such credit.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``36A,'' after ``36,''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 36 the following new item:

``Sec. 36A. Higher education expenses.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2009, for education furnished 
in academic periods beginning after such date.