To amend the Internal Revenue Code of 1986 to expand incentives for education.

Summary: Higher Education Affordability and Equity Act of 2010 - Amends the Internal Revenue Code to: (1) repeal the dollar limitation on the tax deduction for interest on education loans and expand eligibility for such deduction by increasing the threshold for the phaseout of such deduction; (2) increase to $5,000 the maximum allowable contribution to a Coverdell education savings account; and (3) include qualified higher education expenses (i.e., books, supplies, room, board, and special needs services) as amounts excludable from gross income as a qualified scholarship.

Exempts from the general terminating date of the Economic Growth and Tax Relief Reconciliation Act (i.e., December 31, 2010) provisions of that Act modifying education individual retirement accounts and expanding the tax deduction for student loan interest.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Higher Education Affordability and 
Equity Act of 2010''.

SEC. 2. EXPANSION OF DEDUCTION FOR INTEREST ON EDUCATION LOANS.

    (a) Repeal of Dollar Limitation; Increase in Phaseout Beginning 
Point.--Subsection (b) of section 221 of the Internal Revenue Code of 
1986 (relating to maximum deduction) is amended to read as follows:
    ``(b) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount which would (but for this 
        subsection) be allowable as a deduction under this section 
        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) $100,000 ($200,000 in the case of a 
                        joint return), bears to
                    ``(B) $15,000 ($30,000 in the case of a joint 
                return).
            ``(3) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income determined--
                    ``(A) without regard to this section and sections 
                199, 222, 911, 931, and 933, and
                    ``(B) after application of sections 86, 135, 137, 
                219, and 469.''.
    (b) Conforming Amendment.--Section 221(f)(1) of such Code is 
amended to read as follows:
            ``(1) In general.--In the case of a taxable year beginning 
        after 2010, the $100,000 and $200,000 amounts in subsection (b) 
        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 2009' for `calendar year 1992' in 
                subparagraph (B) thereof.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 3. EDUCATION SAVINGS ACCOUNTS.

    (a) Increase in Allowable Contributions.--
            (1) In general.--Clause (iii) of section 530(b)(1)(A) of 
        the Internal Revenue Code of 1986 is amended by striking 
        ``$2,000'' and inserting ``$5,000''.
            (2) Conforming amendment.--Section 4973(e)(1)(A) of such 
        Code is amended by striking ``$2,000'' and inserting 
        ``$5,000''.
    (b) Reports.--Subsection (h) of section 530 of such Code is amended 
by striking the period at the end of the last sentence and inserting 
``, except that reports shall be so filed and furnished for any 
calendar year not later than June 30 of the following year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 4. ALLOWANCE OF ROOM, BOARD, AND SPECIAL NEEDS SERVICES IN THE 
              CASE OF SCHOLARSHIPS AND TUITION REDUCTION PROGRAMS WITH 
              RESPECT TO HIGHER EDUCATION.

    (a) In General.--Paragraph (1) of section 117(b) of the Internal 
Revenue Code of 1986 (defining qualified scholarship) is amended by 
inserting before the period at the end the following: ``or, in the case 
of enrollment or attendance at an eligible educational institution, for 
qualified higher education expenses.''.
    (b) Definitions.--Subsection (b) of section 117 of such Code is 
amended by adding at the end the following new paragraph:
            ``(3) Qualified higher education expenses; eligible 
        educational institution.--The terms `qualified higher education 
        expenses' and `eligible educational institution' have the 
        meanings given such terms in section 529(e).''.
    (c) Tuition Reduction Programs.--Paragraph (5) of section 117(d) of 
such Code (relating to special rules for teaching and research 
assistants) is amended by striking ``shall be applied as if it did not 
contain the phrase `(below the graduate level)'.'' and inserting 
``shall be applied--
                    ``(A) as if it did not contain the phrase `(below 
                the graduate level)', and
                    ``(B) by substituting `qualified higher education 
                expenses' for `tuition' the second place it appears.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2009 (in taxable years ending 
after such date), for education furnished in academic periods beginning 
after such date.

SEC. 5. REPEAL OF EGTRRA SUNSET APPLICABILITY TO CERTAIN EDUCATION 
              PROVISIONS.

    Title IX of the Economic Growth and Tax Relief Reconciliation Act 
of 2001 (relating to sunset of provisions of such Act) shall not apply 
to sections 401 and 412 of such Act.