II

104TH CONGRESS

1ST SESSION S. 242

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

the payment of tuition for higher education and interest on student loans.

IN THE SENATE OF THE UNITED STATES

JANUARY 18 (legislative day, JANUARY 10), 1995

Mr. DASCHLE (for himself, Mr. BREAUX, Mr. KENNEDY, Mr. REID, Mr.

ROCKEFELLER, Ms. MIKULSKI, Mr. FORD, Mr. DODD, and Mr. KERRY)

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 the payment of tuition for higher education

and interest on student 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. SHORT TITLE.

4 This Act may be cited as the ‘‘Higher Education Tax

5 Relief Act of 1995’’.

6 SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

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

8 B of chapter 1 of the Internal Revenue Code of 1986 (re9 lating to additional itemized deductions for individuals) is
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1 amended by redesignating section 220 as section 221 and

2 by inserting after section 219 the following new section:

3 ‘‘SEC. 220. HIGHER EDUCATION TUITION AND FEES; INTER4 EST ON STUDENT LOANS.

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

6 individual, there shall be allowed as a deduction an

7 amount equal to the sum of—

8 ‘‘(1) the qualified higher education expenses,

9 plus

10 ‘‘(2) interest on qualified higher education

11 loans,

12 paid by the taxpayer during the taxable year.

13 ‘‘(b) QUALIFIED HIGHER EDUCATION EXPENSES.—

14 For purposes of this section—

15 ‘‘(1) QUALIFIED HIGHER EDUCATION EX16 PENSES.—

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

18 higher education expenses’ means tuition and

19 fees required for the enrollment or attendance

20 of—

21 ‘‘(i) the taxpayer,

22 ‘‘(ii) the taxpayer’s spouse, or

23 ‘‘(iii) any dependent of the taxpayer

24 with respect to whom the taxpayer is al25 lowed a deduction under section 151,
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1 as an eligible student at an institution of higher

2 education.

3 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV4 ING SPORTS, ETC.—Such term does not include

5 expenses with respect to any course or other

6 education involving sports, games, or hobbies

7 unless such expenses—

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

9 ‘‘(ii) are deductible under this chapter

10 without regard to this section.

11 ‘‘(C) EXCEPTION FOR NONACADEMIC

12 FEES.—Such term does not include any student

13 activity fees, athletic fees, insurance expenses,

14 or other expenses unrelated to a student’s aca15 demic course of instruction.

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

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

18 means a student who meets the requirements of

19 section 484(a)(1) of the Higher Education Act

20 of 1965 (20 U.S.C. 1091(a)(1)).

21 ‘‘(2) DOLLAR LIMITATION.—

22 ‘‘(A) IN GENERAL.—The amount taken

23 into account under paragraph (1) for any tax24 able year shall not exceed $10,000.
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1 ‘‘(B) PHASE-IN.—In the case of taxable

2 years beginning in 1996, 1997, 1998, and

3 1999, the following amounts shall be sub4 stituted for ‘$10,000’ in subparagraph (A):

‘‘For taxable years The substitute

beginning in: amount is:

1996 ............................................................... $2,000

1997 ............................................................... 4,000

1998 ............................................................... 6,000

1999 ............................................................... 8,000.

5 ‘‘(3) LIMITATION BASED ON MODIFIED AD6 JUSTED GROSS INCOME.—

7 ‘‘(A) IN GENERAL.—If the modified ad8 justed gross income of the taxpayer for the tax9 able year exceeds $70,000 ($100,000 in the

10 case of a joint return), the amount which would

11 (but for this paragraph) be taken into account

12 under paragraph (1) shall be reduced (but not

13 below zero) by the amount which bears the

14 same ratio to the amount which would be taken

15 into account as such excess bears to $20,000.

16 ‘‘(B) INFLATION ADJUSTMENT.—In the

17 case of any taxable year beginning in a calendar

18 year after 1996, the $70,000 and $100,000

19 amounts contained in subparagraph (A) shall

20 be increased by an amount equal to—

21 ‘‘(i) such dollar amount, multiplied by
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1 ‘‘(ii) the cost-of-living adjustment

2 under section 1(f)(3) for the calendar year

3 in which the taxable year begins, except

4 that section 1(f)(3)(B) shall be applied by

5 substituting ‘1995’ for ‘1992’.

6 ‘‘(C) ROUNDING.—If any amount as ad7 justed under subparagraph (B) is not a mul8 tiple of $50, such amount shall be rounded to

9 the nearest multiple of $50 (or if such amount

10 is a multiple of $25, such amount shall be

11 rounded to the next highest multiple of $50).

12 ‘‘(D) 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 determined—

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

17 sections 911, 931, and 933, and

18 ‘‘(ii) after the application of sections

19 86, 135, 219, and 469.

20 ‘‘(4) INSTITUTION OF HIGHER EDUCATION.—

21 The term ‘institution of higher education’ means an

22 institution which—

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

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

25 1088), and
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1 ‘‘(B) is eligible to participate in programs

2 under title IV of such Act.

