I

106TH CONGRESS

2D SESSION H. R. 5541

To amend the Internal Revenue Code of 1986 to make the Hope and Lifetime

Learning Credits refundable, and to allow taxpayers to obtain shortterm student loans by using the future refund of such credits as collateral

for the loans.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 25, 2000

Mr. ANDREWS introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to make

the Hope and Lifetime Learning Credits refundable, and

to allow taxpayers to obtain short-term student loans

by using the future refund of such credits as collateral

for the loans.

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

3 SECTION 1. HOPE AND LIFETIME LEARNING CREDITS TO

4 BE REFUNDABLE.

5 (a) CREDIT TO BE REFUNDABLE.—Section 25A of

6 the Internal Revenue Code of 1986 (relating to Hope and

7 Lifetime Learning credits) is hereby moved to subpart C
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1 of part IV of subchapter A of chapter 1 of such Code (re2 lating to refundable credits) and inserted after section 34.

3 (b) TECHNICAL AMENDMENTS.—

4 (1) Section 35 of such Code is redesignated as

5 section 36.

6 (2) Section 25A of such Code (as moved by

7 subsection (a)) is redesignated as section 35.

8 (3) Paragraph (1) of section 35(a) of such Code

9 (as redesignated by paragraph (2)) is amended by

10 striking ‘‘this chapter’’ and inserting ‘‘this subtitle’’.

11 (4) Subparagraph (B) of section 72(t)(7) of

12 such Code is amended by striking ‘‘section

13 25A(g)(2)’’ and inserting ‘‘section 35(g)(2)’’.

14 (5) Subparagraph (A) of section 135(d)(2) of

15 such Code is amended by striking ‘‘section 25A’’ and

16 inserting ‘‘section 35’’.

17 (6) Section 221(e) of such Code is amended—

18 (A) in paragraph (2)(B), by striking ‘‘sec19 tion 25A(g)(2)’’ and inserting ‘‘section

20 35(g)(2)’’ and by striking ‘‘section 25A(f)(2)’’

21 and inserting ‘‘section 35(f)(2)’’, and

22 (B) in paragraph (3), by striking ‘‘section

23 25A(b)(3)’’ and inserting ‘‘section 35(b)(3)’’.
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1 (7) Clause (i) of section 529(e)(3)(B) of such

2 Code is amended by striking ‘‘section 25A(b)(3)’’

3 and inserting ‘‘section 35(b)(3)’’.

4 (8) Subparagraph (A) of section 530(b)(2) is

5 amended by striking ‘‘section 25A(g)(2)’’ and insert6 ing ‘‘section 35(g)(2)’’.

7 (9) Clause (iii) of section 530(d)(4)(B) is

8 amended by striking ‘‘section 25A(g)(2)’’ and insert9 ing ‘‘section 35(g)(2)’’.

10 (10) Subsection (e) of section 6050S is amend11 ed by striking ‘‘section 25A’’ and inserting ‘‘section

12 35’’.

13 (11) Subparagraph (J) of section 6213(g)(2) is

14 amended by striking ‘‘section 25A(g)(1)’’ and insert15 ing ‘‘section 35(g)(1)’’.

16 (12) Paragraph (2) of section 1324(b) of title

17 31, United States Code, is amended by inserting be18 fore the period ‘‘or from section 35 of such Code’’.

19 (13) The table of sections for subpart C of part

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

21 amended by striking the item relating to section 35

22 and inserting the following:

‘‘Sec. 35. Hope and Lifetime Learning credits.

‘‘Sec. 36. Overpayments of tax.’’
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1 (14) The table of sections for subpart A of such

2 part IV is amended by striking the item relating to

3 section 25A.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this subsection shall apply to taxable years beginning after

6 December 31, 2000.

7 SEC. 2. USE OF REFUNDS OF HOPE AND LIFETIME LEARN8 ING CREDITS AS COLLATERAL FOR SHORT9 TERM STUDENT LOANS.

10 (a) IN GENERAL.—Section 35 of the Internal Rev11 enue Code of 1986 (as redesignated by section 1) is

12 amended by redesignating subsection (i) as subsection (j)

13 and by inserting after subsection (h) the following new

14 section:

15 ‘‘(i) TUITION TAX CREDIT ASSIGNMENT LOANS.—

16 ‘‘(1) IN GENERAL.—Any eligible educational in17 stitution may provide to a taxpayer described in

18 paragraph (3) a tuition tax credit assignment loan.

19 ‘‘(2) TUITION TAX CREDIT ASSIGNMENT

20 LOAN.—For purposes of this subsection, the term

21 ‘tuition tax credit assignment loan’ means a loan

22 provided to the taxpayer by the eligible educational

23 institution in return for which the taxpayer agrees

24 to authorize the Internal Revenue Service to dis25 burse the loan amount directly to the lender out of
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1 the next refund due to the taxpayer that is attrib2 utable to a credit under this section.

3 ‘‘(3) TAXPAYERS ELIGIBLE FOR LOAN.—A tax4 payer is eligible for a loan under this subsection if

5 the taxpayer is either—

6 ‘‘(A) an eligible student for whom a Hope

7 Scholarship Credit under subsection (a)(1) is

8 allowed, or

9 ‘‘(B) a taxpayer for whom a Lifetime

10 Learning Credit is allowed.

11 ‘‘(4) MAXIMUM AMOUNT OF LOAN.—The

12 amount of a loan provided under this subsection

13 may not exceed—

14 ‘‘(A) $1,000, or

15 ‘‘(B) in the case of a first-year or second16 year student, $1,500.

17 ‘‘(5) LOAN ORIGINATION FEE MAY BE

18 CHARGED.—An eligible educational institution pro19 viding a tuition tax credit assignment loan may

20 charge the taxpayer a loan origination fee of up to

21 5 percent of the loan amount, but may not charge

22 interest on the loan amount.

23 ‘‘(6) 3-YEAR TIME LIMIT ON USE OF CREDIT

24 REFUND AS COLLATERAL.—If a taxpayer who has

25 obtained a tuition tax credit assignment loan has not
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1 received a refund attributable to a credit under this

2 section within three years after receiving the loan,

3 then the loan will become due and payable in accord4 ance with the terms of the loan agreement.’’.

5 (b) EFFECTIVE DATE.—The amendment made by

6 this section shall apply with respect to credits claimed in

7 taxable years beginning after December 31, 2000.

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