39–006 

113TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 113–526 

STUDENT AND FAMILY TAX SIMPLIFICATION ACT 

JULY 17, 2014.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 3393] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 3393) to amend the Internal Revenue Code of 1986 to 

consolidate certain tax benefits for educational expenses, and for 

other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended 

do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 5 

A. Purpose and Summary ..................................................................... 5 

B. Background and Need for Legislation ............................................. 5 

C. Legislative History ............................................................................ 6 

II. EXPLANATION OF THE BILL ................................................................... 6 

A. Modification of Tax Benefits For Tuition and Tax Treatment 

of Certain Scholarships (secs. 25A, 117, 222 and 6050S of 

the Code) ......................................................................................... 6 

III. VOTES OF THE COMMITTEE .................................................................... 12 

IV. BUDGET EFFECTS OF THE BILL ............................................................ 12 

A. Committee Estimate of Budgetary Effects ...................................... 12 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority .................................................................. 15 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 15 

D. Macroeconomic Impact Analysis ...................................................... 18 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 18 


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A. Committee Oversight Findings and Recommendations ................. 18 

B. Statement of General Performance Goals and Objectives ............. 18 

C. Information Relating to Unfunded Mandates ................................ 18 

D. Applicability of House Rule XXI 5(b) .............................................. 18 

E. Tax Complexity Analysis .................................................................. 18 

F. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 19 

G. Duplication of Federal Programs ..................................................... 19 

H. Disclosure of Directed Rule Makings .............................................. 19 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 19 

VII. DISSENTING VIEWS ................................................................................... 38 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Student and Family Tax Simplification Act’’. 

SEC. 2. CONSOLIDATION OF CERTAIN TAX BENEFITS FOR EDUCATIONAL EXPENSES. 

(a) AMERICAN OPPORTUNITY TAX CREDIT.—Section 25A of the Internal Revenue 

Code of 1986 is amended to read as follows: 

‘‘SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 

‘‘(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit 

against the tax imposed by this chapter for the taxable year, with respect to each 

eligible student, an amount equal to the sum of— 

‘‘(1) 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 

‘‘(2) 25 percent of so much of such expenses so paid as exceeds the dollar 

amount in effect under paragraph (1) but does not exceed twice such dollar 

amount. 

‘‘(b) PORTION OF CREDIT REFUNDABLE.—So much of the credit allowable under 

subsection (a) with respect to each eligible student (determined without regard to 

this subsection and section 26(a) and after application of all other provisions of this 

section) as does not exceed $1,500 shall be treated as a credit allowable under subpart C (and not under this part). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section 1(g) applies 

for such taxable year. 

‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME.— 

‘‘(1) IN GENERAL.—The amount allowable as a credit under subsection (a) for 

any taxable year shall be reduced (but not below zero) by an amount which 

bears the same ratio to the amount so allowable (determined without regard to 

this subsection and subsection (b) but after application of all other provisions 

of this section) as— 

‘‘(A) the excess of— 

‘‘(i) the taxpayer’s modified adjusted gross income for such taxable 

year, over 

‘‘(ii) $80,000 (twice such amount in the case of a joint return), bears 

to 

‘‘(B) $10,000 (twice such amount in the case of a joint return). 

‘‘(2) 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. 

‘‘(d) OTHER LIMITATIONS.—No credit shall be allowed under this section with respect to any eligible student for any taxable year if— 

‘‘(1) such student was taken into account in determining the credit allowed 

under this section (by the taxpayer or any other individual) for any 4 prior taxable years, or 

‘‘(2) such student has completed (before the beginning of such taxable year) 

the first 4 years of postsecondary education at an eligible educational institution. 

‘‘(e) DEFINITIONS.—For purposes of this section— 

‘‘(1) ELIGIBLE STUDENT.— The term ‘eligible student’ means, with respect to 

any academic period, a student who— 

‘‘(A) 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 August 5, 1997, and 


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‘‘(B) is carrying at least 1⁄2 the normal full-time work load for the course 

of study the student is pursuing. 

‘‘(2) QUALIFIED TUITION AND RELATED EXPENSES.— ‘‘(A) IN GENERAL.—The term ‘qualified tuition and related expenses’ 

means tuition, fees, and course materials, required for enrollment or attendance of— 

‘‘(i) the taxpayer, 

‘‘(ii) the taxpayer’s spouse, or 

‘‘(iii) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151, 

at an eligible educational institution for courses of instruction of such individual at such institution. 

‘‘(B) EXCEPTION FOR EDUCATION INVOLVING SPORTS, ETC.—Such term does 

not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part 

of the individual’s degree program. 

‘‘(C) EXCEPTION FOR NONACADEMIC FEES.—Such term does not include 

student activity fees, athletic fees, insurance expenses, or other expenses 

unrelated to an individual’s academic course of instruction. 

‘‘(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 

(20 U.S.C. 1088), as in effect on August 5, 1997, and 

‘‘(B) which is eligible to participate in a program under title IV of such 

Act. 

‘‘(f) SPECIAL RULES.— 

‘‘(1) IDENTIFICATION REQUIREMENT.—No credit 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, and the employer identification number of any institution to which such expenses were paid, on the return of tax 

for the taxable year. 

‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, ETC.— 

‘‘(A) IN GENERAL.—The amount of qualified tuition and related expenses 

otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of 

subsection (c)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as— 

‘‘(i) a qualified scholarship which is excludable from gross income 

under section 117, 

‘‘(ii) 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 

‘‘(iii) a payment (other than a gift, bequest, devise, or inheritance 

within the meaning of section 102(a)) for such individual’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. 

‘‘(B) COORDINATION WITH PELL GRANTS NOT USED FOR QUALIFIED TUITION

AND RELATED EXPENSES.—For purposes of subparagraph (A), the amount of 

any Federal Pell Grant under section 401 of the Higher Education Act of 

1965 (20 U.S.C. 1070a) shall be reduced (but not below zero) by the amount 

of expenses (other than qualified tuition and related expenses) which are 

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 paragraph) of such individual at an eligible educational institution for the academic period for which the credit under this 

section is being determined. 

‘‘(3) 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) qualified tuition and related 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. 

‘‘(4) TREATMENT OF CERTAIN PREPAYMENTS.—If qualified tuition and related 

expenses are paid by the taxpayer during a taxable year for an academic period 


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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. 

‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit shall be allowed under this section for any amount for which a deduction is allowed under any other provision 

of this chapter. 

‘‘(6) 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. 

‘‘(7) 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. 

‘‘(g) INFLATION ADJUSTMENT.— ‘‘(1) IN GENERAL.—In the case of a taxable year beginning after 2018, the $2,000 amount in subsection (a)(1), the $1,500 amount in subsection (b), and the 

$80,000 amount in subsection (c)(1)(A)(ii) 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 2017’ for ‘calendar year 1992’ in subparagraph (B) thereof. 

‘‘(2) ROUNDING.—If any amount as adjusted under paragraph (1) is not a multiple of $100 ($1,000 in the case of the amount in subsection (c)(1)(A)(ii)), such 

amount shall be rounded to the next lowest multiple of $100 ($1,000 in the case 

of the amount in subsection (c)(1)(A)(ii)). 

‘‘(h) REGULATIONS.—The Secretary may prescribe such regulations or other guidance 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 amount which was 

taken into account in determining the amount of such credit.’’. 

(b) REQUIREMENT TO REPORT TUITION PAID RATHER THAN TUITION BILLED.—Section 6050S(b)(2)(B)(i) is amended by striking ‘‘or the aggregate amount billed’’. 

(c) REPEAL OF DEDUCTION FOR QUALIFIED TUITION AND RELATED EXPENSES.—Part 

VII of subchapter B of chapter 1 of such Code is amended by striking section 222 

(and by striking the item relating to such section in the table of sections for such 

part). 

(d) CONFORMING AMENDMENTS.— 

(1) Section 62(a) of such Code is amended by striking paragraph (18). 

(2) Section 72(t)(7)(B) of such Code is amended by striking ‘‘section 25A(g)(2)’’ 

and inserting ‘‘section 25A(f)(2)’’. 

(3) Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 199(d)(2)(A), 219(g)(3)(A)(ii), 

and 221(b)(2)(C)(i) of such Code are each amended by striking ‘‘222,’’. 

(4) Section 469(i)(3)(F)(iii) of such Code is amended by striking ‘‘221, and 222’’ 

and inserting ‘‘and 221’’. 

(5) Section 529(c)(3)(B)(v)(I) of such Code is amended by striking ‘‘section 

25A(g)(2)’’ and inserting ‘‘section 25A(f)(2)’’. 

(6) Section 529(e)(3)(B)(i) of such Code is amended by striking ‘‘section 

25A(b)(3)’’ and inserting ‘‘section 25A(d)’’. 

(7) Section 530(d)(2)(C) of such Code is amended— 

(A) by striking ‘‘section 25A(g)(2)’’ in clause (i)(I) and inserting ‘‘section 

25A(f)(2)’’, and 

(B) by striking ‘‘HOPE AND LIFETIME LEARNING CREDITS’’ in the heading 

and inserting ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 

(8) Section 530(d)(4)(B)(iii) of such Code is amended by striking ‘‘section 

25A(g)(2)’’ and inserting ‘‘section 25A(d)(4)(B)’’. 

