II

106TH CONGRESS

1ST SESSION S. 473

To amend the Internal Revenue Code of 1986 to make higher education

more affordable by providing a full tax deduction for higher education

expenses and interest on student loans.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 25, 1999

Mr. SCHUMER (for himself and Mr. MOYNIHAN) 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 make

higher education more affordable by providing a full tax

deduction for higher education expenses 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 ‘‘Make College Afford5 able Act of 1999’’.
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1 SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

2 (a) DEDUCTION ALLOWED.—Section 221 of the In3 ternal Revenue Code of 1986 is amended to read as fol4 lows:

5 ‘‘SEC. 221. HIGHER EDUCATION EXPENSES.

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

7 individual, there shall be allowed as a deduction an

8 amount equal to—

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

10 and

11 ‘‘(2) interest on qualified higher education

12 loans,

13 paid by the taxpayer during the taxable year.

14 ‘‘(b) LIMITATION BASED ON MODIFIED ADJUSTED

15 GROSS INCOME.—

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

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

18 subsection (a) shall be reduced (but not below zero)

19 by the amount determined under paragraph (2).

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

21 determined under this paragraph equals the amount

22 which bears the same ratio to the amount which

23 would be so taken into account as—

24 ‘‘(A) the excess of—

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

26 gross income for such taxable year, over
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1 ‘‘(ii) $100,000 ($140,000 in the case

2 of a joint return), bears to

3 ‘‘(B) $20,000.

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

5 For purposes of this subsection, the term ‘modified

6 adjusted gross income’ means the adjusted gross in7 come of the taxpayer for the taxable year

8 determined—

9 ‘‘(A) without regard to this section and

10 sections 911, 931, and 933, and

11 ‘‘(B) after the application of sections 86,

12 135, 219, 220, and 469.

13 For purposes of the sections referred to in subpara14 graph (B), adjusted gross income shall be deter15 mined without regard to the deduction allowed under

16 this section.

17 ‘‘(4) INFLATION ADJUSTMENTS.—

18 ‘‘(A) IN GENERAL.—In the case of a tax19 able year beginning after 2000, the $100,000

20 and $140,000 amounts described in paragraph

21 (2) shall each be increased by an amount equal

22 to—

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

24 ‘‘(ii) the cost-of-living adjustment de25 termined under section 1(f)(3) for the cal-
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1 endar year in which the taxable year be2 gins, determined by substituting ‘calendar

3 year 1999’ for ‘calendar year 1992’ in sub4 paragraph (B) thereof.

5 ‘‘(B) ROUNDING.—If any amount as ad6 justed under subparagraph (A) is not a multiple

7 of $5,000, such amount shall be rounded to the

8 next lowest multiple of $5,000.

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

10 For purposes of this section—

11 ‘‘(1) QUALIFIED HIGHER EDUCATION EX12 PENSES.—

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

14 higher education expenses’ means—

15 ‘‘(i) tuition and fees charged by an

16 educational institution and required for the

17 enrollment or attendance of—

18 ‘‘(I) the taxpayer,

19 ‘‘(II) the taxpayer’s spouse,

20 ‘‘(III) any dependent of the tax21 payer with respect to whom the tax22 payer is allowed a deduction under

23 section 151, or

24 ‘‘(IV) any grandchild of the tax25 payer,
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1 as an eligible student at an institution of

2 higher education, and

3 ‘‘(ii) reasonable living expenses for

4 such an individual while away from home

5 and attending such institution.

6 ‘‘(B) ELIGIBLE COURSES.—Amounts paid

7 for qualified higher education expenses of any

8 individual shall be taken into account under

9 subsection (a) only to the extent such

10 expenses—

11 ‘‘(i) are attributable to courses of in12 struction for which credit is allowed toward

13 a baccalaureate degree by an institution of

14 higher education or toward a certificate of

15 required course work at a vocational

16 school, and

17 ‘‘(ii) are not attributable to any grad18 uate program of such individual.

19 ‘‘(C) EXCEPTION FOR NONACADEMIC

20 FEES.—Such term does not include any student

21 activity fees, athletic fees, insurance expenses,

22 or other expenses unrelated to a student’s aca23 demic course of instruction.
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1 ‘‘(D) ELIGIBLE STUDENT.—For purposes

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

3 means a student who—

4 ‘‘(i) meets the requirements of section

5 484(a)(1) of the Higher Education Act of

6 1965 (20 U.S.C. 1091(a)(1)), as in effect

7 on the date of the enactment of this sec8 tion, and

9 ‘‘(ii) is carrying at least one-half the

10 normal full-time work load for the course

11 of study the student is pursuing, as deter12 mined by the institution of higher edu13 cation.

14 ‘‘(E) IDENTIFICATION REQUIREMENT.—No

15 deduction shall be allowed under subsection (a)

16 to a taxpayer with respect to an eligible student

17 unless the taxpayer includes the name, age, and

18 taxpayer identification number of such eligible

19 student on the return of tax for the taxable

20 year.

