II 

110TH CONGRESS 

1ST SESSION S. 851 

To amend the Internal Revenue Code of 1986 to provide a higher education 

opportunity credit in place of existing education tax incentives. 

IN THE SENATE OF THE UNITED STATES 

MARCH 13, 2007 

Mr. SCHUMER (for himself, Ms. CANTWELL, Ms. STABENOW, Mr. BROWN, 

Mrs. MCCASKILL, Mr. BAYH, Mr. SALAZAR, Mr. TESTER, and Mr. 

CASEY) introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a higher education opportunity credit in place of existing 

education tax incentives. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Higher Education Op5 portunity Act of 2007’’. 

6 SEC. 2. HIGHER EDUCATION OPPORTUNITY CREDIT. 

7 (a) IN GENERAL.—Section 25A of the Internal Rev8 enue Code of 1986 (relating to Hope and Lifetime Learn9 ing credits) is amended to read as follows: 


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1 ‘‘SEC. 25A. HIGHER EDUCATION OPPORTUNITY CREDIT. 

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of any 

3 eligible student for whom an election is in effect under 

4 this section for any taxable year, there shall be allowed 

5 as a credit against the tax imposed by this chapter for 

6 the taxable year in an amount equal to the sum of— 

7 ‘‘(1) 100 percent of so much of the qualified 

8 tuition and related expenses paid by the taxpayer 

9 during the taxable year (for education furnished to 

10 the eligible student during any academic period be11 ginning in such taxable year) as does not exceed 

12 $1,000, 

13 ‘‘(2) 50 percent of so much of such expenses as 

14 exceeds $1,000 but does not exceed $3,000, and 

15 ‘‘(3) 20 percent of so much of such expenses as 

16 exceeds $3,000 but does not exceed $5,500. 

17 ‘‘(b) LIMITATIONS.— 

18 ‘‘(1) LIMITATION BASED ON MODIFIED AD19 JUSTED GROSS INCOME.— 

20 ‘‘(A) IN GENERAL.—The amount which 

21 would (but for this paragraph) be taken into ac22 count under subsection (a) for the taxable year 

23 shall be reduced (but not below zero) by the 

24 amount determined under subparagraph (B). 

25 ‘‘(B) AMOUNT OF REDUCTION.—The 

26 amount determined under this subparagraph is 


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1 the amount which bears the same ratio to the 

2 amount which would be so taken into account 

3 as— 

4 ‘‘(i) the excess of— 

5 ‘‘(I) the taxpayer’s modified ad6 justed gross income for such taxable 

7 year, over 

8 ‘‘(II) $70,000 ($140,000 in the 

9 case of a joint return), bears to 

10 ‘‘(ii) $20,000 ($40,000 in the case of 

11 a joint return). 

12 ‘‘(C) MODIFIED ADJUSTED GROSS IN13 COME.—The term ‘modified adjusted gross in14 come’ means the adjusted gross income of the 

15 taxpayer for the taxable year increased by any 

16 amount excluded from gross income under sec17 tion 911, 931, or 933. 

18 ‘‘(2) LIMITATION BASED ON AMOUNT OF

19 TAX.—In the case of a taxable year to which section 

20 26(a)(2) does not apply, the credit allowed under 

21 subsection (a) for any taxable year shall not exceed 

22 the excess of— 

23 ‘‘(A) the sum of the regular tax liability 

24 (as defined in section 26(b)) plus the tax im25 posed by section 55, over 


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1 ‘‘(B) the sum of the credits allowable 

2 under this subpart (other than this section and 

3 sections 23, 24, and 25B) and section 27 for 

4 the taxable year. 

5 ‘‘(3) CREDIT ALLOWED ONLY FOR 3 ELIGIBLE

6 STUDENTS.—The credit under subsection (a) to any 

7 taxpayer shall not be allowed with respect to more 

8 than 3 eligible students for any taxable year. 

9 ‘‘(4) OTHER LIMITATIONS.— 

10 ‘‘(A) CREDIT ALLOWED ONLY FOR 4 TAX11 ABLE YEARS.—An election to have this section 

12 apply with respect to any eligible student may 

13 not be made for any taxable year if such an 

14 election (by the taxpayer or any other indi15 vidual) is in effect with respect to such student 

16 for any 4 prior taxable years. 