(9) Section 6050S(e) of such Code is amended by striking ‘‘subsection (g)(2)’’ 

and inserting ‘‘subsection (f)(2)’’. 

(10) Section 6211(b)(4)(A) of such Code is amended by striking ‘‘subsection 

(i)(6)’’ and inserting ‘‘subsection (b)’’. 

(11) Section 6213(g)(2)(J) of such Code is amended by striking ‘‘TIN required 

under section 25A(g)(1)’’ and inserting ‘‘TIN, and employer identification number, required under section 25A(f)(1)’’. 

(12) Section 1004(c) of division B of the American Recovery and Reinvestment 

Tax Act of 2009 is amended— 

(A) in paragraph (1)— 

(i) by striking ‘‘section 25A(i)(6)’’ each place it appears and inserting 

‘‘section 25A(b)’’, 


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(ii) by striking ‘‘with respect to taxable years beginning after 2008 

and before 2018’’ in subparagraph (A) and inserting ‘‘with respect to 

each taxable year’’, and 

(iii) by striking ‘‘for taxable years beginning after 2008 and before 

2018’’ in subparagraph (B) and inserting ‘‘for each taxable year’’, 

(B) in paragraph (2), by striking ‘‘Section 25A(i)(6)’’ and inserting ‘‘Section 

25A(b)’’, and 

(C) in paragraph (3)(C), by striking ‘‘subsection (i)(6)’’ and inserting ‘‘subsection (b)’’. 

(13) The table of sections for subpart A of part IV of subchapter A of chapter 

1 of the Internal Revenue Code of 1986 is amended by striking the item relating 

to section 25A and inserting the following new item: 

‘‘Sec. 25A. American opportunity tax credit.’’. 

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014. 

SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM GROSS INCOME. 

(a) IN GENERAL.—Paragraph (1) of section 117(b) of the Internal Revenue Code 

of 1986 is amended— 

(1) by striking the period at the end and inserting ‘‘, or’’, 

(2) by striking ‘‘received by an individual as a scholarship’’ and inserting the 

following: ‘‘received by an individual— 

‘‘(A) as a scholarship’’, and 

(3) by adding at the end the following new subparagraph: 

‘‘(B) as a Federal Pell Grant under section 401 of the Higher Education 

Act of 1965 (20 U.S.C. 1070a).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

Similar to a provision contained in the discussion draft of the 

‘‘Tax Reform Act of 2014’’ released on February 26, 2014, the bill, 

H.R. 3393, reported by the Committee on Ways and Means, provides a permanent, partially refundable tax credit of up to $2,500 

per student per year for qualified higher education expenses, replacing four overlapping education tax benefits, while making other 

improvements to help those students most in need and to promote 

greater compliance. One of the education tax benefits that would 

be consolidated under the legislation expired for tax years beginning after December 31, 2013, while another is scheduled to expire 

for tax years beginning after December 31, 2017. 

B. BACKGROUND AND NEED FOR LEGISLATION

While the Committee continues actively to pursue comprehensive 

tax reform as a critical means of promoting economic growth, job 

creation, and tax simplification, the Committee also believes that 

it is important to act immediately to simplify and consolidate the 

current, complicated array of education-related tax benefits, while 

providing students and their families permanent tax relief to help 

them better afford the rising costs of higher education. By making 

permanent and increasing the larger credit amount available under 

the American Opportunity Tax Credit, H.R. 3393 would preserve 

and expand an important benefit for taxpayers pursuing higher 

education. This bipartisan proposal—developed by Reps. Diane 

Black (R–TN) and Danny Davis (D–IL) as a result of their work on 

the Committee’s 2013 Tax Reform Working Group on Education 

and Family Benefits—would streamline and simplify four complex 

and overlapping education-related tax benefits available under 


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1Sec. 25A(a)(1). Unless otherwise stated, all section references are to the Internal Revenue 

Code of 1986, as amended (the ‘‘Code’’). 

present law. Additionally, by improving the tax treatment of Pell 

Grants and the interaction of those grants with other benefits, H.R. 

3393 would especially help those most in need cope with the increasing costs of higher education. Furthermore, by improving the 

reporting requirements for higher education institutions, H.R. 3393 

would help ensure that education-related tax benefits are administered correctly. According to testimony received by the Committee, 

streamlining and consolidating the definitions, eligibility, and income phaseouts for the current patchwork of education benefits on 

a permanent basis would provide critical certainty and stability to 

students and their families. 

C. LEGISLATIVE HISTORY

Background 

H.R. 3393 was introduced on October 30, 2013, and was referred 

to the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up H.R. 3393, the 

‘‘Student and Family Tax Simplification Act,’’ on June 25, 2014, 

and ordered the bill, as amended, favorably reported (with a 

quorum being present). 

Committee hearings 

The need for a workable, permanent higher education tax credit 

was discussed at no fewer than three hearings during the 112th 

and 113th Congresses: • Full Committee hearing on How the Tax Code’s Burdens on Individuals and Families Demonstrate the Need for Comprehensive 

Tax Reform (April 13, 2011). 

• Oversight Subcommittee hearing on Improper Payments in the 

Administration of Refundable Tax Credits (May 25, 2011). • Full Committee hearing on the President’s Fiscal Year 2015 

Budget Proposal with the U.S. Department of the Treasury Secretary Jacob J. Lew (Mar. 6, 2014). 

II. EXPLANATION OF THE BILL 

A. MODIFICATION OF TAX BENEFITS FOR TUITION AND TAX TREATMENT OF CERTAIN SCHOLARSHIPS (SECS. 25A, 117, 222 AND 6050S 

OF THE CODE) 

PRESENT LAW

Tax credits for qualified tuition and related expenses 

Hope credit and American Opportunity credit 

For taxable years beginning before 2009 and after 2017, an individual may claim a tax credit, the Hope credit, for qualified tuition 

and related expenses paid for the first two years of the student’s 

post-secondary education in a degree or certificate program.1 Although temporarily superseded by the American Opportunity tax 

credit (described below), the Hope credit in 2014, if it were in efVerDate Mar 15 2010 07:09 Jul 18, 2014 Jkt 039006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR526.XXX HR526

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2Sec. 25A(b)(1). The $1,300 amount, determined by the staff of the Joint Committee on Tax- ation, is the statutory amount of $1,000, indexed for inflation from 2001. 3Sec. 25A(h). 

4 Based on inflation adjustments determined by the staff of the Joint Committee on Taxation. 

5Sec. 25A(d)(3). 

6Sec. 25A(d)(2)(B). 

7Sec. 25A(b)(2)(D). 

8Sec. 25A(g)(1). 

9Sec. 25A(i). 

10Sec. 25A(i)(1). 

fect, would be 100 percent on the first $1,300 of qualified tuition 

and related expenses, and 50 percent on the next $1,300 of qualified tuition and related expenses, for up to $1,950 per eligible student per year.2 These dollar amounts are indexed for inflation, with 

the amount rounded down to the next lowest multiple of $100.3

Thus, for example, the Hope credit for a taxpayer who incurs 

$1,300 of qualified tuition and related expenses for an eligible student (subject to the modified adjusted gross income (‘‘MAGI’’) 

phaseout described below) would be $1,300. If a taxpayer incurs 

$2,600 of qualified tuition and related expenses for an eligible student, then the Hope credit would be $1,950. 

The Hope credit that a taxpayer may otherwise claim is phased 

out ratably for taxpayers with MAGI between $55,000 and $65,000 

($110,000 and $130,000 for married taxpayers filing a joint return) 

for 2014.4 MAGI includes certain otherwise excludable income 

earned by U.S. citizens or residents living abroad or in certain U.S. 

territories.5 The beginning points of the MAGI phaseout ranges are 

indexed for inflation, with the amount rounded down to the next 

lowest multiple of $1,000. The size of the phaseout ranges for single and married taxpayers are always $10,000 and $20,000 respectively.6

A taxpayer may not claim the Hope credit with respect to qualified tuition and related expenses for the enrollment or attendance 

of a student, if the student has been convicted of a Federal or State 

felony offense consisting of the possession or distribution of a controlled substance before the end of the taxable year.7 Additionally, 

a taxpayer must include the name and taxpayer identification 

number of the student on whose behalf the qualified tuition and related expenses were paid in order to be eligible for the credit.8

The credit is allowable against both the regular tax and the alternative minimum tax (‘‘AMT’’). 

For taxable years beginning after December 31, 2008, and before 

January 1, 2018, an individual may claim the American Opportunity tax credit (‘‘AOTC’’), which is a modified version of the Hope 

credit.9 The maximum allowable AOTC is $2,500 per eligible student per year for qualified tuition and related expenses paid for 

each of the first four years of the student’s post-secondary education in a degree or certificate program. The AOTC rate is 100 

percent on the first $2,000 of qualified tuition and related expenses, and 25 percent on the next $2,000 of qualified tuition and 

related expenses.10 For purposes of the AOTC, the definition of 

qualified tuition and related expenses is expanded to include course 

materials. Forty percent of a taxpayer’s otherwise allowable AOTC 

is refundable. The AOTC that a taxpayer may otherwise claim is 

phased out ratably for taxpayers with MAGI between $80,000 and 

$90,000 ($160,000 and $180,000 for married taxpayers filing a joint 


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11Sec. 25A(i)(5). 12Sec. 25A(c). 13Sec. 25A(a)(2). 14Sec. 222(a). 15Sec. 222(b)(2)(B). 

return).11 Neither the credit rate nor the phaseout thresholds are 

indexed for inflation. 

