To amend the Internal Revenue Code of 1986 to permanently extend the American opportunity tax credit increases made to the Hope Scholarship Credit.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Opportunity Tax Credit 
Extension Act of 2010''.

SEC. 2. INCREASES IN HOPE SCHOLARSHIP CREDIT MADE PERMANENT.

    (a) In General.--Subparagraphs (A) and (B) of section 25A(b)(1) of 
the Internal Revenue Code of 1986 (relating to Hope Scholarship Credit) 
are amended to read as follows:
                    ``(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 the applicable 
                limit.''.
    (b) Credit Allowed for First 4 Years of Post-Secondary Education.--
Subparagraphs (A) and (C) of section 25A(b)(2) of such Code are amended 
by striking ``2'' each place it appears and inserting ``4''.
    (c) Qualified Tuition and Related Expenses To Include Required 
Course Materials.--Subparagraph (A) of section 25A(f)(1) of such Code 
is amended by striking ``and fees'' and inserting ``, fees, and course 
materials''.
    (d) Increase in AGI Limits.--
            (1) In general.--Paragraph (2) of section 25A(d) of such 
        Code is amended to read as follows:
            ``(2) Amount of reduction.--
                    ``(A) Hope scholarship credit.--In the case of the 
                Hope Scholarship Credit, the amount determined under 
                this paragraph is the amount which bears the same ratio 
                to the credit which would be determined under 
                subsection (a)(1) (without regard to this subsection) 
                as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $80,000 ($160,000 in the 
                                case of a joint return), bears to
                            ``(ii) $10,000 ($20,000 in the case of a 
                        joint return).
                    ``(B) Lifetime learning credit.--In the case of the 
                Lifetime Learning Credit, the amount determined under 
                this paragraph is the amount which bears the same ratio 
                to the credit which would be determined under 
                subsection (a)(2) (without regard to this subsection) 
                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) Conforming amendments to inflation adjustments.--
                    (A) Amount of credit.--Subparagraph (A) of section 
                25A(h)(1) of such Code is amended--
                            (i) by striking ``2001'' and inserting 
                        ``2010'',
                            (ii) by striking ``calendar year 2000'' and 
                        inserting ``calendar year 2009'', and
                            (iii) by striking ``$1,000'' and inserting 
                        ``$2,000''.
                    (B) Income limits.--
                            (i) Paragraph (2) of section 25A(h) of such 
                        Code is amended by redesignating subparagraphs 
                        (A) and (B) as subparagraphs (B) and (C), 
                        respectively, and by inserting before 
                        subparagraph (B) (as so redesignated) the 
                        following new subparagraph:
                    ``(A) Hope scholarship credit.--In the case of a 
                taxable year beginning after 2010, the $80,000 and 
                $160,000 amounts in subsection (d)(2)(A) 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 2009' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.''.
                            (ii) Subparagraph (B) of section 25A(h)(2) 
                        of such Code, as redesignated by clause (i), is 
                        amended--
                                    (I) by striking ``In General'' in 
                                the heading and inserting ``Lifetime 
                                Learning Credit'', and
                                    (II) by striking ``subsection 
                                (d)(2)'' and inserting ``subsection 
                                (d)(2)(B)''.
                    (C) Rounding.--Subparagraph (C) of section 
                25A(h)(2) of such Code, as redesignated by subparagraph 
                (B)(i), is amended by inserting ``or (B)'' after 
                ``subparagraph (A)''.
    (e) Credit Allowed Against Minimum Tax, Etc.--
            (1) In general.--Subsection (i) of section 25A of such Code 
        is amended by striking paragraphs (1), (2), (3), (4), and (7) 
        and by redesignating paragraphs (5) and (6) as paragraphs (1) 
        and (2), respectively.
            (2) Paragraph (2) of section 25A(i) of such Code, as 
        redesignated by paragraph (1), is amended--
                    (A) by striking ``paragraph (4)'' and inserting 
                ``subsection (d)'', and
                    (B) by striking ``paragraph (5)'' and inserting 
                ``paragraph (1)''.
            (3) The heading for such subsection (i) is amended to read 
        as follows:
    ``(i) Hope Scholarship Credit Allowed Against Minimum Tax; Portion 
of Credit Made Refundable.--''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

Summary: American Opportunity Tax Credit Extension Act of 2010 - Amends the Internal Revenue Code, with respect to the Hope Scholarship tax credit, to: (1) make permanent increases in the amount of such tax credit. (2) allow such credit for the first four years of post-secondary education. (3) include course materials in the definition of qualified tuition and related expenses for purposes of such credit. (4) increase adjusted gross income levels for purposes of determining eligibility for such credit and the lifetime learning tax credit. And (5) allow such credit as an offset against the alternative minimum tax (AMT).