I 

113TH CONGRESS 

1ST SESSION H. R. 3437 

To amend the Internal Revenue Code of 1986 to consolidate, with modifications, the Hope Scholarship Credit, the Lifetime Learning Credit, and 

the American Opportunity Tax Credit, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 30, 2013 

Ms. SCHWARTZ introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to consolidate, 

with modifications, the Hope Scholarship Credit, the 

Lifetime Learning Credit, and the American Opportunity 

Tax Credit, 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. 

4 This Act may be cited as the ‘‘College Affordability 

5 Act of 2013’’. 


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1 SEC. 2. CONSOLIDATION OF EDUCATION CREDITS WITH 

2 MODIFICATIONS. 

3 (a) IN GENERAL.—Section 25A of the Internal Rev4 enue Code of 1986 is amended to read as follows: 

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

6 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in7 dividual, there shall be allowed as a credit against the tax 

8 imposed by this chapter for the taxable year the amount 

9 equal to 100 percent of so much of the qualified tuition 

10 and related expenses paid by the taxpayer during the tax11 able year (for education furnished to the eligible student 

12 during any academic period beginning in such taxable 

13 year) as does not exceed $2,500. 

14 ‘‘(b) LIFETIME LIMITATION ON AGGREGATE CRED15 IT.—In the case of qualified tuition and related expenses 

16 with respect to any individual, the aggregate amount of 

17 the credits claimed under this section for all taxable years 

18 shall not exceed $10,000, determined without regard to 

19 whether— 

20 ‘‘(1) such credits are claimed on the return of 

21 tax filed by the individual or by another taxpayer, or 

22 ‘‘(2) such expenses are treated as paid by the 

23 individual or by another taxpayer. 

24 ‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED

25 GROSS INCOME.— 


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1 ‘‘(1) IN GENERAL.—The amount which would 

2 (but for this subsection) be taken into account under 

3 this section for the taxable year shall be reduced 

4 (but not below zero) by the amount determined 

5 under paragraph (2). 

6 ‘‘(2) AMOUNT OF REDUCTION.—The amount 

7 determined under this paragraph is the amount 

8 which bears the same ratio to the amount which 

9 would be so taken into account as— 

10 ‘‘(A) the excess of— 

11 ‘‘(i) the taxpayer’s modified adjusted 

12 gross income for such taxable year, over 

13 ‘‘(ii) $80,000 (twice such amount in 

14 the case of a joint return), bears to 

15 ‘‘(B) $10,000 ($20,000 in the case of a 

16 joint return). 

17 ‘‘(3) MODIFIED ADJUSTED GROSS INCOME.— 

18 For purposes of this subsection, the term ‘modified 

19 adjusted gross income’ means the adjusted gross in20 come of the taxpayer for the taxable year increased 

21 by any amount excluded from gross income under 

22 section 911, 931, or 933. 

23 ‘‘(d) OTHER LIMITATIONS.— 

24 ‘‘(1) CREDIT ALLOWED FOR YEAR ONLY IF INDIVIDUAL IS AT LEAST 1 25 ⁄2 TIME STUDENT FOR PORVerDate Mar 15 2010 03:02 Nov 07, 2013 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3437.IH H3437

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1 TION OF YEAR.—The credit under this section shall 

2 not be allowed for a taxable year with respect to the 

3 qualified tuition and related expenses of an indi4 vidual unless such individual is an eligible student 

5 for at least one academic period which begins during 

6 such year. 

7 ‘‘(2) DENIAL OF CREDIT IF STUDENT CON8 VICTED OF A FELONY DRUG OFFENSE.—The credit 

9 under subsection (a) shall not be allowed for quali10 fied tuition and related expenses for the enrollment 

11 or attendance of a student for any academic period 

12 if such student has been convicted of a Federal or 

13 State felony offense consisting of the possession or 

14 distribution of a controlled substance before the end 

15 of the taxable year with or within which such period 

16 ends. 