Lifetime Learning credit 

An individual taxpayer may claim a nonrefundable tax credit, 

the Lifetime Learning credit, equal to 20 percent of qualified tuition and related expenses incurred during the taxable year on behalf of the taxpayer, the taxpayer’s spouse, or any dependents.12

Up to $10,000 of qualified tuition and related expenses per taxpayer return are eligible for the Lifetime Learning credit (i.e., the 

maximum credit per taxpayer return is $2,000). In contrast with 

the Hope credit, the maximum credit amount is not indexed for inflation. 

In contrast to the Hope and American Opportunity tax credits, 

a taxpayer may claim the Lifetime Learning credit for an unlimited 

number of taxable years.13 Also in contrast to the Hope and American Opportunity tax credits, the maximum amount of the Lifetime 

Learning credit that may be claimed on a taxpayer’s return does 

not vary based on the number of students in the taxpayer’s family—that is, the Hope credit is computed on a per student basis 

while the Lifetime Learning credit is computed on a family-wide 

basis. The Lifetime Learning credit amount that a taxpayer may 

otherwise claim is phased out ratably for taxpayers with MAGI between $55,000 and $65,000 ($110,000 and $130,000 for married 

taxpayers filing a joint return) in 2014. These phaseout ranges are 

the same as those for the Hope credit as it applies for tax years 

beginning before 2009 and after 2017, and are similarly indexed for 

inflation. 

Deduction for qualified tuition and related expenses 

For taxable years ending prior to January 1, 2014, an individual 

who has not elected to take the above-described credits is allowed 

an above-the-line deduction for qualified tuition and related expenses for higher education paid by the individual during the taxable year.14 Qualified tuition includes tuition and fees required for 

the enrollment or attendance by the taxpayer, the taxpayer’s 

spouse, or any dependent of the taxpayer with respect to whom the 

taxpayer may claim a personal exemption, at an eligible institution 

of higher education for courses of instruction of such individual at 

such institution. The expenses must be in connection with enrollment at an institution of higher education during the taxable year, 

or with an academic term beginning during the taxable year or 

during the first three months of the next taxable year. The deduction is not available for tuition and related expenses paid for elementary or secondary education. 

The maximum deduction is $4,000 for an individual whose AGI 

for the taxable year does not exceed $65,000 ($130,000 in the case 

of a joint return), or $2,000 for other individuals whose AGI does 

not exceed $80,000 ($160,000 in the case of a joint return).15 No deduction is allowed for an individual whose AGI exceeds the relVerDate Mar 15 2010 07:09 Jul 18, 2014 Jkt 039006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR526.XXX HR526

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16See secs. 222(c) and (d). 17Sec. 222(d)(2). 18Secs. 117(a) and 3121(a)(20). 19Sec. 117(c). 20Sec. 117(b)(1). 21Sec. 117(b)(2). 22 20 U.S.C. sec. 1070(a). 23Sec. 117(b)(2)(A). 

evant AGI limitations, for a married individual who does not file 

a joint return, or for an individual with respect to whom a personal 

exemption deduction may be claimed by another taxpayer for the 

taxable year.16 The deduction is not available for taxable years beginning after December 31, 2013. 

Additionally, a taxpayer must include the name and taxpayer 

identification number of the student on whose behalf the qualified 

tuition and related expenses were paid in order to be eligible to 

claim the deduction.17

Tax treatment of qualified scholarships 

Present law provides an exclusion from gross income and wages 

for amounts received as a qualified scholarship by an individual 

who is a candidate for a degree at a qualifying educational organization.18 Generally, the exclusion does not apply to amounts received by a student that represent payment for teaching, research, 

or other services by the student as a condition for receiving the 

scholarship.19

In general, a qualified scholarship is any amount received by 

such an individual as a scholarship or fellowship grant if the 

amount is used for qualified tuition and related expenses.20 Qualified tuition and related expenses include tuition and fees required 

for enrollment or attendance, or for fees, books, supplies, and 

equipment required for courses of instruction, at the qualifying 

educational organization.21 This definition does not include regular 

living expenses, such as room and board. Thus, for example, the 

portion of a Federal Pell Grant under section 401 of the Higher 

Education Act of 1965 22 (‘‘Pell Grant’’) that is not attributed to 

qualified tuition and related expenses is not a qualified scholarship 

and is included in an individual’s gross income. A qualifying educational organization is an educational organization which normally maintains a regular faculty and curriculum and normally 

has a regularly enrolled body of pupils or students in attendance 

at the place where its educational activities are regularly carried 

on.23

Coordination of tax benefits for qualified tuition and scholarships 

The amount of qualified tuition and related expenses paid, for 

purposes of computing the value of the Hope, American Opportunity, or Lifetime Learning credits, as well as the deduction for 

qualified tuition and related expenses, generally includes only outof-pocket expenses. Qualified tuition and related expenses do not 

include expenses covered by employer-provided educational assistance and scholarships that are not required to be included in the 

gross income of either the student or the taxpayer claiming the 

credit. Thus, total qualified tuition and related expenses are reduced by any scholarship or fellowship grants excludable from 

gross income under section 117 and any other tax-free educational 


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24Sec. 6050S(b)(2)(B)(i). 

benefits received by the student (or the taxpayer claiming the credit) during the taxable year. 

Reporting requirements for eligible institutions 

Section 6050S imposes reporting requirements, related to higher 

education tax benefits, on eligible educational institutions if the institution receives payments for qualified tuition and related expenses with respect to any individual for any calendar year. The 

information an institution subject to the reporting requirements is 

required to provide includes providing either the aggregate amount 

of payments received or the aggregate amount billed for qualified 

tuition and related expenses during the calendar year period.24

REASONS FOR CHANGE

The Committee believes that, with the cost of post-secondary 

education increasing at a rate in excess of the rate of inflation for 

nearly 30 years, it is appropriate to help mitigate the burden on 

individuals wishing to pursue a college education. The Committee 

believes that the AOTC is an important means by which to accomplish this goal. The Committee believes that permanently extending this provision will provide taxpayers with the certainty necessary to plan for college, and that indexing both the credit rate 

and the phaseout thresholds for inflation is necessary to ensure 

that the assistance provided by the credit is not diluted over time. 

Furthermore, the Committee believes that by consolidating the 

Hope, AOTC, Lifetime Learning credit and deduction for tuition 

and related expenses into one consolidated credit, simplification is 

provided in an area where tax benefits have grown increasingly 

complex. 

By increasing the maximum portion of the AOTC that is refundable from $1,000 to $1,500, the Committee believes the AOTC will 

become a more effective means by which the government can provide assistance to low-income taxpayers without tax liability who 

wish to attend college. 

The Committee believes that Pell Grants should be excluded 

from taxable income, without regard to whether those funds were 

used for tuition or other non-tuition expenses while attending 

school. Because Pell Grants in particular serve students with the 

greatest financial need, excluding the entirety of Pell Grant funds 

from taxation is an appropriate means by which to assist low-income students wishing to pursue a college education. Furthermore, 

the Committee believes it is appropriate to coordinate Pell Grant 

funds and the AOTC such that a student may receive the maximum benefit of the AOTC without regard to whether the Pell 

Grant funds were used for tuition or non-tuition costs of college attendance. 

Finally, the Committee believes that the reporting requirements 

on the Form 1098–T should be modified to more accurately reflect 

the basis of the AOTC. Because the AOTC is based on tuition paid 

by a student to an educational institution (and not the amount of 

tuition billed to that student), reporting the tuition that the student has actually paid to the institution provides both the student 


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and the Internal Revenue Service with the relevant information for 

computing the credit. 

EXPLANATION OF PROVISION

Consolidation and modification of tuition credits and deduction 

The provision permanently replaces the Hope credit with a modified version of the AOTC, and repeals both the Lifetime Learning 

credit and the now-expired deduction for qualified tuition expenses. 

As under present law, the credit is claimed on a per-student basis 

and the credit rate is 100 percent on the first $2,000 of qualified 

tuition and related expenses, and 25 percent on the next $2,000 of 

qualified tuition and related expenses, for a maximum credit of 

$2,500. Under the proposal, the taxpayer’s credit for the first 

$1,500 of qualified tuition and related expenses is refundable. 

The provision retains the phaseout range of the AOTC (i.e., the 

credit will continue to be phased out ratably for taxpayers with 

MAGI between $80,000 and $90,000 ($160,000 and $180,000 for 

married taxpayers filing a joint return). The provision provides 

that both the credit amounts and the phaseout ranges are indexed 

for inflation for taxable years beginning after 2018. 

The provision does not retain the rule that denies the credit with 

respect to qualified tuition and related expenses for the enrollment 

or attendance of any student who has been convicted of a felony offense consisting of the possession or distribution of a controlled 

substance. 

The provision adds a requirement that a taxpayer must include 

the employer identification number of the institution to which 

qualified tuition and related expenses was paid. 

Coordination of Pell Grants with credit for tuition 

The provision alters the determination of qualified tuition and 

related expenses for students who are recipients of Pell Grants. 