17 ‘‘(B) CREDIT ALLOWED FOR YEAR ONLY IF

18 INDIVIDUAL IS AT LEAST 1/2 TIME STUDENT

19 FOR PORTION OF YEAR.—The credit under sub20 section (a) shall not be allowed for a taxable 

21 year with respect to the qualified tuition and re22 lated expenses of an individual unless such indi23 vidual is an eligible student for at least one aca24 demic period which begins during such year. 


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1 ‘‘(C) DENIAL OF CREDIT IF STUDENT CON2 VICTED OF A FELONY DRUG OFFENSE.—The 

3 credit under subsection (a) shall not be allowed 

4 for qualified tuition and related expenses for 

5 the enrollment or attendance of a student for 

6 any academic period if such student has been 

7 convicted of a Federal or State felony offense 

8 consisting of the possession or distribution of a 

9 controlled substance before the end of the tax10 able year with or within which such period 

11 ends. 

12 ‘‘(c) DEFINITIONS.—For purposes of this sub13 section— 

14 ‘‘(1) ELIGIBLE STUDENT.—The term ‘eligible 

15 student’ means, with respect to any academic period, 

16 a student who— 

17 ‘‘(A) meets the requirements of section 

18 484(a)(1) of the Higher Education Act of 1965 

19 (20 U.S.C. 1091(a)(1)), as in effect on the date 

20 of the enactment of the Taxpayer Relief Act of 

21 1997, and 

22 ‘‘(B) is carrying at least 1/2 the normal 

23 full-time work load for the course of study the 

24 student is pursuing. 


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1 ‘‘(2) QUALIFIED TUITION AND RELATED EX2 PENSES.— 

3 ‘‘(A) IN GENERAL.—The term ‘qualified 

4 tuition and related expenses’ means tuition and 

5 fees required for the enrollment or attendance 

6 of an eligible student who is— 

7 ‘‘(i) the taxpayer, 

8 ‘‘(ii) the taxpayer’s spouse, or 

9 ‘‘(iii) any dependent of the taxpayer 

10 with respect to whom the taxpayer is al11 lowed a deduction under section 151, 

12 at an eligible educational institution for courses 

13 of instruction of such individual at such institu14 tion. 

15 ‘‘(B) INCLUSION OF CERTAIN EXPENSES

16 FOR BOOKS.— 

17 ‘‘(i) IN GENERAL.—For purposes of 

18 subparagraph (A), tuition and fees shall 

19 include 50 percent of amounts paid or in20 curred for books. 

21 ‘‘(ii) LIMITATION.—The amount of 

22 tuition and fees taken into account under 

23 subparagraph (A) by reason of clause (i) 

24 for any taxable year shall not exceed $250 

25 with respect to any eligible student. 


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1 ‘‘(C) EXCEPTION FOR EDUCATION INVOLV2 ING SPORTS, ETC.—Such term does not include 

3 expenses with respect to any course or other 

4 education involving sports, games, or hobbies, 

5 unless such course or other education is part of 

6 the individual’s degree program. 

7 ‘‘(D) EXCEPTION FOR NONACADEMIC

8 FEES.—Such term does not include student ac9 tivity fees, athletic fees, insurance expenses, or 

10 other expenses unrelated to an individual’s aca11 demic course of instruction. 

12 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

13 The term ‘eligible educational institution’ means an 

14 institution— 

15 ‘‘(A) which is described in section 481 of 

16 the Higher Education Act of 1965 (20 U.S.C. 

17 1088), as in effect on the date of the enactment 

18 of the Taxpayer Relief Act of 1997, and 

19 ‘‘(B) which is eligible to participate in a 

20 program under title IV of the Higher Education 

21 Act of 1965. 

22 ‘‘(d) ELECTION NOT TO HAVE SECTION APPLY.— 

23 A taxpayer may elect not to have this section apply with 

24 respect to the qualified tuition and related expenses of an 

25 individual for any taxable year. 


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1 ‘‘(e) SPECIAL RULES.— 

2 ‘‘(1) IDENTIFICATION REQUIREMENT.—No 

3 credit shall be allowed under subsection (a) to a tax4 payer with respect to the qualified tuition and re5 lated expenses of an individual unless the taxpayer 

6 includes the name and taxpayer identification num7 ber of such individual on the return of tax for the 

8 taxable year. 

