A bill to amend the Internal Revenue Code of 1986 to provide assistance to students and families coping with the costs of higher education, and for other purposes.

Summary: College Tuition Assistance Act of 2001 - Amends the Internal Revenue Code to allow an income-based deduction ($5,000 maximum for 2002; $10,000 maximum for 2003 and thereafter) for qualifying higher education tuition and related expenses on behalf of an individual who can be claimed as a personal exemption by a taxpayer.Increases the: (1) lifetime learning credit to 28 percent of qualified education expenses; and (2) related income eligibility levels.Eliminates specified needs-based educational assistance under the Higher Education Act of 1965 from financial eligibility computations for such credit and the hope scholarship credit.Amends education loan interest provisions to: (1) eliminate the 60-month deductibility limit; (2) increase joint filer income eligibility levels; and (3) apply deductibility limits on a per student basis.Amends the Higher Education Act of 1965 to increase Federal Pell grant amounts for academic years 2001-2002 and 2002-2003.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``College Tuition Assistance Act of 
2001''.

SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

    (a) Deduction Allowed.--Part VII of subchapter B of chapter 1 of 
the Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 222 as 
section 223 and by inserting after section 221 the following:

``SEC. 222. HIGHER EDUCATION EXPENSES.

    ``(a) Allowance of Deduction.--
            ``(1) In general.--In the case of an individual, there 
        shall be allowed as a deduction an amount equal to the 
        applicable dollar amount of the qualified tuition and related 
        expenses paid by the taxpayer during the taxable year.
            ``(2) Applicable dollar amount.--The applicable dollar 
        amount for any taxable year shall be determined as follows:

                                                             Applicable
``Taxable year:                                          dollar amount:
    2002..........................................              $5,000 
    2003 and thereafter...........................             $10,000.
    ``(b) 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) shall be 
        reduced (but not below zero) by the amount determined under 
        paragraph (2).
            ``(2) Amount of reduction.--The amount determined under 
        this paragraph equals 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) $50,000 ($100,000 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.--For purposes of this 
        subsection, the term `modified adjusted gross income' means the 
        adjusted gross income of the taxpayer for the taxable year 
        determined without regard to this section and sections 911, 
        931, and 933.
            ``(4) Adjustments for inflation.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2001, the $50,000 and $100,000 amounts 
                in paragraph (2)(A)(ii) 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 $1,000, such 
                amount shall be rounded to the next lowest multiple of 
                $1,000.
    ``(c) Qualified Tuition and Related Expenses.--For purposes of this 
section, the term `qualified tuition and related expenses' has the 
meaning given such term by section 25A(f)(1) (determined with regard to 
section 25A(c)(2)(B)).
    ``(d) Special Rules.--
            ``(1) 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 such individual on the return of tax for the taxable 
        year.
            ``(2) No double benefit.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) for any expense for which a 
                deduction is allowable to the taxpayer under any other 
                provision of this chapter unless the taxpayer 
                irrevocably waives his right to the deduction of such 
                expense under such other provision.
                    ``(B) Denial of deduction to the extent credit is 
                elected.--No deduction shall be allowed under 
                subsection (a) for a taxable year with respect to the 
                qualified tuition and related expenses of an individual 
                to the extent the taxpayer elects to have section 25A 
                apply with respect to such expenses for such year.
                    ``(C) 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) Coordination with exclusions.--A deduction 
                shall be allowed under subsection (a) for qualified 
                tuition and related expenses only to the extent the 
                amount of such expenses exceeds the amount excludable 
                under section 135 or 530(d)(2) 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) Adjustment for certain scholarships and veterans 
        benefits.--The amount of qualified tuition and related expenses 
        otherwise taken into account under subsection (a) with respect 
        to the education of an individual shall be reduced (before the 
        application of subsection (b)) by the sum of the amounts 
        received with respect to such individual for the taxable year 
        as--
                    ``(A) a qualified scholarship which under section 
                117 is not includable in gross income,
                    ``(B) an educational assistance allowance under 
                chapter 30, 31, 32, 34, or 35 of title 38, United 
                States Code, or
                    ``(C) a payment (other than a gift, bequest, 
                devise, or inheritance within the meaning of section 
                102(a) or needs-based aid received under part A of 
                title IV of the Higher Education Act of 1965) for 
                educational expenses, or attributable to enrollment at 
                an eligible educational institution, which is exempt 
                from income taxation by any law of the United States.
            ``(5) 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.
            ``(6) 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.
            ``(7) 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.''.
    (b) Deduction Allowed in Computing Adjusted Gross Income.--Section 
62(a) of the Internal Revenue Code of 1986 is amended by inserting 
after paragraph (17) the following:
            ``(18) Higher education expenses.--The deduction allowed by 
        section 222.''.
    (c) Conforming Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by striking the item relating to section 222 and inserting the 
following:

                              ``Sec. 222. Higher education expenses.
                              ``Sec. 223. Cross reference.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2001 (in taxable years ending 
after such date), for education furnished in academic periods beginning 
after such date.