Under the provision, for purposes of reducing the amount of qualified tuition and related expenses owing to receipt of scholarships, 

the recipient of the Pell Grant may disregard an amount of the Pell 

Grant equaling the amount of expenses (other than qualified tuition and related expenses) that are taken into account in determining the cost of attendance (as defined in section 472 of the 

Higher Education Act of 1965). That is, the student may first apply 

the Pell Grant to certain living expenses before any excess is 

deemed to reduce the amount of tuition and related expenses eligible for the AOTC. For example, under present law, if a student had 

$2,000 in tuition and related expenses, $4,000 in living expenses 

related to the cost of attendance, and received a $3,000 Pell Grant, 

if that student had applied the Pell Grant towards his or her tuition first, the student would not be eligible for any AOTC because 

the qualified tuition and related expenses ($2,000) is reduced by 

the amount of the Pell Grant ($3,000), leaving no qualified tuition 

and related expenses. Under the provision, the $3,000 Pell Grant 

is disregarded to the extent of living expenses related to the cost 

of attendance ($4,000), thus leaving the full $2,000 in qualified tuition and related expenses eligible for the AOTC. 


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Modification of treatment of Pell Grant scholarships 

The provision modifies the exclusion for qualified scholarships by 

providing that Pell Grants are excluded from gross income, without 

regard to whether the grant is used for qualified tuition and related expenses. 

Modification of reporting requirements 

The provision modifies present-law reporting requirements, such 

that an eligible educational institution may only report the aggregate amount of tuition received with respect to any individual during the calendar year period. 

EFFECTIVE DATE

The provision applies to taxable years beginning after December 

31, 2014. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 3393, the Student and Family Tax Simplification 

Act, on June 25, 2014. 

The bill, H.R. 3393, was ordered favorably reported as amended 

by a roll call vote of 22 yeas to 13 nays (with a quorum being 

present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .............................. X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Rangel ........................... ........... ........... .............

Mr. Brady .............................. X ........... ............. Mr. McDermott ..................... ........... X .............

Mr. Ryan ............................... X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Becerra .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Boustany ......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Gerlach ........................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Price ............................... X ........... ............. Mr. Kind ............................... ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Pascrell .......................... ........... ........... .............

Mr. Smith .............................. X ........... ............. Mr. Crowley .......................... ........... ........... .............

Mr. Schock ............................ X ........... ............. Ms. Schwartz ........................ ........... X .............

Ms. Jenkins ........................... X ........... ............. Mr. Davis .............................. ........... X .............

Mr. Paulsen ........................... X ........... ............. Ms. Sanchez ......................... ........... X .............

Mr. Marchant ........................ X ........... ............. .

Ms. Black .............................. X ........... .............

Mr. Reed ............................... ........... ........... .............

Mr. Young ............................. X ........... .............

Mr. Kelly ................................ X ........... .............

Mr. Griffin ............................. X ........... .............

Mr. Renacci ........................... X ........... .............

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 3393, as reported. 


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The bill, as reported, is estimated to have the following effect on 

Federal budget receipts for fiscal years 2014–2024 (with no effect 

on such receipts in fiscal year 2014): 


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FISCAL YEARS 

[Billions of Dollars] 

Item 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015–19 2015–24 

Revenues[1] ............................................................................. [2] ¥1.0 ¥0.9 ¥1.5 ¥14.5 ¥14.4 ¥15.5 ¥15.5 ¥15.9 ¥17.1 ¥18.1 ¥96.5 

NOTE: Details do not add to totals due to rounding. 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015–19 2015–24 

[1] Estimate contains the following outlay effects ................ ............... 3.4 3.2 3.2 10.2 10.1 10.8 10.7 10.8 11.5 19.9 73.7 [2] Loss of less than $50 million 


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B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves new or increased budget authority. The Committee further 

states that the revenue-reducing tax provisions involve increased 

tax expenditures. (See amounts in table in Part IV.A, above.) 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, July 7, 2014. 

Hon. DAVE CAMP, 

Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3393, the Student and 

Family Tax Simplification Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Logan Timmerhoff. 

Sincerely, 

PETER A. FONTAINE

(For Douglas W. Elmendorf, Director) 

Enclosure. 

H.R. 3393—Student and Family Tax Simplification Act 

H.R. 3393 would amend certain education-related provisions of 

the Internal Revenue Code. The bill would permanently extend, in 

modified form, the American Opportunity Tax Credit (AOTC) for 

tuition and related post-secondary expenses that is currently scheduled to expire at the end of 2017. Modifications to the credit would 

include increasing the refundable portion (starting in 2015) and indexing the credit and income phaseout amounts for inflation (starting in 2019). The Hope tax credit, which is scheduled to come back 

into effect in 2018 when the AOTC expires, would be replaced by 

the AOTC, and the Lifetime Learning tax credit would be repealed. 

In addition, for Pell grant recipients, the bill would increase the 

amount of expenses that potentially qualify for the AOTC, and Pell 

grant amounts that exceeded certain education expenses would no 

longer be considered taxable income. The bill would also modify the 

information-reporting requirements on higher educational institutions. 

The staff of the Joint Committee on Taxation (JCT) estimates 

that enacting H.R. 3393 would increase direct spending over the 

2014–2024 period by about $73.7 billion, and reduce revenues over 

that period by about $22.7 billion. JCT therefore estimates that enacting the legislation would increase federal budget deficits by 

about $96.5 billion over the 2014–2024 period. 


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The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct 

spending and revenues. Because enacting H.R. 3393 would affect 

revenues and direct spending, pay-as-you-go procedures apply. The 

net changes in revenues and outlays that are subject to pay-as-yougo procedures are shown in the following table. 

JCT has determined that the bill contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act. 

The CBO staff contact for this estimate is Logan Timmerhoff. 

The estimate was approved by David Weiner, Assistant Director for 

Tax Analysis. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3393, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JUNE 25, 2014 

By fiscal year, in millions of dollars— 

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014–2019 2014–2024 

NET INCREASE IN THE DEFICIT 

Statutory Pay-As-You-Go Effects ........... 0 45 1,038 936 1,519 14,531 14,354 15,492 15,515 15,941 17,082 18,068 96,453 Memorandum: 

Changes in Outlays ...................... 0 0 3,350 3,215 3,162 10,152 10,085 10,766 10,743 10,806 11,462 19,879 73,740 Changes in Revenues ................... 0 ¥45 2,312 2,279 1,643 ¥4,379 ¥4,269 ¥4,726 ¥4,772 ¥5,135 ¥5,620 1,811 ¥22,713 

Source: Staff of the Joint Committee on Taxation Note: Components may not sum to totals because of rounding. 


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D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made by the 

Joint Committee on Taxation with respect to the provisions of the 

bill amending the Internal Revenue Code of 1986: the effects of the 

bill on economic activity are so small as to be incalculable within 

the context of a model of the aggregate economy. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the provisions of H.R. 3393 that the Committee concluded that it 

is appropriate to report the bill, as amended, favorably to the 

House of Representatives with the recommendation that the bill do 

pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the bill, and 

states that the bill does not involve any Federal income tax rate 

increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 requires the staff of the Joint Committee 

on Taxation (in consultation with the Internal Revenue Service and 

the Treasury Department) to provide a tax complexity analysis. 

The complexity analysis is required for all legislation reported by 

the Senate Committee on Finance, the House Committee on Ways 

and Means, or any committee of conference if the legislation inVerDate Mar 15 2010 07:09 Jul 18, 2014 Jkt 039006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\HR526.XXX HR526

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cludes a provision that directly or indirectly amends the Code and 

has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of 

the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with sec. 3(j)(2) of H. Res. 5 (113th Congress), the 

Committee states that the Government Accountability Office has 

included the American Opportunity Tax Credit and Form 1098–T 

(the form on which educational institutions report tuition-related 

information) in reports to Congress pursuant to section 21 of Public 

Law 111–139. The Committee also states that the most recent 

Catalog of Federal Domestic Assistance, published pursuant to the 

Federal Program Information Act (Pub. L. No. 95–220, as amended 

by Pub. L. No. 98–169), identified programs related to the American Opportunity Tax Credit. 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with sec. 3(k) of H. Res. 5 (113th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 

existing law in which no change is proposed is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle A—Income Taxes 

* * * * * * * 


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CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter A—Determination of Tax Liability 

* * * * * * * 

PART IV—CREDITS AGAINST TAX 

* * * * * * * 

Subpart A—Nonrefundable Personal Credits 

* * * * * * * 

øSec. 25A. Hope and Lifetime Learning credits.¿ 

Sec. 25A. American opportunity tax credit. 

* * * * * * * 

øSEC. 25A. HOPE AND LIFETIME LEARNING CREDITS. 

ø(a) ALLOWANCE OF CREDIT.—In the case of an individual, there 

shall be allowed as a credit against the tax imposed by this chapter 

for the taxable year the amount equal to the sum of— 

ø(1) the Hope Scholarship Credit, plus 

ø(2) the Lifetime Learning Credit. 

ø(b) HOPE SCHOLARSHIP CREDIT.— ø(1) PER STUDENT CREDIT.—In the case of any eligible student for whom an election is in effect under this section for any 

taxable year, the Hope Scholarship Credit is an amount equal 

to the sum of— 

ø(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 $1,000, plus 

ø(B) 50 percent of such expenses so paid as exceeds 

$1,000 but does not exceed the applicable limit. 