9 ‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLAR10 SHIPS, ETC.—The amount of qualified tuition and 

11 related expenses otherwise taken into account under 

12 subsection (a) with respect to an individual for an 

13 academic period shall be reduced (before the applica14 tion of subsections (a), (b), and (c)) by the sum of 

15 any amounts paid for the benefit of such individual 

16 which are allocable to such period as— 

17 ‘‘(A) a qualified scholarship which is ex18 cludable from gross income under section 117, 

19 ‘‘(B) an educational assistance allowance 

20 under chapter 30, 31, 32, 34, or 35 of title 38, 

21 United States Code, or under chapter 1606 of 

22 title 10, United States Code, and 

23 ‘‘(C) a payment (other than a gift, be24 quest, devise, or inheritance within the meaning 

25 of section 102(a)) for such individual’s eduVerDate Aug 31 2005 02:45 Mar 16, 2007 Jkt 059200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S851.IS S851

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1 cational expenses, or attributable to such indi2 vidual’s enrollment at an eligible educational in3 stitution, which is excludable from gross income 

4 under any law of the United States. 

5 ‘‘(3) TREATMENT OF EXPENSES PAID BY DE6 PENDENT.—If a deduction under section 151 with 

7 respect to an individual is allowed to another tax8 payer for a taxable year beginning in the calendar 

9 year in which such individual’s taxable year begins— 

10 ‘‘(A) no credit shall be allowed under sub11 section (a) to such individual for such individ12 ual’s taxable year, and 

13 ‘‘(B) qualified tuition and related expenses 

14 paid by such individual during such individual’s 

15 taxable year shall be treated for purposes of 

16 this section as paid by such other taxpayer. 

17 ‘‘(4) TREATMENT OF CERTAIN PREPAY18 MENTS.—If qualified tuition and related expenses 

19 are paid by the taxpayer during a taxable year for 

20 an academic period which begins during the first 3 

21 months following such taxable year, such academic 

22 period shall be treated for purposes of this section 

23 as beginning during such taxable year. 

24 ‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 

25 shall be allowed under this section for any expense 


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1 for which a deduction is allowed under any other 

2 provision of this chapter. 

3 ‘‘(6) NO CREDIT FOR MARRIED INDIVIDUALS

4 FILING SEPARATE RETURNS.—If the taxpayer is a 

5 married individual (within the meaning of section 

6 7703), this section shall apply only if the taxpayer 

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

8 taxable year. 

9 ‘‘(7) NONRESIDENT ALIENS.—If the taxpayer is 

10 a nonresident alien individual for any portion of the 

11 taxable year, this section shall apply only if such in12 dividual is treated as a resident alien of the United 

13 States for purposes of this chapter by reason of an 

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

15 ‘‘(f) INFLATION ADJUSTMENTS.— 

16 ‘‘(1) DOLLAR LIMITATION ON AMOUNT OF

17 CREDIT.— 

18 ‘‘(A) IN GENERAL.—In the case of a tax19 able year beginning after 2008, each of the dol20 lar amounts under subsection (a) shall be in21 creased by an amount equal to— 

22 ‘‘(i) such dollar amount, multiplied by 

23 ‘‘(ii) the cost-of-living adjustment de24 termined under section 1(f)(3) for the cal25 endar year in which the taxable year beVerDate Aug 31 2005 23:02 Mar 14, 2007 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S851.IS S851

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1 gins, determined by substituting ‘calendar 

2 year 2007’ for ‘calendar year 1992’ in sub3 paragraph (B) thereof. 

4 ‘‘(B) ROUNDING.—If any amount as ad5 justed under subparagraph (A) is not a multiple 

6 of $100, such amount shall be rounded to the 

7 next lowest multiple of $100. 

8 ‘‘(2) INCOME LIMITS.— 

9 ‘‘(A) IN GENERAL.—In the case of a tax10 able year beginning after 2008, the $70,000 

11 and $140,000 amounts in subsection (b)(1)(B) 

12 shall each be increased by an amount equal 

13 to— 

14 ‘‘(i) such dollar amount, multiplied by 

15 ‘‘(ii) the cost-of-living adjustment de16 termined under section 1(f)(3) for the cal17 endar year in which the taxable year be18 gins, determined by substituting ‘calendar 

19 year 2007’ for ‘calendar year 1992’ in sub20 paragraph (B) thereof. 