SEC. 3. EXPANSION OF LIFETIME LEARNING CREDIT.

    (a) In General.--Section 25A(c)(1) of the Internal Revenue Code of 
1986 (relating to lifetime learning credit) is amended by striking ``20 
percent'' and inserting ``28 percent''.
    (b) Increase in AGI Limits.--
            (1) In general.--Subsection (d) of section 25A of the 
        Internal Revenue Code of 1986 is amended to read as follows:
    ``(d) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) Hope credit.--
                    ``(A) In general.--The amount which would (but for 
                this subsection) be taken into account under subsection 
                (a)(1) shall be reduced (but not below zero) by the 
                amount determined under subparagraph (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph equals the amount which bears 
                the same ratio to the amount which would be so taken 
                into account as--
                            ``(i) 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
                            ``(ii) $10,000 ($20,000 in the case of a 
                        joint return).
            ``(2) Lifetime learning credit.--
                    ``(A) In general.--The amount which would (but for 
                this subsection) be taken into account under subsection 
                (a)(2) shall be reduced (but not below zero) by the 
                amount determined under subparagraph (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph equals the amount which bears 
                the same ratio to the amount which would be so taken 
                into account as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $50,000 ($100,000 in the 
                                case of a joint return), bears to
                            ``(ii) $10,000 ($20,000 in the case of a 
                        joint return).
            ``(3) 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.''.
            (2) Conforming amendment.--Section 25A(h)(2)(A) of such 
        Code is amended by striking ``subsection (d)(2)'' and inserting 
        ``subsection (d)(1)(B) and the $50,000 and $100,000 amounts in 
        subsection (d)(2)(B)''.
    (c) Use of Certain Needs-Based Aid for Qualified Expenses.--Section 
25A(g)(2)(C) of the Internal Revenue Code of 1986 (relating to 
adjustment for certain scholarships , etc.) is amended by inserting 
``or needs-based aid received under part A of title IV of the Higher 
Education Act of 1965'' after ``section 102(a)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2001 (in taxable years ending 
after such date), for education furnished in academic periods beginning 
after such date.

SEC. 4. EXPANSION OF STUDENT LOAN INTEREST DEDUCTION.

    (a) Per Student Basis.--
            (1) In general.--Section 221(b)(1) of the Internal Revenue 
        Code of 1986 (relating to maximum deduction) is amended by 
        inserting ``with respect to qualified education loans of each 
        eligible student'' after ``paragraph (2),''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to any loan interest paid after 
        December 31, 2001, in taxable years ending after such date.
    (b) Elimination of 60-Month Limit.--
            (1) In general.--Section 221 of the Internal Revenue Code 
        of 1986 (relating to interest on education loans) is amended by 
        striking subsection (d) and by redesignating subsections (e), 
        (f), and (g) as subsections (d), (e), and (f), respectively.
            (2) Conforming amendment.--Section 6050S(e) of such Code is 
        amended by striking ``section 221(e)(1)'' and inserting 
        ``section 221(d)(1)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to any loan interest paid after 
        December 31, 2001, in taxable years ending after such date.
    (c) Increase in Income Limitation.--
            (1) In general.--Section 221(b)(2)(B) of the Internal 
        Revenue Code of 1986 (relating to amount of reduction) is 
        amended by striking clauses (i) and (ii) and inserting the 
        following:
                            ``(i) 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
                            ``(ii) $15,000 ($20,000 in the case of a 
                        joint return).''.
            (2) Conforming amendment.--Section 221(g)(1) of such Code 
        is amended by striking ``$60,000'' and inserting ``$80,000''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after December 31, 2001.

SEC. 5. PELL GRANTS.

    Section 401(b)(2)(A) of the Higher Education Act of 1965 (20 U.S.C. 
1070a(b)(2)(A)) is amended--
            (1) in clause (iii), by striking ``$5,100'' and inserting 
        ``$5,800''; and
            (2) in clause (iv), by striking ``$5,400'' and inserting 
        ``$5,800''.