ø(2) LIMITATIONS APPLICABLE TO HOPE SCHOLARSHIP CRED- IT.— ø(A) CREDIT ALLOWED ONLY FOR 2 TAXABLE YEARS.—An 

election to have this section apply with respect to any eligible student for purposes of the Hope Scholarship Credit 

under subsection (a)(1) may not be made for any taxable 

year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 2 

prior taxable years. 

ø(B) CREDIT ALLOWED FOR YEAR ONLY IF INDIVIDUAL IS

AT LEAST 1/2 TIME STUDENT FOR PORTION OF YEAR.—The 

Hope Scholarship Credit under subsection (a)(1) shall not 

be allowed for a taxable year with respect to the qualified 

tuition and related expenses of an individual unless such 

individual is an eligible student for at least one academic 

period which begins during such year. 

ø(C) CREDIT ALLOWED ONLY FOR FIRST 2 YEARS OF POSTSECONDARY EDUCATION.—The Hope Scholarship Credit 

under subsection (a)(1) shall not be allowed for a taxable 


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year with respect to the qualified tuition and related expenses of an eligible student if the student has completed 

(before the beginning of such taxable year) the first 2 years 

of postsecondary education at an eligible educational institution. 

ø(D) DENIAL OF CREDIT IF STUDENT CONVICTED OF A FELONY DRUG OFFENSE.—The Hope Scholarship Credit under 

subsection (a)(1) shall not be allowed for qualified tuition 

and related expenses for the enrollment or attendance of 

a student for any academic period if such student has been 

convicted of a Federal or State felony offense consisting of 

the possession or distribution of a controlled substance before the end of the taxable year with or within which such 

period ends. 

ø(3) ELIGIBLE STUDENT.—For purposes of this subsection, the 

term ‘‘eligible student’’ means, with respect to any academic 

period, a student who— 

ø(A) 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 this section, and 

ø(B) is carrying at least 1/2 the normal full-time work 

load for the course of study the student is pursuing. 

ø(4) APPLICABLE LIMIT.—For purposes of paragraph (1)(B), 

the applicable limit for any taxable year is an amount equal 

to 2 times the dollar amount in effect under paragraph (1)(A) 

for such taxable year. 

ø(c) LIFETIME LEARNING CREDIT.— 

ø(1) PER TAXPAYER CREDIT.—The Lifetime Learning Credit 

for any taxpayer for any taxable year is an amount equal to 

20 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished during any academic period beginning in such 

taxable year) as does not exceed $10,000 ($5,000 in the case of 

taxable years beginning before January 1, 2003). 

ø(2) SPECIAL RULES FOR DETERMINING EXPENSES.— 

ø(A) COORDINATION WITH HOPE SCHOLARSHIP.—The 

qualified tuition and related expenses with respect to an 

individual who is an eligible student for whom a Hope 

Scholarship Credit under subsection (a)(1) is allowed for 

the taxable year shall not be taken into account under this 

subsection. 

ø(B) EXPENSES ELIGIBLE FOR LIFETIME LEARNING CREDIT.—For purposes of paragraph (1), qualified tuition and 

related expenses shall include expenses described in subsection (f)(1) with respect to any course of instruction at an 

eligible educational institution to acquire or improve job 

skills of the individual. 

ø(d) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME.— 

ø(1) IN GENERAL.—The amount which would (but for this 

subsection) be taken into account under subsection (a) for the 

taxable year shall be reduced (but not below zero) by the 

amount determined under paragraph (2). 


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ø(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— 

ø(A) the excess of— 

ø(i) the taxpayer’s modified adjusted gross income 

for such taxable year, over 

ø(ii) $40,000 ($80,000 in the case of a joint return), bears to (B) $10,000 ($20,000 in the case of a joint return). 

ø(3) MODIFIED ADJUSTED GROSS INCOME.—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. 

ø(e) ELECTION NOT TO HAVE SECTION APPLY.—A taxpayer may 

elect not to have this section apply with respect to the qualified tuition and related expenses of an individual for any taxable year. 

ø(f) DEFINITIONS.—For purposes of this section— 

ø(1) QUALIFIED TUITION AND RELATED EXPENSES.— ø(A) IN GENERAL.—The term ‘‘qualified tuition and related expenses’’ means tuition and fees required for the enrollment or attendance of— 

ø(i) the taxpayer, 

ø(ii) the taxpayer’s spouse, or 

ø(iii) any dependent of the taxpayer with respect to 

whom the taxpayer is allowed a deduction under section 151, 

at an eligible educational institution for courses of instruction of such individual at such institution. 

ø(B) EXCEPTION FOR EDUCATION INVOLVING SPORTS, 

ETC.—Such term does not include expenses with respect to 

any course or other education involving sports, games, or 

hobbies, unless such course or other education is part of 

the individual’s degree program. 

ø(C) EXCEPTION FOR NONACADEMIC FEES.—Such term 

does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual’s academic course of instruction. 

ø(2) ELIGIBLE EDUCATIONAL INSTITUTION.—The term ‘‘eligible 

educational institution’’ means an institution— 

ø(A) which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date 

of the enactment of this section, and 

ø(B) which is eligible to participate in a program under 

title IV of such Act. 

ø(g) SPECIAL RULES.— 

ø(1) IDENTIFICATION REQUIREMENT.—No credit 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. 

ø(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, ETC..—The 

amount of qualified tuition and related expenses otherwise 

taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the apVerDate Mar 15 2010 07:09 Jul 18, 2014 Jkt 039006 PO 00000 Frm 00022 Fmt 6659 Sfmt 6601 E:\HR\OC\HR526.XXX HR526

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plication of subsections (b), (c), and (d)) by the sum of any 

amounts paid for the benefit of such individual which are allocable to such period as— 

ø(A) a qualified scholarship which is excludable from 

gross income under section 117, 

ø(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 

ø(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such 

individual’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. 

ø(3) 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— 

ø(A) no credit shall be allowed under subsection (a) to 

such individual for such individual’s taxable year, and 

ø(B) qualified tuition and related 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. 

ø(4) TREATMENT OF CERTAIN PREPAYMENTS.—If qualified tuition and related expenses are 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. 

ø(5) DENIAL OF DOUBLE BENEFIT.—No credit shall be allowed 

under this section for any expense for which a deduction is allowed under any other provision of this chapter. 

ø(6) 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. 

ø(7) 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. 

ø(h) INFLATION ADJUSTMENTS.— 

ø(1) DOLLAR LIMITATION ON AMOUNT OF CREDIT.— 

ø(A) IN GENERAL.—In the case of a taxable year beginning after 2001, each of the $1,000 amounts under subsection (b)(1) shall be increased by an amount equal to— 

ø(i) such dollar amount, multiplied by 

ø(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. 


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ø(B) ROUNDING.—If any amount as adjusted under sub- paragraph (A) is not a multiple of $100, such amount shall 

be rounded to the next lowest multiple of $100. 

ø(2) INCOME LIMITS.— ø(A) IN GENERAL.—In the case of a taxable year begin- ning after 2001, the $40,000 and $80,000 amounts in subsection (d)(2) shall each be increased by an amount equal 

to— 

ø(i) such dollar amount, multiplied by 

ø(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. 

ø(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. 

ø(i) AMERICAN OPPORTUNITY TAX CREDIT.—In the case of any 

taxable year beginning after 2008 and before 2018— 

ø(1) INCREASE IN CREDIT.—The Hope Scholarship Credit 

shall be an amount equal to the sum of— 

ø(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 

ø(B) 25 percent of such expenses so paid as exceeds 

$2,000 but does not exceed $4,000. 

ø(2) CREDIT ALLOWED FOR FIRST 4 YEARS OF POST-SECONDARY

EDUCATION.—Subparagraphs (A) and (C) of subsection (b)(2) 

shall be applied by substituting ‘‘4’’ for ‘‘2’’. 

ø(3) QUALIFIED TUITION AND RELATED EXPENSES TO INCLUDE

REQUIRED COURSE MATERIALS.—Subsection (f)(1)(A) shall be applied by substituting ‘‘tuition, fees, and course materials’’ for 

‘‘tuition and fees’’. 

ø(4) INCREASE IN AGI LIMITS FOR HOPE SCHOLARSHIP CRED- IT.—In lieu of applying subsection (d) with respect to the Hope 

Scholarship Credit, such credit (determined without regard to 

this paragraph) shall be reduced (but not below zero) by the 

amount which bears the same ratio to such credit (as so determined) as— 

ø(A) the excess of— 

ø(i) the taxpayer’s modified adjusted gross income 

(as defined in subsection (d)(3)) for such taxable year, 

over 

ø(ii) $80,000 ($160,000 in the case of a joint return), bears to (B) $10,000 ($20,000 in the case of a joint return). 

ø(5) PORTION OF CREDIT MADE REFUNDABLE.—40 percent of 

so much of the credit allowed under subsection (a) as is attributable to the Hope Scholarship Credit (determined after application of paragraph (4) and without regard to this paragraph 

and section 26(a)) shall be treated as a credit allowable under 

subpart C (and not allowed under subsection (a)). The preceding sentence shall not apply to any taxpayer for any taxable 


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year if such taxpayer is a child to whom subsection (g) of section 1 applies for such taxable year. 