21 ‘‘(B) ROUNDING.—If any amount as ad22 justed under subparagraph (A) is not a multiple 

23 of $1,000, such amount shall be rounded to the 

24 next lowest multiple of $1,000. 


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1 ‘‘(g) REGULATIONS.—The Secretary may prescribe 

2 such regulations as may be necessary or appropriate to 

3 carry out this section, including regulations providing for 

4 a recapture of the credit allowed under this section in 

5 cases where there is a refund in a subsequent taxable year 

6 of any amount which was taken into account in deter7 mining the amount of such credit.’’. 

8 (b) REPEAL OF DEDUCTION FOR QUALIFIED TUI9 TION AND RELATED EXPENSES.— 

10 (1) IN GENERAL.—Part VII of subchapter B of 

11 chapter 1 of the Internal Revenue Code of 1986 is 

12 amended by striking section 222 (relating to quali13 fied tuition and related expenses). 

14 (2) CLERICAL AMENDMENT.—The table of sec15 tion for part VII of subchapter B of chapter 1 of 

16 such Code is amended by striking the item relating 

17 to section 222. 

18 (c) CONFORMING AMENDMENTS.— 

19 (1) Paragraph (1) of section 26(a) of the Inter20 nal Revenue Code of 1986 is amended by inserting 

21 ‘‘25A,’’ after ‘‘24,’’. 

22 (2) Section 62(a) of such Code is amended by 

23 striking paragraph (18). 


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1 (3) Subparagraph (B) of section 72(t)(7) of 

2 such Code is amended by striking ‘‘section 

3 25A(g)(2)’’ and inserting ‘‘section 25A(e)(2)’’. 

4 (4) Section 221(d) of such Code is amended— 

5 (A) by striking ‘‘section 25A(g)(2)’’ in 

6 paragraph (2)(B) and inserting ‘‘section 

7 25A(e)(2)’’, 

8 (B) by striking ‘‘section 25A(f)(2)’’ in 

9 paragraph (2)(B) and inserting ‘‘section 

10 25A(c)(3)’’, and 

11 (C) by striking ‘‘section 25A(b)(3)’’ in 

12 paragraph (3) and inserting ‘‘section 

13 25A(c)(1)’’. 

14 (5) Section 529 of such Code is amended— 

15 (A) by striking ‘‘section 25A(g)(2)’’ in sub16 clause (I) of subsection (c)(3)(B)(v) and insert17 ing ‘‘section 25(e)(2)’’, and 

18 (B) by striking ‘‘section 25A(b)(3)’’ in 

19 clause (i) of subsection (e)(3)(B) and inserting 

20 ‘‘section 25A(c)(1)’’. 

21 (6) Section 530 of such Code is amended— 

22 (A) by striking ‘‘section 25A(g)(2)’’ in sub23 clause (I) of subsection (d)(2)(C)(i) and insert24 ing ‘‘section 25A(e)(2)’’, and 


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1 (B) by striking ‘‘section 25A(g)(2)’’ in 

2 clause (iii) of subsection (d)(4)(B) and inserting 

3 ‘‘section 25A(e)(2)’’. 

4 (7) Section 1400O of such Code is amended by 

5 adding at the end the following flush sentence: 

6 ‘‘For purposes of this section, any reference to section 25A 

7 shall be treated as a reference to such section before the 

8 date of the enactment of this sentence.’’. 

9 (8) Subsection (e) of section 6050S of such 

10 Code is amended by striking ‘‘(without regard to 

11 subsection (g)(2) thereof)’’ and inserting ‘‘(without 

12 regard to subsection (e)(2) thereof)’’. 

13 (9) Subparagraph (J) of section 6213(g)(2) of 

14 such Code is amended by striking ‘‘section 

15 25A(g)(1)’’ and inserting ‘‘section 25A(e)(1)’’. 

16 (10) The table of sections for subpart A of part 

17 IV of subchapter A of chapter 1 of such Code is 

18 amended by striking the item relating to section 25A 

19 and inserting the following: 

‘‘Sec. 25A. Higher education opportunity credit.’’. 

20 (d) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to expenses paid after December 

22 31, 2007 (in taxable years ending after such date), for 

23 education furnished in academic periods beginning after 

24 such date. 

Æ 


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