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

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

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

20 a student who— 

21 ‘‘(A) meets the requirements of section 

22 484(a)(1) of the Higher Education Act of 1965 

23 (20 U.S.C. 1091(a)(1)), as in effect on August 

24 5, 1997, and 


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

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

3 student is pursuing. 

4 ‘‘(2) QUALIFIED TUITION AND RELATED EX5 PENSES.— 

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

7 tuition and related expenses’ means tuition, 

8 fees, and course materials required for the en9 rollment or attendance of— 

10 ‘‘(i) the taxpayer, 

11 ‘‘(ii) the taxpayer’s spouse, or 

12 ‘‘(iii) any dependent of the taxpayer 

13 with respect to whom the taxpayer is al14 lowed a deduction under section 151, 

15 at an eligible educational institution for courses 

16 of instruction of such individual at such institu17 tion. 

18 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV19 ING SPORTS, ETC.—Such term does not include 

20 expenses with respect to any course or other 

21 education involving sports, games, or hobbies, 

22 unless such course or other education is part of 

23 the individual’s degree program. 

24 ‘‘(C) EXCEPTION FOR NONACADEMIC

25 FEES.—Such term does not include student acVerDate Mar 15 2010 03:02 Nov 07, 2013 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3437.IH H3437

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1 tivity fees, athletic fees, insurance expenses, or 

2 other expenses unrelated to an individual’s aca3 demic course of instruction. 

4 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

5 The term ‘eligible educational institution’ means an 

6 institution— 

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

8 the Higher Education Act of 1965, as in effect 

9 on August 5, 1997, and 

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

11 program under title IV of such Act. 

12 ‘‘(f) OTHER LIMITATIONS AND SPECIAL RULES.— 

13 For purposes of this section: 

14 ‘‘(1) IDENTIFICATION REQUIREMENT.—No 

15 credit shall be allowed under this section to a tax16 payer with respect to the qualified tuition and re17 lated expenses of an individual unless the taxpayer 

18 includes the name and taxpayer identification num19 ber of such individual on the return of tax for the 

20 taxable year. 

21 ‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLAR22 SHIPS, ETC.— 

23 ‘‘(A) IN GENERAL.—The amount of quali24 fied tuition and related expenses otherwise 

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1 spect to an individual for an academic period 

2 shall be reduced (before the application of sub3 sections (a) and (c)) by the sum of any 

4 amounts paid for the benefit of such individual 

5 which are allocable to such period as— 

6 ‘‘(i) a qualified scholarship which is 

7 excludable from gross income under section 

8 117, 

9 ‘‘(ii) an educational assistance allow10 ance under chapter 30, 31, 32, 34, or 35 

11 of title 38, United States Code, or under 

12 chapter 1606 of title 10, United States 

13 Code, and 

14 ‘‘(iii) a payment (other than a gift, 

15 bequest, devise, or inheritance within the 

16 meaning of section 102(a)) for such indi17 vidual’s educational expenses, or attrib18 utable to such individual’s enrollment at an 

19 eligible educational institution, which is ex20 cludable from gross income under any law 

21 of the United States. 

22 ‘‘(B) COORDINATION WITH PELL GRANTS

23 NOT USED FOR QUALIFIED TUITION AND RE24 LATED EXPENSES.—Any amount determined 

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1 graph (A) which is attributable to a Federal 

2 Pell Grant under section 401 of the Higher 

3 Education Act of 1965 shall be reduced (but 

4 not below zero) by the amount of the expenses 

5 (other than qualified tuition and related ex6 penses) which are taken into account in deter7 mining the cost of attendance (as defined in 

8 section 472 of the Higher Education Act of 

9 1965, as in effect on the date of the enactment 

10 of this subparagraph) of such individual at an 

11 eligible educational institution for the academic 

12 period for which the credit under this section is 

13 being determined. 

