I 

113TH CONGRESS 

1ST SESSION H. R. 3476 

To amend the Internal Revenue Code of 1986 to extend and modify the 

American Opportunity Tax Credit, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 13, 2013 

Mr. ISRAEL 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 extend 

and modify 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 ‘‘Middle Class College 

5 Tuition Tax Credit Expansion Act’’. 

6 SEC. 2. EXTENSION AND MODIFICATION OF AMERICAN OP7 PORTUNITY TAX CREDIT. 

8 (a) IN GENERAL.—Section 25A of the Internal Rev9 enue Code of 1986 is amended to read as follows: 


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

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in3 dividual who is an eligible student for any taxable year, 

4 there shall be allowed as a credit against the tax imposed 

5 by this chapter for such taxable year the amount deter6 mined under subsection (b) with respect to such indi7 vidual. 

8 ‘‘(b) AMOUNT OF CREDIT.— 

‘‘(1) STUDENT ENROLLED AT LEAST 1 9 ⁄2 TIME.— 

10 In the case of an eligible student who is carrying at 

least 1 11 ⁄2 the normal full-time workload for the course 

12 of study the student is pursuing, the amount deter13 mined under this subsection with respect to such in14 dividual is the sum of— 

15 ‘‘(A) 100 percent of so much of the quali16 fied tuition and related expenses paid by the 

17 taxpayer during the taxable year (for education 

18 furnished to the eligible student during any 

19 academic period beginning in such taxable year) 

20 as does not exceed $2,500, plus 

21 ‘‘(B) 50 percent of such expenses so paid 

22 as exceeds $2,500 but does not exceed $7,500. 

23 ‘‘(2) OTHER STUDENTS.—In the case of an eli24 gible student not described in paragraph (1), the 

25 amount determined under this subsection with re26 spect to such individual is 50 percent of so much of 


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1 the qualified tuition and related expenses paid by 

2 the taxpayer during the taxable year (for education 

3 furnished to the eligible student during any aca4 demic period beginning in such taxable year) as does 

5 not exceed $10,000. 

6 ‘‘(c) DOLLAR LIMITATIONS.— 

7 ‘‘(1) LIMITATION BASED ON MODIFIED AD8 JUSTED GROSS INCOME.— 

9 ‘‘(A) IN GENERAL.—The amount which 

10 would (but for this paragraph) be taken into ac11 count under this section for the taxable year 

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

13 amount determined under paragraph (2). 

14 ‘‘(B) AMOUNT OF REDUCTION.—The 

15 amount determined under this paragraph is the 

16 amount which bears the same ratio to the 

17 amount which would be so taken into account 

18 as— 

19 ‘‘(i) the excess of— 

20 ‘‘(I) the taxpayer’s modified ad21 justed gross income for such taxable 

22 year, over 

23 ‘‘(II) $160,000 (twice such 

24 amount in the case of a joint return), 

25 bears to 


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

2 a joint return). 

3 ‘‘(C) MODIFIED ADJUSTED GROSS IN4 COME.—For purposes of this paragraph, the 

5 term ‘modified adjusted gross income’ means 

6 the adjusted gross income of the taxpayer for 

7 the taxable year increased by any amount ex8 cluded from gross income under section 911, 

9 931, or 933. 

10 ‘‘(D) INFLATION ADJUSTMENT.—In the 

11 case of any taxable year beginning after 2014, 

12 the $160,000 amount in subparagraph 

13 (B)(i)(II) shall be increased by an amount 

14 equal to— 

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

16 ‘‘(ii) the cost-of-living adjustment de17 termined under section 1(f)(3) for the cal18 endar year in which the taxable year be19 gins, determined by substituting ‘calendar 

20 year 2013’ for ‘calendar year 1992’ in sub21 paragraph (B) thereof. 

22 Any increase determined under the preceding 

23 sentence shall be rounded to the nearest mul24 tiple of $1,000. 


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1 ‘‘(2) LIMITATION BASED ON AMOUNT OF

2 TAX.—The credit allowed under this section shall 

3 not exceed the excess of— 

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

5 (as defined in section 26(b)) plus the tax im6 posed by section 55, over 

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

8 under this subpart (other than this subsection 

9 and sections 23, 25D, and 30D) and section 27 

10 for the taxable year. 

11 ‘‘(d) OTHER LIMITATIONS AND SPECIAL RULES.— 

12 For purposes of this section: 

13 ‘‘(1) LIFETIME DOLLAR LIMITATION.—In the 

14 case of qualified tuition and related expenses with 

15 respect to any individual, the aggregate amount of 

16 the credits claimed under this section for all taxable 

17 years shall not exceed $25,000, determined without 

18 regard to whether— 

19 ‘‘(A) such credits are claimed on the re20 turn of tax filed by the individual or by another 

21 taxpayer, or 

22 ‘‘(B) such expenses are treated as paid by 

23 the individual or by another taxpayer. 