ø(6) COORDINATION WITH MIDWESTERN DISASTER AREA BENEFITS.—In the case of a taxpayer with respect to whom section 

702(a)(1)(B) of the Heartland Disaster Tax Relief Act of 2008 

applies for any taxable year, such taxpayer may elect to waive 

the application of this subsection to such taxpayer for such taxable year. 

ø(j) 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 amount which was taken into account in determining the amount of such credit.¿ 

SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 

(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the 

taxable year, with respect to each eligible student, an amount equal 

to the sum of— 

(1) 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 

(2) 25 percent of so much of such expenses so paid as exceeds 

the dollar amount in effect under paragraph (1) but does not exceed twice such dollar amount. 

(b) PORTION OF CREDIT REFUNDABLE.—So much of the credit allowable under subsection (a) with respect to each eligible student 

(determined without regard to this subsection and section 26(a) and 

after application of all other provisions of this section) as does not 

exceed $1,500 shall be treated as a credit allowable under subpart 

C (and not under this part). The preceding sentence shall not apply 

to any taxpayer for any taxable year if such taxpayer is a child to 

whom section 1(g) applies for such taxable year. 

(c) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME.— 

(1) IN GENERAL.—The amount allowable as a credit under 

subsection (a) for any taxable year shall be reduced (but not 

below zero) by an amount which bears the same ratio to the 

amount so allowable (determined without regard to this subsection and subsection (b) but after application of all other provisions of this section) as— 

(A) the excess of— 

(i) the taxpayer’s modified adjusted gross income for 

such taxable year, over 

(ii) $80,000 (twice such amount in the case of a joint 

return), bears to 

(B) $10,000 (twice such amount in the case of a joint return). 

(2) 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. 


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(d) OTHER LIMITATIONS.—No credit shall be allowed under this 

section with respect to any eligible student for any taxable year if— 

(1) such student was taken into account in determining the 

credit allowed under this section (by the taxpayer or any other 

individual) for any 4 prior taxable years, or 

(2) such student has completed (before the beginning of such 

taxable year) the first 4 years of postsecondary education at an 

eligible educational institution. 

(e) DEFINITIONS.—For purposes of this section— 

(1) ELIGIBLE STUDENT.— The term ‘‘eligible student’’ means, 

with respect to any academic period, a student who— 

(A) 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 August 5, 1997, and 

(B) is carrying at least 1⁄2 the normal full-time work load 

for the course of study the student is pursuing. 

(2) QUALIFIED TUITION AND RELATED EXPENSES.— 

(A) IN GENERAL.—The term ‘‘qualified tuition and related 

expenses’’ means tuition, fees, and course materials, required for enrollment or attendance of— 

(i) the taxpayer, 

(ii) the taxpayer’s spouse, or 

(iii) any dependent of the taxpayer with respect to 

whom the taxpayer is allowed a deduction under section 151, 

at an eligible educational institution for courses of instruction of such individual at such institution. 

(B) EXCEPTION FOR EDUCATION INVOLVING SPORTS, 

ETC.—Such term does not include expenses with respect to 

any course or other education involving sports, games, or 

hobbies, unless such course or other education is part of the 

individual’s degree program. 

(C) EXCEPTION FOR NONACADEMIC FEES.—Such term does 

not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual’s academic course of instruction. 

(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 (20 U.S.C. 1088), as in effect on August 

5, 1997, and 

(B) which is eligible to participate in a program under 

title IV of such Act. 

(f) SPECIAL RULES.— 

(1) IDENTIFICATION REQUIREMENT.—No credit 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, and the employer identification 

number of any institution to which such expenses were paid, on 

the return of tax for the taxable year. 

(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, ETC.— (A) IN GENERAL.—The amount of qualified tuition and 

related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic 


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period shall be reduced (before the application of subsection 

(c)) by the sum of any amounts paid for the benefit of such 

individual which are allocable to such period as— 

(i) a qualified scholarship which is excludable from 

gross income under section 117, 

(ii) 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 

(iii) a payment (other than a gift, bequest, devise, or 

inheritance within the meaning of section 102(a)) for 

such individual’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. 

(B) COORDINATION WITH PELL GRANTS NOT USED FOR

QUALIFIED TUITION AND RELATED EXPENSES.—For purposes 

of subparagraph (A), the amount of any Federal Pell Grant 

under section 401 of the Higher Education Act of 1965 (20 

U.S.C. 1070a) shall be reduced (but not below zero) by the 

amount of expenses (other than qualified tuition and related expenses) which are 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 paragraph) of such individual at 

an eligible educational institution for the academic period 

for which the credit under this section is being determined. 

(3) 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) qualified tuition and related 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. 

(4) TREATMENT OF CERTAIN PREPAYMENTS.—If qualified tuition and related expenses are 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. 

(5) DENIAL OF DOUBLE BENEFIT.—No credit shall be allowed 

under this section for any amount for which a deduction is allowed under any other provision of this chapter. 

(6) 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. 

(7) 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 


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of the United States for purposes of this chapter by reason of 

an election under subsection (g) or (h) of section 6013. 

(g) INFLATION ADJUSTMENT.— (1) IN GENERAL.—In the case of a taxable year beginning after 2018, the $2,000 amount in subsection (a)(1), the $1,500 

amount in subsection (b), and the $80,000 amount in subsection 

(c)(1)(A)(ii) 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 2017’’ for 

‘‘calendar year 1992’’ in subparagraph (B) thereof. 

(2) ROUNDING.—If any amount as adjusted under paragraph 

(1) is not a multiple of $100 ($1,000 in the case of the amount 

in subsection (c)(1)(A)(ii)), such amount shall be rounded to the 

next lowest multiple of $100 ($1,000 in the case of the amount 

in subsection (c)(1)(A)(ii)). 

(h) REGULATIONS.—The Secretary may prescribe such regulations 

or other guidance 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 amount which was taken into 

account in determining the amount of such credit. 

* * * * * * * 

Subchapter B—Computation of Taxable Income 

* * * * * * * 

PART I—DEFINITION OF GROSS INCOME, ADJUSTED 

GROSS INCOME, TAXABLE INCOME, ETC 

* * * * * * * 

SEC. 62. ADJUSTED GROSS INCOME DEFINED. 

(a) GENERAL RULE.—For purposes of this subtitle, the term ‘‘adjusted gross income’’ means, in the case of an individual, gross income minus the following deductions: 

(1) * * * 

* * * * * * * 

ø(18) HIGHER EDUCATION EXPENSES.—The deduction allowed 

by section 222.¿ 

* * * * * * * 

PART II—ITEMS SPECIFICALLY INCLUDED IN GROSS 

INCOME 

* * * * * * * 

SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE 

INSURANCE CONTRACTS. 

(a) * * * 

* * * * * * * 

(t) 10-PERCENT ADDITIONAL TAX ON EARLY DISTRIBUTIONS FROM

QUALIFIED RETIREMENT PLANS.— 


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(1) * * * 

* * * * * * * 

(7) QUALIFIED HIGHER EDUCATION EXPENSES.—For purposes 

of paragraph (2)(E)— 

(A) * * * 

(B) COORDINATION WITH OTHER BENEFITS.—The amount 

of qualified higher education expenses for any taxable year 

shall be reduced as provided in øsection 25A(g)(2)¿ section 

25A(f)(2). 

* * * * * * * 

SEC. 86. SOCIAL SECURITY AND TIER 1 RAILROAD RETIREMENT BENEFITS. 

(a) * * * 

(b) TAXPAYERS TO WHOM SUBSECTION (a) APPLIES.— 

(1) * * * 

(2) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this 

subsection, the term ‘‘modified adjusted gross income’’ means 

adjusted gross income— 

(A) determined without regard to this section and sections 135, 137, 199, 221, ø222,¿ 911, 931, and 933, and 

* * * * * * * 

PART III—ITEMS SPECIFICALLY EXCLUDED FROM 

GROSS INCOME 

* * * * * * * 

SEC. 117. QUALIFIED SCHOLARSHIPS. 

(a) * * * 

(b) QUALIFIED SCHOLARSHIP.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘qualified scholarship’’ means 

any amount øreceived by an individual as a scholarship¿ received by an individual— 

(A) as a scholarship or fellowship grant to the extent the 

individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expensesø.¿, or 

(B) as a Federal Pell Grant under section 401 of the 

Higher Education Act of 1965 (20 U.S.C. 1070a). 

* * * * * * * 

SEC. 135. INCOME FROM UNITED STATES SAVINGS BONDS USED TO 

PAY HIGHER EDUCATION TUITION AND FEES. 

(a) * * * 

* * * * * * * 

(c) DEFINITIONS.—For purposes of this section— 

(1) * * * 

* * * * * * * 

(4) MODIFIED ADJUSTED GROSS INCOME.—The term ‘‘modified 

adjusted gross income’’ means the adjusted gross income of the 

taxpayer for the taxable year determined— 


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(A) without regard to this section and sections 137, 199, 

221, ø222,¿ 911, 931, and 933, and 

* * * * * * * 

SEC. 137. ADOPTION ASSISTANCE PROGRAM. 