14 ‘‘(3) TREATMENT OF EXPENSES PAID BY DE15 PENDENT.—If a deduction under section 151 with 

16 respect to an individual is allowed to another tax17 payer for a taxable year beginning in the calendar 

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

19 ‘‘(A) no credit shall be allowed under this 

20 section to such individual for such individual’s 

21 taxable year, and 

22 ‘‘(B) qualified tuition and related expenses 

23 paid by such individual during such individual’s 

24 taxable year shall be treated for purposes of 

25 this section as paid by such other taxpayer. 


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1 ‘‘(4) TREATMENT OF CERTAIN PREPAY2 MENTS.—If qualified tuition and related expenses 

3 are paid by the taxpayer during a taxable year for 

4 an academic period which begins during the first 3 

5 months following such taxable year, such academic 

6 period shall be treated for purposes of this section 

7 as beginning during such taxable year. 

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

9 shall be allowed under this section for any expense 

10 for which a deduction is allowed under any other 

11 provision of this chapter. 

12 ‘‘(6) NO CREDIT FOR MARRIED INDIVIDUALS

13 FILING SEPARATE RETURNS.—If the taxpayer is a 

14 married individual (within the meaning of section 

15 7703), this section shall apply only if the taxpayer 

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

17 taxable year. 

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

19 a nonresident alien individual for any portion of the 

20 taxable year, this section shall apply only if such in21 dividual is treated as a resident alien of the United 

22 States for purposes of this chapter by reason of an 

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

24 ‘‘(g) PORTION OF CREDIT REFUNDABLE.— 


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1 ‘‘(1) IN GENERAL.—80 percent of the amount 

2 which would (but for this subsection and section 26) 

3 be allowed as a credit allowed under this section for 

4 the taxable year shall be treated as a credit allow5 able under subpart C (and not allowed under this 

6 section). The preceding sentence shall not apply to 

7 any taxpayer for any taxable year if such taxpayer 

8 is a child to whom subsection (g) of section 1 applies 

9 for such taxable year. 

10 ‘‘(2) MAXIMUM AMOUNT REFUNDABLE.—The 

11 amount treated by paragraph (1) as a credit allow12 able under subpart C for any taxable year shall not 

13 exceed $1,500. 

14 ‘‘(h) INFLATION ADJUSTMENTS.— 

15 ‘‘(1) IN GENERAL.—In the case of taxable years 

16 beginning after 2014, the $2,500 and $3,000 

17 amounts in subsection (a), the $10,000 amount in 

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

19 (c)(2)(A)(ii), and the $1,500 in subsection (g)(2) 

20 shall each be increased by an amount equal to— 

21 ‘‘(A) such dollar amount, multiplied by 

22 ‘‘(B) the cost-of-living adjustment deter23 mined under section 1(f)(3) for the calendar 

24 year in which the taxable year begins, deter25 mined by substituting ‘calendar year 2013’ for 


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1 ‘calendar year 1992’ in subparagraph (B) 

2 thereof. 

3 ‘‘(2) ROUNDING.— 

4 ‘‘(A) IN GENERAL.—If the $1,500, $2,500, 

5 $3,000, or $10,000 amount as adjusted under 

6 paragraph (1) is not a multiple of $100, such 

7 amount shall be rounded to the next lowest 

8 multiple of $100. 

9 ‘‘(B) $80,000 AMOUNT.—If the $80,000 

10 amount as adjusted under paragraph (1) is not 

11 a multiple of $1,000, such amount shall be 

12 rounded to the next lowest multiple of $1,000. 

13 ‘‘(i) ELECTION NOT TO HAVE SECTION APPLY.—A 

14 taxpayer may elect not to have this section apply with re15 spect to the qualified tuition and related expenses of an 

16 individual for any taxable year. 

17 ‘‘(j) REGULATIONS.—The Secretary may prescribe 

18 such regulations as may be necessary or appropriate to 

19 carry out this section, including regulations providing for 

20 a recapture of the credit allowed under this section in 

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

22 of any amount which was taken into account in deter23 mining the amount of such credit. 