24 ‘‘(2) REPORTING.—No credit shall be allowed 

25 under this section to a taxpayer with respect to the 


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1 qualified tuition and related expenses of an eligible 

2 student unless the taxpayer includes the name and 

3 taxpayer identification number of such eligible stu4 dent on the return of tax for the taxable year. 

5 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR6 SHIPS, ETC.— 

7 ‘‘(A) IN GENERAL.—The amount of quali8 fied tuition and related expenses otherwise 

9 taken into account under this section with re10 spect to an individual for an academic period 

11 shall be reduced (before the application of sub12 sections (b) and (c)) by the sum of any 

13 amounts paid for the benefit of such individual 

14 which are allocable to such period as— 

15 ‘‘(i) a qualified scholarship which is 

16 excludable from gross income under section 

17 117, 

18 ‘‘(ii) an educational assistance allow19 ance under chapter 30, 31, 32, 34, or 35 

20 of title 38, United States Code, or under 

21 chapter 1606 of title 10, United States 

22 Code, and 

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

24 bequest, devise, or inheritance within the 

25 meaning of section 102(a)) for such indiVerDate Mar 15 2010 00:50 Nov 15, 2013 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3476.IH H3476

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1 vidual’s educational expenses, or attrib2 utable to such individual’s enrollment at an 

3 eligible educational institution, which is ex4 cludable from gross income under any law 

5 of the United States. 

6 ‘‘(B) COORDINATION WITH PELL GRANTS

7 NOT USED FOR QUALIFIED TUITION AND RE8 LATED EXPENSES.—Any amount determined 

9 with respect to an individual under subpara10 graph (A) which is attributable to a Federal 

11 Pell Grant under section 401 of the Higher 

12 Education Act of 1965 shall be reduced (but 

13 not below zero) by the amount of the expenses 

14 (other than qualified tuition and related ex15 penses) which are taken into account in deter16 mining the cost of attendance (as defined in 

17 section 472 of the Higher Education Act of 

18 1965, as in effect on the date of the enactment 

19 of the Middle Class College Tuition Tax Credit 

20 Expansion Act) of such individual at an eligible 

21 educational institution for the academic period 

22 for which the credit under this section is being 

23 determined. 

24 ‘‘(4) TREATMENT OF EXPENSES PAID BY DE25 PENDENT.—If a deduction under section 151 with 


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1 respect to an individual is allowed to another tax2 payer for a taxable year beginning in the calendar 

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

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

5 section to such individual for such individual’s 

6 taxable year, and 

7 ‘‘(B) qualified tuition and related expenses 

8 paid by such individual during such individual’s 

9 taxable year shall be treated for purposes of 

10 this section as paid by such other taxpayer. 

11 ‘‘(5) TREATMENT OF CERTAIN PREPAY12 MENTS.—If qualified tuition and related expenses 

13 are paid by the taxpayer during a taxable year for 

14 an academic period which begins during the first 3 

15 months following such taxable year, such academic 

16 period shall be treated for purposes of this section 

17 as beginning during such taxable year. 

18 ‘‘(6) DENIAL OF DOUBLE BENEFIT.—No credit 

19 shall be allowed under this section for any expense 

20 for which a deduction is allowed under any other 

21 provision of this chapter. 

22 ‘‘(7) NO CREDIT FOR MARRIED INDIVIDUALS

23 FILING SEPARATE RETURNS.—If the taxpayer is a 

24 married individual (within the meaning of section 

25 7703), this section shall apply only if the taxpayer 


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

2 taxable year. 

3 ‘‘(8) NONRESIDENT ALIENS.—If the taxpayer is 

4 a nonresident alien individual for any portion of the 

5 taxable year, this section shall apply only if such in6 dividual is treated as a resident alien of the United 

7 States for purposes of this chapter by reason of an 

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

9 ‘‘(e) ELECTION NOT TO HAVE SECTION APPLY.—A 

10 taxpayer may elect not to have this section apply with re11 spect to the qualified tuition and related expenses of an 

12 individual for any taxable year. 

13 ‘‘(f) DEFINITIONS.—For purposes of this section: 

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

15 student’ means, with respect to any taxable year, an 

16 individual who— 

17 ‘‘(A) is enrolled for at least one academic 

18 period which begins during such taxable year at 

19 an eligible educational institution, and 

20 ‘‘(B) meets the requirements of section 

21 484(a)(1) of the Higher Education Act of 1965, 

22 as in effect on the date of the enactment of the 

23 Middle Class College Tuition Tax Credit Ex24 pansion Act. 


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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, 

5 fees, and course materials required for the en6 rollment 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 at an eligible educational institution for courses 

13 of instruction of such individual at such institu14 tion. 

15 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV16 ING SPORTS, ETC.—Such term does not include 

17 expenses with respect to any course or other 

18 education involving sports, games, or hobbies, 

19 unless such course or other education is part of 

20 the individual’s degree program. 