(a) * * * 

(b) LIMITATIONS.— (1) * * * 

* * * * * * * 

(3) DETERMINATION OF ADJUSTED GROSS INCOME.—For purposes of paragraph (2), adjusted gross income shall be determined— 

(A) without regard to this section and sections 199, 221, 

ø222,¿ 911, 931, and 933, and 

* * * * * * * 

PART VI—ITEMIZED DEDUCTIONS FOR INDIVIDUALS 

AND CORPORATIONS 

* * * * * * * 

SEC. 199. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES. 

(a) * * * 

* * * * * * * 

(d) DEFINITIONS AND SPECIAL RULES.— 

(1) * * * 

(2) APPLICATION TO INDIVIDUALS.—In the case of an individual, subsections (a)(1)(B) and (d)(9)(A)(iii) shall be applied 

by substituting ‘‘adjusted gross income’’ for ‘‘taxable income’’. 

For purposes of the preceding sentence, adjusted gross income 

shall be determined— 

(A) after application of sections 86, 135, 137, 219, 221, 

ø222,¿ and 469, and 

* * * * * * * 

PART VII—ADDITIONAL ITEMIZED DEDUCTIONS FOR 

INDIVIDUALS 

Sec. 211. Allowance of deductions. 

* * * * * * * 

øSec. 222. Qualified tuition and related expenses.¿ 

* * * * * * * 

SEC. 219. RETIREMENT SAVINGS. 

(a) * * * 

* * * * * * * 

(g) LIMITATION ON DEDUCTION FOR ACTIVE PARTICIPANTS IN CERTAIN PENSION PLANS.— 

(1) * * * 

* * * * * * * 

(3) ADJUSTED GROSS INCOME; APPLICABLE DOLLAR AMOUNT.— 

For purposes of this subsection— 


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(A) ADJUSTED GROSS INCOME.—Adjusted gross income of 

any taxpayer shall be determined— 

(i) * * * 

(ii) without regard to sections 135, 137, 199, 221, 

ø222,¿ and 911 or the deduction allowable under this 

section. 

* * * * * * * 

SEC. 221. INTEREST ON EDUCATION LOANS. 

(a) * * * 

(b) MAXIMUM DEDUCTION.— (1) * * * 

(2) LIMITATION BASED ON MODIFIED ADJUSTED GROSS IN- COME.— 

(A) * * * 

* * * * * * * 

(C) MODIFIED ADJUSTED GROSS INCOME.—The term 

‘‘modified adjusted gross income’’ means adjusted gross income determined— 

(i) without regard to this section and sections 199, 

ø222,¿ 911, 931, and 933, and 

* * * * * * * 

øSEC. 222. QUALIFIED TUITION AND RELATED EXPENSES. 

ø(a) ALLOWANCE OF DEDUCTION.—In the case of an individual, 

there shall be allowed as a deduction an amount equal to the qualified tuition and related expenses paid by the taxpayer during the 

taxable year. 

ø(b) DOLLAR LIMITATIONS.— ø(1) IN GENERAL.—The amount allowed as a deduction under 

subsection (a) with respect to the taxpayer for any taxable year 

shall not exceed the applicable dollar limit. 

ø(2) APPLICABLE DOLLAR LIMIT.— ø(A) 2002 AND 2003.—In the case of a taxable year beginning in 2002 or 2003, the applicable dollar limit shall be 

equal to— 

ø(i) in the case of a taxpayer whose adjusted gross income for the taxable year does not exceed $65,000 

($130,000 in the case of a joint return), $3,000, and— 

ø(ii) in the case of any other taxpayer, zero. 

ø(B) AFTER 2003.—In the case of any taxable year beginning after 2003, the applicable dollar amount shall be 

equal to— 

ø(i) in the case of a taxpayer whose adjusted gross 

income for the taxable year does not exceed $65,000 

($130,000 in the case of a joint return), $4,000, 

ø(ii) in the case of a taxpayer not described in clause 

(i) whose adjusted gross income for the taxable year 

does not exceed $80,000 ($160,000 in the case of a 

joint return), $2,000, and 

ø(iii) in the case of any other taxpayer, zero. 

ø(C) ADJUSTED GROSS INCOME.—For purposes of this 

paragraph, adjusted gross income shall be determined— 

ø(i) without regard to this section and sections 199, 

911, 931, and 933, and 


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ø(ii) after application of sections 86, 135, 137, 219, 

221, and 469. 

ø(c) NO DOUBLE BENEFIT.— 

ø(1) IN GENERAL.—No deduction shall be allowed under subsection (a) for any expense for which a deduction is allowed to 

the taxpayer under any other provision of this chapter. 

ø(2) COORDINATION WITH OTHER EDUCATION INCENTIVES.— 

ø(A) DENIAL OF DEDUCTION IF CREDIT ELECTED.—No deduction shall be allowed under subsection (a) for a taxable 

year with respect to the qualified tuition and related expenses with respect to an individual if the taxpayer or any 

other person elects to have section 25A apply with respect 

to such individual for such year. 

ø(B) COORDINATION WITH EXCLUSIONS.—The total 

amount of qualified tuition and related expenses shall be 

reduced by the amount of such expenses taken into account in determining any amount excluded under section 

135, 529(c)(1), or 530(d)(2). For purposes of the preceding 

sentence, the amount taken into account in determining 

the amount excluded under section 529(c)(1) shall not include that portion of the distribution which represents a 

return of any contributions to the plan. 

ø(3) 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. 

ø(d) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— 

ø(1) QUALIFIED TUITION AND RELATED EXPENSES.—The term 

‘‘qualified tuition and related expenses’’ has the meaning given 

such term by section 25A(f). Such expenses shall be reduced in 

the same manner as under section 25A(g)(2). 

ø(2) 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 the individual on the return of tax for the taxable 

year. 

ø(3) LIMITATION ON TAXABLE YEAR OF DEDUCTION.— 

ø(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. 

ø(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. 

ø(4) 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 


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the taxpayer and the taxpayer’s spouse file a joint return for 

the taxable year. 

ø(5) 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. 

ø(6) 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. 

ø(e) TERMINATION.—This section shall not apply to taxable years 

beginning after December 31, 2013.¿ 

* * * * * * * 

Subchapter E—Accounting Periods and Methods 

of Accounting 

* * * * * * * 

PART II—METHODS OF ACCOUNTING 

* * * * * * * 

Subpart C—Taxable Year for Which Deductions Taken 

* * * * * * * 

SEC. 469. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED. 

(a) * * * 

* * * * * * * 

(i) $25,000 offset for rental real estate activities 

(1) * * * 

* * * * * * * 

(3) PHASE-OUT OF EXEMPTION.— 

(A) * * * 

* * * * * * * 

(F) ADJUSTED GROSS INCOME.—For purposes of this paragraph, adjusted gross income shall be determined without 

regard to— 

(i) * * * 

* * * * * * * 

(iii) the amounts allowable as a deduction under sections 199, 219, ø221, and 222¿ and 221, and 

* * * * * * * 

Subchapter F—Exempt Organizations 

* * * * * * * 


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PART VIII—HIGHER EDUCATION SAVINGS ENTITIES 

SEC. 529. QUALIFIED TUITION PROGRAMS. 

(a) * * * 

* * * * * * * 

(c) TAX TREATMENT OF DESIGNATED BENEFICIARIES AND CONTRIBUTORS.— 

(1) * * * 

* * * * * * * 

(3) DISTRIBUTIONS.— 

(A) * * * 

(B) DISTRIBUTIONS FOR QUALIFIED HIGHER EDUCATION

EXPENSES.—For purposes of this paragraph— 

(i) * * * 

* * * * * * * 

(v) COORDINATION WITH HOPE AND LIFETIME LEARNING CREDITS.—The total amount of qualified higher 

education expenses with respect to an individual for 

the taxable year shall be reduced— 

(I) as provided in øsection 25A(g)(2)¿ section 

25A(f)(2), and 

* * * * * * * 

(e) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of 

this section— 

(1) * * * 

* * * * * * * 

(3) QUALIFIED HIGHER EDUCATION EXPENSES.— 

(A) * * * 

(B) ROOM AND BOARD INCLUDED FOR STUDENTS WHO ARE

AT LEAST HALF-TIME.— 

(i) IN GENERAL.—In the case of an individual who is 

an eligible student (as defined in øsection 25A(b)(3)¿ 

section 25A(d)) for any academic period, such term 

shall also include reasonable costs for such period (as 

determined under the qualified tuition program) incurred by the designated beneficiary for room and 

board while attending such institution. For purposes 

of subsection (b)(6), a designated beneficiary shall be 

treated as meeting the requirements of this clause. 

* * * * * * * 

SEC. 530. COVERDELL EDUCATION SAVINGS ACCOUNTS. 