21 ‘‘(2) INSTITUTION OF HIGHER EDUCATION.—

22 The term ‘institution of higher education’ means an

23 institution which—

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

25 Higher Education Act of 1965 (20 U.S.C.
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1 1088), as in effect on the date of the enactment

2 of this section, and

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

4 under title IV of such Act.

5 ‘‘(d) QUALIFIED HIGHER EDUCATION LOAN.—For

6 purposes of this section—

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

8 education loan’ means a loan which is—

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

10 Federal Government,

11 ‘‘(B) made by a State or a political sub12 division of a State,

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

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

15 ‘‘(D) made by an institution of higher edu16 cation (as defined in section 1201(a) of the

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

18 1141(a))).

19 ‘‘(2) LIMITATION.—The amount of interest on

20 a qualified higher education loan which is taken into

21 account under subsection (a)(2) shall not exceed the

22 amount which bears the same ratio to such amount

23 of interest as—

24 ‘‘(A) the proceeds from such loan used for

25 qualified higher education expenses, bears to
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1 ‘‘(B) the total proceeds from such loan.

2 For purposes of the preceding sentence, the term

3 ‘qualified higher education expenses’ shall be deter4 mined without regard to subsection (c)(1)(A)(i)(IV).

5 ‘‘(e) SPECIAL RULES.—

6 ‘‘(1) NO DOUBLE BENEFIT.—

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

8 allowed under subsection (a) for any expense

9 for which a deduction is allowable to the tax10 payer under any other provision of this chapter

11 unless the taxpayer irrevocably waives his right

12 to the deduction of such expense under such

13 other provision.

14 ‘‘(B) DENIAL OF DEDUCTION IF CREDIT

15 ELECTED.—No deduction shall be allowed

16 under subsection (a) for a taxable year with re17 spect to the qualified higher education expenses

18 of an individual if the taxpayer elects to have

19 section 25A apply with respect to such individ20 ual for such year.

21 ‘‘(C) DEPENDENTS.—No deduction shall

22 be allowed under subsection (a) to any individ23 ual with respect to whom a deduction under

24 section 151 is allowable to another taxpayer for
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1 a taxable year beginning in the calendar year in

2 which such individual’s taxable year begins.

3 ‘‘(D) COORDINATION WITH EXCLUSIONS.—

4 A deduction shall be allowed under subsection

5 (a) for qualified higher education expenses only

6 to the extent the amount of such expenses ex7 ceeds the amount excludable under section 135

8 or 530(d)(2) for the taxable year.

9 ‘‘(2) LIMITATION ON TAXABLE YEAR OF DE10 DUCTION.—

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

12 allowed under subsection (a) for qualified high13 er education expenses for any taxable year only

14 to the extent such expenses are in connection

15 with enrollment at an institution of higher edu16 cation during the taxable year.

17 ‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—

18 Subparagraph (A) shall not apply to qualified

19 higher education expenses paid during a taxable

20 year if such expenses are in connection with an

21 academic term beginning during such taxable

22 year or during the first 3 months of the next

23 taxable year.

24 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR25 SHIPS AND VETERANS BENEFITS.—The amount of
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1 qualified higher education expenses otherwise taken

2 into account under subsection (a) or (d)(2) with re3 spect to the education of an individual shall be re4 duced (before the application of subsection (b)) by

5 the sum of the amounts received with respect to

6 such individual for the taxable year as—

7 ‘‘(A) a qualified scholarship which under

8 section 117 is not includable in gross income,

9 ‘‘(B) an educational assistance allowance

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

11 United States Code, or

12 ‘‘(C) a payment (other than a gift, be13 quest, devise, or inheritance within the meaning

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

15 attributable to enrollment at an eligible edu16 cational institution, which is exempt from in17 come taxation by any law of the United States.

18 ‘‘(4) NO DEDUCTION FOR MARRIED INDIVID19 UALS FILING SEPARATE RETURNS.—If the taxpayer

20 is a married individual (within the meaning of sec21 tion 7703), this section shall apply only if the tax22 payer and the taxpayer’s spouse file a joint return

23 for the taxable year.

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

25 a nonresident alien individual for any portion of the
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1 taxable year, this section shall apply only if such in2 dividual is treated as a resident alien of the United

3 States for purposes of this chapter by reason of an

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

5 ‘‘(6) REGULATIONS.—The Secretary may pre6 scribe such regulations as may be necessary or ap7 propriate to carry out this section, including regula8 tions requiring recordkeeping and information re9 porting.’’

10 (b) DEDUCTION ALLOWED IN COMPUTING AD11 JUSTED GROSS INCOME.—Paragraph (17) of section

12 62(a) of such Code is amended to read as follows:

13 ‘‘(17) HIGHER EDUCATION EXPENSES.—The

14 deduction allowed by section 221.’’

15 (c) CONFORMING AMENDMENTS.—

16 (1) The table of sections for part VII of sub17 chapter B of chapter 1 of such Code is amended by

18 striking the item relating to section 221 and insert19 ing the following new item:

‘‘Sec. 221. Higher education expenses.’’

20 (2) Section 6050S(e) of such Code is amended

21 by striking ‘‘section 221(e)(1)’’ and inserting ‘‘sec22 tion 221(d)(1)’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to payments made after December

3 31, 1998.

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