II

104TH CONGRESS

2D SESSION S. 1670

To amend the Internal Revenue Code of 1986 to allow a deduction for

postsecondary education expenses, to make permanent the exclusion for

employer-provided education, and for other purposes.

IN THE SENATE OF THE UNITED STATES

APRIL 15, 1996

Mr. HARKIN 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 allow a

deduction for postsecondary education expenses, to make

permanent the exclusion for employer-provided education,

and for other purposes.

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; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Common Sense Middle Class Tax Relief Act of 1996’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment
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1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

5 (a) DEDUCTION ALLOWED.— Part VII of subchapter

6 B of chapter 1 (relating to additional itemized deductions

7 for individuals) is amended by redesignating section 220

8 as section 221 and by inserting after section 219 the fol9 lowing new section:

10 ‘‘SEC. 220. HIGHER EDUCATION TUITION AND FEES.

11 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an

12 individual, there shall be allowed as a deduction the

13 amount of qualified higher education expenses paid by the

14 taxpayer during the taxable year.

15 ‘‘(b) LIMITATIONS.—

16 ‘‘(1) DOLLAR LIMITATION.—

17 ‘‘(A) IN GENERAL.—The amount allowed

18 as a deduction under subsection (a) for any tax19 able year shall not exceed $10,000.

20 ‘‘(B) PHASE-IN.—In the case of taxable

21 years beginning in 1996, subparagraph (A)

22 shall be applied by substituting ‘$5,000’ for

23 ‘$10,000’.

24 ‘‘(2) LIMITATION BASED ON MODIFIED AD25 JUSTED GROSS INCOME.—
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1 ‘‘(A) IN GENERAL.—The amount allowed

2 as a deduction under subsection (a) (after ap3 plication of paragraph (1)) shall be reduced

4 (but not below zero) by the amount determined

5 under subparagraph (B).

6 ‘‘(B) AMOUNT OF REDUCTION.—The

7 amount determined under this subparagraph

8 equals the amount which bears the same ratio

9 to the deduction (determined without regard to

10 this paragraph) as—

11 ‘‘(i) the excess of—

12 ‘‘(I) the taxpayer’s modified ad13 justed gross income for such taxable

14 year, over

15 ‘‘(II) $60,000 ($80,000 in the

16 case of a joint return), bears to

17 ‘‘(ii) $20,000.

18 ‘‘(C) MODIFIED ADJUSTED GROSS IN19 COME.—The term ‘modified adjusted gross in20 come’ means the adjusted gross income of the

21 taxpayer for the taxable year determined—

22 ‘‘(i) without regard to this section and

23 sections 911, 931, and 933, and

24 ‘‘(ii) after the application of sections

25 86, 135, 219 and 469.
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1 For purposes of sections 86, 135, 219, and

2 469, adjusted gross income shall be determined

3 without regard to the deduction allowed under

4 this section.

5 ‘‘(D) INFLATION ADJUSTMENTS.—

6 ‘‘(i) IN GENERAL.—In the case of a

7 taxable year beginning after 1998, the

8 $60,000 and $80,000 amounts described in

9 subparagraph (B) shall each be increased

10 by an amount equal to—

11 ‘‘(I) such dollar amounts, multi12 plied by

13 ‘‘(II) the cost-of-living adjust14 ment determined under section 1(f)(3)

15 for the calendar year in which the tax16 able year begins, determined by sub17 stituting ‘calendar year 1997’ for ‘cal18 endar year 1992’ in subparagraph (B)

19 thereof.

20 ‘‘(ii) ROUNDING.—If any amount as

21 adjusted under clause (i) is not a multiple

22 of $5,000, such amount shall be rounded

23 to the next lowest multiple of $5,000.

24 ‘‘(c) QUALIFIED HIGHER EDUCATION EXPENSES.—

25 For purposes of this section—
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1 ‘‘(1) QUALIFIED HIGHER EDUCATION EX2 PENSES.—

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

4 higher education expenses’ means tuition and

5 fees charged by an educational institution and

6 required for the enrollment or attendance of—

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 as an eligible student at an institution of higher

13 education.

14 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV15 ING SPORTS, ETC.—Such term does not include

16 expenses with respect to any course or other

17 education involving sports, games, or hobbies,

18 unless such expenses—

19 ‘‘(i) are part of a degree program, or

20 ‘‘(ii) are deductible under this chapter

21 without regard to this section.

22 ‘‘(C) EXCEPTION FOR NONACADEMIC

23 FEES.—Such term does not include any student

24 activity fees, athletic fees, insurance expenses,
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1 or other expenses unrelated to a student’s aca2 demic course of instruction.

3 ‘‘(D) ELIGIBLE STUDENT.—For purposes

4 of subparagraph (A), the term ‘eligible student’

5 means a student who—

6 ‘‘(i) meets the requirements of section

7 484(a)(1) of the Higher Education Act of

8 1965 (20 U.S.C. 1091(a)(1)), as in effect

9 on the date of the enactment of this sec10 tion, and

11 ‘‘(ii)(I) is carrying at least one-half

12 the normal full-time work load for the

13 course of study the student is pursuing, as

14 determined by the institution of higher

15 education, or

16 ‘‘(II) is enrolled in a course which en17 ables the student to improve the student’s

18 job skills or to acquire new job skills.

