Children's Education Tax Credit Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Children's Education Tax Credit 
Act''.

SEC. 2. CREDIT FOR 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 redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. EDUCATION EXPENSES.

    ``(a) General Rule.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle for the 
taxable year, the amount of the qualified education expenses paid by 
the taxpayer during the taxable year for the education of the taxpayer, 
the taxpayer's spouse, or any individual with respect to whom the 
taxpayer is allowed a deduction under section 151(c).
    ``(b) Limitation.--
            ``(1) Amount per individual.--The amount allowed as a 
        credit under subsection (a) for any taxable year with respect 
        to the qualified education expenses of any 1 individual shall 
        not exceed $450.
            ``(2) Proration of credit where more than one taxpayer pays 
        expenses.--If the qualified education expenses of an individual 
        are paid by more than one taxpayer during any calendar year, 
        the dollar limitation under paragraph (1) shall be allocated 
        among such taxpayers in proportion to their respective shares 
        of the qualified education expenses of such individual paid 
        during such calendar year by all such taxpayers.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified education expenses.--
                    ``(A) In general.--The term `qualified education 
                expenses' means amounts paid for--
                            ``(i) tuition and fees required for the 
                        enrollment or attendance of a student at an 
                        eligible educational institution, and
                            ``(ii) fees, books, supplies, and equipment 
                        required for courses of instruction at an 
                        eligible educational institution.
                    ``(B) Meals and lodging expenses not included.--
                Such term does not include any amount paid, directly or 
                indirectly, for meals, lodging, or similar personal, 
                living, or family expenses. In the event an amount paid 
                for tuition or fees includes an amount for meals, 
                lodging, or similar expenses which is not separately 
                stated, the portion of such amount which is 
                attributable to meals, lodging, or similar expenses 
                shall be determined under regulations prescribed by the 
                Secretary.
                    ``(C) Special rule for home schooling.--In the case 
                of education furnished in the home (as a substitute for 
                public education) which meets the requirements of State 
                law relating to compulsory school attendance, the term 
                `qualified education expenses' means amounts paid for 
                books, computer software, and other supplies used in 
                furnishing such education.
            ``(2) Eligible educational institution.--The term `eligible 
        educational institution' means--
                    ``(A) an institution of higher education,
                    ``(B) a vocational school,
                    ``(C) a secondary school, or
                    ``(D) an elementary school.
            ``(3) Institution of higher education.--The term 
        `institution of higher education' means the institutions 
        described in section 1201(a) or 481(a) of the Higher Education 
        Act of 1965.
            ``(4) Vocational school.--The term `vocational school' 
        means an area vocational education school as defined in section 
        521(3) of the Carl D. Perkins Vocational Education Act.
            ``(5) Elementary and secondary schools.--The terms 
        `elementary school' and `secondary school' have the respective 
        meanings given such terms by section 14101 of the Elementary 
        and Secondary Education Act of 1965.
    ``(d) Special Rules.--
            ``(1) Adjustment for certain scholarships and veterans' 
        benefits.--The amounts otherwise taken into account under 
        subsection (a) as qualified education expenses of any 
        individual during any period shall be reduced (before the 
        application of subsection (b)) by the sum of the amounts 
        referred to in section 135(d)(1) which are received with 
        respect to such individual for the taxable year.
            ``(2) Eligible courses.--Except as provided in subsection 
        (c)(1)(C), amounts paid for qualified education expenses of any 
        individual shall be taken into account under subsection (a) 
        only to the extent such expenses--
                    ``(A) are attributable to courses of instruction 
                offered by an elementary or secondary school, or
                    ``(B) are attributable to courses of instruction 
                for which credit is allowed toward a baccalaureate or 
                graduate degree by an institution of higher education 
                or toward a certificate of required course work at a 
                vocational school.
            ``(3) Individual must be at least half-time student.--
        Except as provided in subsection (c)(1)(C), no credit shall be 
        allowed under subsection (a) for amounts paid during the 
        taxable year for qualified education expenses with respect to 
        any individual unless that individual, during any 4 calendar 
        months during the calendar year in which the taxable year of 
        the taxpayer begins, is at least a half-time student at an 
        eligible education institution.
            ``(4) Spouse.--No credit shall be allowed under subsection 
        (a) for amounts paid during the taxable year for qualified 
        education expenses for the spouse of the taxpayer unless--
                    ``(A) the taxpayer is entitled to an exemption for 
                his spouse under section 151(b) for the taxable year, 
                or
                    ``(B) the taxpayer files a joint return with his 
                spouse for the taxable year.
    ``(e) Disallowance of Expenses as Deduction.--No deduction shall be 
allowed under section 162 (relating to trade or business expenses) for 
any qualified education expense which (after the application of 
subsection (b)) is taken into account in determining the amount of any 
credit allowed under subsection (a). The preceding sentence shall not 
apply to the qualified education expenses of any taxpayer who, under 
regulations prescribed by the Secretary, elects not to apply the 
provisions of this section with respect to such expenses for the 
taxable year.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the provisions of this section.''
    (b) Technical Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``or 
        from section 35 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the last item and inserting the following new items:

                              ``Sec. 35. Education expenses.
                              ``Sec. 36. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

Summary: Children's Education Tax Credit Act - Amends the Internal Revenue Code to establish an annual tax credit for qualified educational expenses paid by a taxpayer for the taxpayer, a spouse, or a dependent. Provides for: (1) credit proration in cases of shared expenses, (2) inclusion of certain home schooling expenses. And (3) adjustments for certain scholarships and veterans' benefits. Defines eligible educational institution as an institution of higher education, or a vocational, secondary, or elementary school.