3 ‘‘(c) QUALIFIED HIGHER EDUCATION LOAN.—For

4 purposes of this section—

5 ‘‘(1) IN GENERAL.—The term ‘qualified higher

6 education loan’ means a loan to a student which is—

7 ‘‘(A) made, insured, or guaranteed by the

8 Federal Government,

9 ‘‘(B) made by a State or a political sub10 division of a State,

11 ‘‘(C) made from the proceeds of a qualified

12 student loan bond under section 144(b), or

13 ‘‘(D) made by an institution of higher edu14 cation (as defined in section 1201(a) of the

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

16 1141(a))).

17 ‘‘(2) LIMITATION.—

18 ‘‘(A) IN GENERAL.—The amount of inter19 est on a qualified higher education loan which

20 is taken into account under subsection (a)(2)

21 shall be reduced by the amount which bears the

22 same ratio to such amount of interest as—

23 ‘‘(i) the proceeds from such loan used

24 for qualified higher education expenses,

25 bears to
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1 ‘‘(ii) the total proceeds from such

2 loan.

3 ‘‘(B) QUALIFIED HIGHER EDUCATION EX4 PENSES.—For purposes of subparagraph (A),

5 the term ‘qualified higher education expenses’

6 has the meaning given such term by subsection

7 (b), except that—

8 ‘‘(i) such term shall include reason9 able living expenses while away from home,

10 and

11 ‘‘(ii) the limitations of paragraphs (2)

12 and (3) of subsection (b) shall not apply.

13 ‘‘(d) COORDINATION WITH OTHER PROVISIONS.—

14 ‘‘(1) NO DOUBLE BENEFIT.—

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

16 allowed under subsection (a) for qualified high17 er education expenses or interest on qualified

18 higher education loans with respect to which a

19 deduction is allowed under any other provision

20 of this chapter.

21 ‘‘(B) SAVINGS BOND EXCLUSION.—A de22 duction shall be allowed under subsection (a)(1)

23 for qualified higher education expenses only to

24 the extent the amount of such expenses exceeds
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1 the amount excludable under section 135 for

2 the taxable year.

3 ‘‘(2) QUALIFIED RESIDENCE INTEREST.—If a

4 deduction is allowed under subsection (a)(2) for in5 terest which is also qualified residence interest under

6 section 163(h), such interest shall not be taken into

7 account under section 163(h).

8 ‘‘(e) SPECIAL RULES.—

9 ‘‘(1) ELECTION.—If a deduction is allowable

10 under more than one provision of this chapter with

11 respect to qualified higher education expenses, the

12 taxpayer may elect the provision under which the de13 duction is allowed.

14 ‘‘(2) LIMITATION ON TAXABLE YEAR OF DE15 DUCTION.—

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

17 allowed under subsection (a)(1) for any taxable

18 year only to the extent the qualified higher edu19 cation expenses are in connection with attend20 ance at an institution of higher education dur21 ing the taxable year.

22 ‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—

23 Subparagraph (A) shall not apply to qualified

24 higher education expenses paid during a taxable

25 year which are in connection with attendance at
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1 an institution of higher education which begins

2 during the first 2 months of the following tax3 able year.

4 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR5 SHIPS AND VETERANS BENEFITS.—The amount of

6 qualified higher education expenses otherwise taken

7 into account under subsection (a)(1) with respect to

8 the education of an individual shall be reduced (be9 fore the application of subsection (b)) by the sum of

10 the amounts received with respect to such individual

11 for the taxable year as—

12 ‘‘(A) a qualified scholarship which under

13 section 117 is not includable in gross income,

14 ‘‘(B) an educational assistance allowance

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

16 United States Code, or

17 ‘‘(C) a payment (other than a gift, be18 quest, devise, or inheritance within the meaning

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

20 attributable to attendance at an eligible edu21 cational institution, which is exempt from in22 come taxation by any law of the United States.

23 ‘‘(4) NO DEDUCTION FOR MARRIED INDIVID24 UALS FILING SEPARATE RETURNS.—If the taxpayer

25 is a married individual (within the meaning of sec-
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1 tion 7703), this section shall apply only if the tax2 payer and his spouse file a joint return for the tax3 able year.

4 ‘‘(5) REGULATIONS.—The Secretary may pre5 scribe such regulations as may be necessary or ap6 propriate to carry out this section, including regula7 tions requiring recordkeeping and information re8 porting.’’

9 (b) DEDUCTION ALLOWED IN COMPUTING AD10 JUSTED GROSS INCOME.—Section 62(a) of such Code is

11 amended by inserting after paragraph (15) the following

12 new paragraph:

13 ‘‘(16) HIGHER EDUCATION TUITION AND

14 FEES.—The deduction allowed by section 219.’’

15 (c) CONFORMING AMENDMENT.—The table of sec16 tions for part VII of subchapter B of chapter 1 of such

17 Code is amended by striking the item relating to section

18 220 and inserting:

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

‘‘Sec. 221. Cross reference.’’

19 (d) EFFECTIVE DATES.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 1995.

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