24 ‘‘(k) PILOT PROGRAM TO MAKE PERIODIC PAY25 MENTS AS COLLEGE EXPENSES INCURRED.— 


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1 ‘‘(1) IN GENERAL.—The Secretary of the 

2 Treasury and the Secretary of Education shall joint3 ly establish a program designed to make payments 

4 periodically to or on behalf of an eligible student as 

5 the student incurs qualified expenses during the tax6 able year. The total amount that may be so paid to 

7 or on behalf of an eligible student through this pro8 gram shall not exceed the credit which would (but 

9 for paragraph (2)) be allowable under this section if 

10 subsection (c) were applied by using the taxpayer’s 

11 modified adjusted gross income for the preceding 

12 taxable year. 

13 ‘‘(2) CREDIT REDUCED BY PILOT PROGRAM

14 PAYMENTS.—The credit allowable under this section 

15 (without regard to this paragraph) for any taxable 

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

17 payments made with respect to a student under 

18 paragraph (1) for expenses which would otherwise be 

19 taken into account in determining the credit under 

20 this section for such year. 

21 ‘‘(3) PROGRAM PARTICIPATION.—Participation 

22 in the program established under this subsection 

23 shall be voluntary with respect to both students and 

24 educational institutions; except that, institutions 

25 which are taxable under this chapter (other than by 


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1 reason of section 511) may not participate in such 

2 program. 

3 ‘‘(4) PROGRAM PERIOD.—The program estab4 lished under this subsection shall apply to expenses 

5 for academic periods beginning during the 5-year pe6 riod which begins on the date which is 1 year after 

7 the date of the enactment of this subsection. 

8 ‘‘(5) PAYMENTS NOT TREATED AS RESOURCES

9 FOR FINANCIAL AID.—Payments made under this 

10 subsection shall not be treated as resources for pur11 poses of determining the amount of any financial aid 

12 which is funded in whole or part with Federal funds. 

13 Payments under the program shall not be made in 

14 a manner that would reduce the State, private, or 

15 institutional aid available to an eligible student. 

16 ‘‘(6) NOTICE OF PROGRAM.—Educational insti17 tutions participating in the program established 

18 under this subsection shall provide appropriate no19 tices to parents and students of the option of pay20 ments under such program. Such notices shall not 

21 be considered tax advice for purposes of any Federal 

22 law or regulation. 

23 ‘‘(7) REPORTING.—The Secretary of the Treas24 ury and the Secretary of Education shall jointly sub25 mit annual reports to Congress on the program esVerDate Mar 15 2010 03:02 Nov 07, 2013 Jkt 039200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H3437.IH H3437

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1 tablished under this subsection, together with any 

2 recommendations with respect to such program.’’. 

3 (b) CLERICAL AMENDMENT.—The item relating to 

4 section 25A in the table of sections for subpart A of part 

5 IV of subchapter A of chapter 1 of such Code is amended 

6 to read as follows: 

‘‘Sec. 25A. American Opportunity Tax Credit.’’. 

7 (c) CONFORMING AMENDMENTS.— 

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

9 such Code is amended by striking ‘‘25A(g)(2)’’ and 

10 inserting ‘‘25A(f)(2)’’. 

11 (2) Paragraph (2) of section 221(d) of such 

12 Code is amended— 

13 (A) by striking ‘‘25A(g)(2)’’ in subpara14 graph (B) and inserting ‘‘25A(f)(2)’’, and 

15 (B) by striking ‘‘25A(f)(2)’’ and inserting 

16 ‘‘25A(e)(3)’’. 

17 (3) Paragraph (3) of section 221(d) of such 

18 Code is amended by striking ‘‘25A(b)(3)’’ and in19 serting ‘‘25A(e)(1)’’. 

20 (4) Paragraph (1) of section 222(d) of such 

21 Code is amended— 

22 (A) by striking ‘‘25A(f)’’ and inserting 

23 ‘‘25A(e)(2)’’, and 

24 (B) by striking ‘‘25A(g)(2)’’ and inserting 

25 ‘‘25A(f)(2)’’. 