19 ‘‘(E) IDENTIFICATION REQUIREMENT.—No

20 deduction shall be allowed under subsection (a)

21 to a taxpayer with respect to an eligible student

22 unless the taxpayer includes the name, age, and

23 taxpayer identification number of such eligible

24 student on the return of tax for the taxable

25 year.
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1 ‘‘(2) INSTITUTION OF HIGHER EDUCATION.—

2 The term ‘institution of higher education’ means an

3 institution which—

4 ‘‘(A) is described in section 481 of the

5 Higher Education Act of 1965 (20 U.S.C.

6 1088), as in effect on the date of the enactment

7 of this section, and

8 ‘‘(B) is eligible to participate in programs

9 under title IV of such Act.

10 ‘‘(d) SPECIAL RULES.—

11 ‘‘(1) NO DOUBLE BENEFIT.—

12 ‘‘(A) IN GENERAL.—No deduction shall be

13 allowed under subsection (a) for qualified high14 er education expenses with respect to which a

15 deduction is allowable to the taxpayer under

16 any other provision of this chapter unless the

17 taxpayer irrevocably waives his right to the de18 duction of such expenses under such other pro19 vision.

20 ‘‘(B) DEPENDENTS.—No deduction shall

21 be allowed under subsection (a) to any individ22 ual with respect to whom a deduction under

23 section 151 is allowable to another taxpayer for

24 a taxable year beginning in the calendar year in

25 which such individual’s taxable year begins.
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1 ‘‘(C) SAVINGS BOND EXCLUSION.—A de2 duction shall be allowed under subsection (a)

3 for qualified higher education expenses only to

4 the extent the amount of such expenses exceeds

5 the amount excludable under section 135 for

6 the taxable year.

7 ‘‘(2) LIMITATION ON TAXABLE YEAR OF DE8 DUCTION.—

9 ‘‘(A) IN GENERAL.—A deduction shall be

10 allowed under subsection (a) for any taxable

11 year only to the extent the qualified higher edu12 cation expenses are in connection with enroll13 ment at an institution of higher education dur14 ing the taxable year.

15 ‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—

16 Subparagraph (A) shall not apply to qualified

17 higher education expenses paid during a taxable

18 year if such expenses are in connection with an

19 academic term beginning during such taxable

20 year or during the first 3 months of the next

21 taxable year.

22 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR23 SHIPS AND VETERANS’ BENEFITS.—The amount of

24 qualified higher education expenses otherwise taken

25 into account under subsection (a) with respect to the
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1 education of an individual shall be reduced (before

2 the application of subsection (b)) by the sum of the

3 amounts received with respect to such individual for

4 the taxable year as—

5 ‘‘(A) a qualified scholarship which under

6 section 117 is not includable in gross income,

7 ‘‘(B) an educational assistance allowance

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

9 United States Code, or

10 ‘‘(C) a payment (other than a gift, be11 quest, devise, or inheritance within the meaning

12 of section 102(a)) for educational expenses, or

13 attributable to enrollment at an eligible edu14 cational institution, which is exempt from in15 come taxation by any law of the United States.

16 ‘‘(4) NO DEDUCTION FOR MARRIED INDIVID17 UALS FILING SEPARATE RETURNS.—If the taxpayer

18 is a married individual (within the meaning of sec19 tion 7703), this section shall apply only if the tax20 payer and the taxpayer’s spouse file a joint return

21 for the taxable year.

22 ‘‘(5) NONRESIDENT ALIENS.—If the taxpayer is

23 a nonresident alien individual for any portion of the

24 taxable year, this section shall apply only if such in25 dividual is treated as a resident alien of the United
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1 States for purposes of this chapter by reason of an

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

3 ‘‘(6) REGULATIONS.—The Secretary may pre4 scribe such regulations as may be necessary or ap5 propriate to carry out this section, including regula6 tions requiring recordkeeping and information re7 porting.’’

8 (b) DEDUCTION ALLOWED IN COMPUTING AD9 JUSTED GROSS INCOME.—Section 62(a) is amended by in10 serting after paragraph (15) the following new paragraph:

11 ‘‘(16) HIGHER EDUCATION TUITION AND

12 FEES.—The deduction allowed by section 220.’’

13 (c) CONFORMING AMENDMENT.—The table of sec14 tions for part VII of subchapter B of chapter 1 is amended

15 by striking the item relating to section 220 and inserting:

‘‘Sec. 220. Higher education tuition and fees.

‘‘Sec. 221. Cross reference.’’

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

17 this section shall apply to payments made after December

18 31, 1995.

19 SEC. 3. EXCLUSION FOR EMPLOYER-PROVIDED EDU20 CATIONAL ASSISTANCE MADE PERMANENT.

21 (a) IN GENERAL.—Section 127 (relating to exclusion

22 for employer-provided educational assistance programs) is

23 amended by striking subsection (d) and by redesignating

24 subsection (e) as subsection (d).
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

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