21 ‘‘(C) EXCEPTION FOR NONACADEMIC

22 FEES.—Such term does not include student ac23 tivity fees, athletic fees, insurance expenses, or 

24 other expenses unrelated to an individual’s aca25 demic course of instruction. 


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1 ‘‘(D) COMPUTER TECHNOLOGY AND

2 EQUIPMENT.—Such term includes expenses for 

3 the purchase of computer technology or equip4 ment (as defined in section 170(e)(6)(F)(i)), or 

5 Internet access and related services, only to the 

6 extent the purchase of such technology, equip7 ment, or services is specifically required by the 

8 individual’s academic course of instruction or 

9 degree program. 

10 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

11 The term ‘eligible educational institution’ means an 

12 institution— 

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

14 the Higher Education Act of 1965, as in effect 

15 on the date of the enactment of the Middle 

16 Class College Tuition Tax Credit Expansion 

17 Act, and 

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

19 program under title IV of such Act. 

20 ‘‘(g) PORTION OF CREDIT REFUNDABLE.—Fifty per21 cent of the credit allowed under this section (determined 

22 after application of subsections (c)(1) and (d) and without 

23 regard to this subsection and subsection (c)(2), as the case 

24 may be) shall be treated as a credit allowable under sub25 part C (and not allowed under this section). The preceding 


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1 sentence shall not apply to any taxpayer for any taxable 

2 year if such taxpayer is a child to whom subsection (g) 

3 of section 1 applies for such taxable year. 

4 ‘‘(h) REGULATIONS.—The Secretary may prescribe 

5 such regulations as may be necessary or appropriate to 

6 carry out this section, including regulations providing for 

7 a recapture of the credit allowed under this section in 

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

9 of any amount which was taken into account in deter10 mining the amount of such credit.’’. 

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

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

13 IV of subchapter A of chapter 1 of the Internal Revenue 

14 Code of 1986 is amended to read as follows: 

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

15 (c) CONFORMING AMENDMENTS.— 

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

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

18 inserting ‘‘25A(d)(3)’’. 

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

20 Code is amended— 

21 (A) by striking ‘‘25A(g)(2)’’ in subpara22 graph (B) and inserting ‘‘25A(d)(3)’’, and 

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

24 ‘‘25A(f)(3)’’. 


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

2 Code is amended by striking ‘‘25A(b)(3)’’ and in3 serting ‘‘25A(f)(1) (but only with respect to a student who is carrying at least 1 4 ⁄2 the normal full-time 

5 workload for the course of study the student is pur6 suing)’’. 

7 (4) Clause (v) of section 529(c)(3)(B) of such 

8 Code is amended— 

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

10 (I) and inserting ‘‘25A(d)(3)’’, and 

11 (B) by striking ‘‘HOPE AND LIFETIME

12 LEARNING CREDITS’’ in the heading and insert13 ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 

14 (5) Clause (i) of section 529(e)(3)(B) of such 

15 Code is amended by striking ‘‘25A(b)(3)’’ and in16 serting ‘‘25A(f)(1) (but only with respect to a student who is carrying at least 1 17 ⁄2 the normal full-time 

18 workload for the course of study the student is pur19 suing)’’. 

20 (6) Subparagraph (C) of section 530(d)(2) of 

21 such Code is amended— 

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

23 and inserting ‘‘25A(d)(3)’’, and 


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1 (B) by striking ‘‘HOPE AND LIFETIME

2 LEARNING CREDITS’’ in the heading and insert3 ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 

4 (7) Clause (iii) of section 530(d)(4)(B) of such 

5 Code is amended by striking ‘‘25A(g)(2)’’ and in6 serting ‘‘25A(d)(3)’’. 

7 (8) Section 1400O of such Code is amended— 

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

9 ‘‘25A(f)(3)’’, 

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

11 of the enactment of this section)’’ after 

12 ‘‘25A(b)(1)’’ in paragraph (2), and 

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

14 of the enactment of this section)’’ after 

15 ‘‘25A(c)(1)’’ in paragraph (3). 

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

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

18 inserting ‘‘subsection (d)(3)’’. 

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

20 such Code is amended by striking ‘‘subsection 

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

22 (11) Subparagraph (J) of section 6213(g)(2) of 

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

24 inserting ‘‘25A(d)(2)’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2013. 

4 SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM 

5 GROSS INCOME. 

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

7 of the Internal Revenue Code of 1986 is amended by strik8 ing ‘‘received by an individual’’ and all that follows and 

9 inserting ‘‘received by an individual— 

10 ‘‘(A) as a scholarship or fellowship grant 

11 to the extent the individual establishes that, in 

12 accordance with the conditions of the grant, 

13 such amount was used for qualified tuition and 

14 related expenses, or 

15 ‘‘(B) as a Federal Pell Grant under section 

16 401 of the Higher Education Act of 1965 (as 

17 in effect on the date of the enactment of the 

18 Middle Class College Tuition Tax Credit Ex19 pansion Act).’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2013. 

Æ 


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