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1 (5) Clause (v) of section 529(c)(3)(B) of such 

2 Code is amended— 

3 (A) by striking ‘‘25A(g)(2)’’ in subclause 

4 (I) and inserting ‘‘25A(f)(2)’’, and 

5 (B) by striking ‘‘HOPE AND LIFETIME

6 LEARNING CREDITS’’ in the heading and insert7 ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 

8 (6) Clause (i) of section 529(e)(3)(B) of such 

9 Code is amended by striking ‘‘25A(b)(3)’’ and in10 serting ‘‘25A(e)(1)’’. 

11 (7) Subparagraph (C) of section 530(d)(2) of 

12 such Code is amended— 

13 (A) by striking ‘‘25A(g)(2)’’ in clause (i)(I) 

14 and inserting ‘‘25A(f)(2)’’, and 

15 (B) by striking ‘‘HOPE AND LIFETIME

16 LEARNING CREDITS’’ in the heading and insert17 ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 

18 (8) Clause (iii) of section 530(d)(4)(B) of such 

19 Code is amended by striking ‘‘25A(g)(2)’’ and in20 serting ‘‘25A(f)(2)’’. 

21 (9) Section 1400O of such Code is amended— 

22 (A) by striking ‘‘25A(f)(2)’’ and inserting 

23 ‘‘25A(e)(3)’’, 


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1 (B) by inserting ‘‘(as in effect on the date 

2 of the enactment of this section)’’ after 

3 ‘‘25A(b)(1)’’ in paragraph (2), and 

4 (C) by inserting ‘‘(as in effect on the date 

5 of the enactment of this section)’’ after 

6 ‘‘25A(c)(1)’’ in paragraph (3). 

7 (10) Subsection (e) of section 6050S of such 

8 Code is amended by striking ‘‘subsection (g)(2)’’ and 

9 inserting ‘‘subsection (f)(2)’’. 

10 (11) Subparagraph (A) of section 6211(b)(4) of 

11 such Code is amended by striking ‘‘subsection 

12 (i)(6)’’ and inserting ‘‘subsection (g)’’. 

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

14 such Code is amended by striking ‘‘25A(g)(1)’’ and 

15 inserting ‘‘25A(f)(1)’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2013. 

19 SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM 

20 GROSS INCOME. 

21 (a) IN GENERAL.—Paragraph (1) of section 117(b) 

22 of the Internal Revenue Code of 1986 is amended by strik23 ing ‘‘received by an individual’’ and all that follows and 

24 inserting ‘‘received by an individual— 


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1 ‘‘(A) as a scholarship or fellowship grant to the 

2 extent the individual establishes that, in accordance 

3 with the conditions of the grant, such amount was 

4 used for qualified tuition and related expenses, or 

5 ‘‘(B) as a Federal Pell Grant under section 401 

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

7 1070a) (as in effect on the date of the enactment of 

8 this subparagraph).’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2013. 

12 SEC. 4. INCREASED PUBLIC AWARENESS OF AMERICAN OP13 PORTUNITY TAX CREDIT. 

14 The Secretary of the Treasury, or the Secretary’s del15 egate, in consultation with the Secretary of Education, 

16 shall establish a taxpayer awareness program to inform 

17 the taxpaying public of the availability of the American 

18 Opportunity Tax Credit allowed under section 25A of the 

19 Internal Revenue Code of 1986. Such public awareness 

20 program shall be designed to assure that individuals who 

21 may be eligible are informed of the availability of such 

22 credit and filing procedures. The Secretary shall use ap23 propriate means of communication to carry out the provi24 sions of this section. The taxpayer awareness program 

25 shall include, but not be limited to, prominent display of 


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1 information about the availability of the American Oppor2 tunity Tax Credit on information return forms specified 

3 by such Secretary for use by educational institutions to 

4 report qualified tuition and related expenses incurred. 

Æ 


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