(a) * * * 

* * * * * * * 

(d) TAX TREATMENT OF DISTRIBUTIONS.— (1) * * * 

(2) DISTRIBUTIONS FOR QUALIFIED EDUCATION EXPENSES.— 

(A) * * * 

* * * * * * * 

(C) COORDINATION WITH øHOPE AND LIFETIME LEARNING

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FIED TUITION PROGRAMS.—For purposes of subparagraph 

(A)— 

(i) CREDIT COORDINATION.—The total amount of 

qualified education expenses with respect to an individual for the taxable year shall be reduced— 

(I) as provided in øsection 25A(g)(2)¿ section 

25A(f)(2), and 

* * * * * * * 

(4) ADDITIONAL TAX FOR DISTRIBUTIONS NOT USED FOR EDU- CATIONAL EXPENSES.— (A) * * * 

(B) EXCEPTIONS.—Subparagraph (A) shall not apply if 

the payment or distribution is— 

(i) * * * 

* * * * * * * 

(iii) made on account of a scholarship, allowance, or 

payment described in øsection 25A(g)(2)¿ section 

25A(d)(4)(B) received by the designated beneficiary to 

the extent the amount of the payment or distribution 

does not exceed the amount of the scholarship, allowance, or payment, 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 

Subchapter A—Returns and Records 

* * * * * * * 

PART III—INFORMATION RETURNS 

* * * * * * * 

Subpart B—Information Concerning Transactions with 

Other Persons 

* * * * * * * 

SEC. 6050S. RETURNS RELATING TO HIGHER EDUCATION TUITION 

AND RELATED EXPENSES. 

(a) * * * 

(b) FORM AND MANNER OF RETURNS.—A return is described in 

this subsection if such return— 

(1) * * * 

(2) contains— 

(A) * * * 

(B) the— 

(i) aggregate amount of payments received øor the 

aggregate amount billed¿ for qualified tuition and reVerDate Mar 15 2010 07:09 Jul 18, 2014 Jkt 039006 PO 00000 Frm 00035 Fmt 6659 Sfmt 6601 E:\HR\OC\HR526.XXX HR526

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lated expenses with respect to the individual described 

in subparagraph (A) during the calendar year, 

* * * * * * * 

(e) DEFINITIONS.—For purposes of this section, the terms ‘‘eligible 

educational institution’’ and ‘‘qualified tuition and related expenses’’ have the meanings given such terms by section 25A (without regard to øsubsection (g)(2)¿ subsection (f)(2) thereof), and except as provided in regulations, the term ‘‘qualified education loan’’ 

has the meaning given such term by section 221(d)(1). 

* * * * * * * 

CHAPTER 63—ASSESSMENT 

* * * * * * * 

Subchapter B—Deficiency Procedures in the Case 

of Income, Estate, Gift, and Certain Excise Taxes 

SEC. 6211. DEFINITION OF A DEFICIENCY. 

(a) * * * 

(b) RULES FOR APPLICATION OF SUBSECTION (A).—For purposes of 

this section— 

(1) * * * 

* * * * * * * 

(4) For purposes of subsection (a)— 

(A) any excess of the sum of the credits allowable under 

sections 24(d), 25A by reason of øsubsection (i)(6)¿ subsection (b) thereof, 32, 34, 35, 36, 36A, 36B, 53(e), 

168(k)(4), 6428, and 6431 over the tax imposed by subtitle 

A (determined without regard to such credits), and 

* * * * * * * 

SEC. 6213. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION 

TO TAX COURT. 

(a) * * * 

* * * * * * * 

(g) DEFINITIONS.—For purposes of this section— 

(1) * * * 

(2) MATHEMATICAL OR CLERICAL ERROR.—The term ‘‘mathematical or clerical error’’ means— 

(A) * * * 

* * * * * * * 

(J) an omission of a correct øTIN required under section 

25A(g)(1)¿ TIN, and employer identification number, required under section 25A(f)(1) (relating to higher education 

tuition and related expenses) to be included on a return, 

* * * * * * * 


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SECTION 1004 OF THE AMERICAN RECOVERY AND 

REINVESTMENT TAX ACT OF 2009 

SEC. 1004. AMERICAN OPPORTUNITY TAX CREDIT. 

(a) * * * 

* * * * * * * 

(c) TREATMENT OF POSSESSIONS.— 

(1) PAYMENTS TO POSSESSIONS.— 

(A) MIRROR CODE POSSESSION.—The Secretary of the 

Treasury shall pay to each possession of the United States 

with a mirror code tax system amounts equal to the loss 

to that possession by reason of the application of øsection 

25A(i)(6)¿ section 25A(b) of the Internal Revenue Code of 

1986 (as added by this section) øwith respect to taxable 

years beginning after 2008 and before 2018¿ with respect 

to each taxable year. Such amounts shall be determined by 

the Secretary of the Treasury based on information provided by the government of the respective possession. 

(B) OTHER POSSESSIONS.—The Secretary of the Treasury 

shall pay to each possession of the United States which 

does not have a mirror code tax system amounts estimated 

by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of the application of 

øsection 25A(i)(6)¿ section 25A(b) of such Code (as so 

added) øfor taxable years beginning after 2008 and before 

2018¿ for each taxable year if a mirror code tax system had 

been in effect in such possession. The preceding sentence 

shall not apply with respect to any possession of the 

United States unless such possession has a plan, which 

has been approved by the Secretary of the Treasury, under 

which such possession will promptly distribute such payments to the residents of such possession. 

(2) COORDINATION WITH CREDIT ALLOWED AGAINST UNITED

STATES INCOME TAXES.—øSection 25A(i)(6)¿ Section 25A(b) of 

such Code (as added by this section) shall not apply to a bona 

fide resident of any possession of the United States. 

(3) DEFINITIONS AND SPECIAL RULES.— (A) * * * 

* * * * * * * 

(C) TREATMENT OF PAYMENTS.—For purposes of section 

1324(b)(2) of title 31, United States Code, the payments 

under this subsection shall be treated in the same manner 

as a refund due from the credit allowed under section 25A 

of the Internal Revenue Code of 1986 by reason of øsubsection (i)(6)¿ subsection (b) of such section (as added by 

this section). 

* * * * * * * 


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VII. DISSENTING VIEWS 

Notwithstanding that there is strong support for streamlining 

the education tax benefits, we opposed this bill because it takes 

away benefits from certain students—graduate students, lifetime 

learners, and non-traditional undergraduate students—to pay for 

educational benefits available to a narrower set of students—primarily, traditional undergraduate students who complete their degrees in four years. 

The bill will negatively impact many low-income and middle-income students and families who benefit from the education tax provisions under current law. By replacing the Hope Scholarship Credit and repealing both the Lifetime Learning Credit (LLC) and the 

now-expired deduction for qualified tuition expenses, this bill will 

harm traditional middle-income undergraduates, adult learners, 

and low-income and middle-income graduate students. The bill appears to be based on outdated assumptions about the typical student in higher education—the student who enrolls in college fulltime and completes a degree within four years. While the median 

time to degree for all bachelor’s degree recipients is 4.3 years, the 

median time for adult students (between ages 24–29) is 6.6 years. 

Thus, the bill’s four-year limit on benefits, in combination with the 

elimination of the LLC and tuition deduction for which part-time 

students are eligible, will cost many undergraduates much needed 

financial assistance. 

The bill also provides no educational benefits to lifetime learners 

or graduate students. These learners are the primary beneficiaries 

of the LLC. Many of these learners are low-income and need assistance in pursuing additional skill development or advanced degrees 

that employers require. 

In addition to our substantive concerns with the bill, we also believe that it should not be made permanent by adding to the deficit 

without any revenue offset. In three short months, Republicans on 

the Committee have approved 14 tax bills that would add a stunning $825 billion to the deficit—and there does not appear to be an 

end in sight. Chairman Camp’s Tax Reform Act of 2014 discussion 

draft (the ‘‘Republican tax reform plan’’) was revenue neutral and 

did not add to the deficit. These bills are going in the opposite direction. We should be considering these bills in the context of a revenue-neutral, bipartisan tax reform plan. To put the combined $825 billion cost into context, it is 1.7 times the entire projected federal deficit for this year and $241 billion 

more than what the total non-defense discretionary spending (e.g., 

medical research, education, veterans’ pensions and health care, 

transportation, etc.) will be in 2014. It is more than nine times 

what we spend annually on education, job training, and social services. It is almost 14 times what we appropriate for veterans’ health 

care and benefits in a year, and it is 27 times more than we spend 


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on medical research. It is more than we spend to pay earned Social 

Security benefits to 58 million Americans—one in four American 

families—for a year. Unoffset tax cuts amounting to $825 billion 

mean $2,600 in debt for every man, woman, and child in the 

United States. 

Make no mistake, this is part of the Republicans’ bigger plan to 

force cuts in spending in response to the increased deficit from 

their reckless tax cuts. Republicans already have cut non-defense 

appropriations below the level needed to keep up with inflation 

every year since 2011, putting us on a path to the lowest level of 

domestic investment (as a percent of GDP) since we began tracking 

it in 1962. By 2018, real non-defense discretionary spending is projected to be 18 percent lower than it was in 2010. Americans feel 

those cuts every day. They result in overcrowded classrooms for our 

children, fewer food safety inspections, slower progress on medical 

research to fight deadly diseases, delays in highway repairs, waiting lists for child care, early national park closings, reduced investment in small businesses, and delays in awarding earned Medicare 

and Social Security benefits. 

We found it hypocritical that, six months ago, Republicans let 

emergency unemployment insurance expire for more than 1.3 million Americans, a number that has now grown to 3 million, by arguing that an adequate offset had yet to be proposed. In early 

April, the Senate came to a bipartisan agreement on an offset after 

months of painstaking negotiations. Yet House Republicans still 

refuse to act. 

SANDER M. LEVIN. 

Æ 


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