II 

112TH CONGRESS 

2D SESSION S. 3267 

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

American Opportunity Tax Credit, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 6, 2012 

Mr. SCHUMER (for himself, Mr. KERRY, and Mr. MENENDEZ) 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 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 ‘‘American Opportunity 

5 Tax Credit Permanence and Consolidation Act of 2012’’. 

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 $2,000, plus 

21 ‘‘(B) 25 percent of such expenses so paid 

22 as exceeds $2,000 but does not exceed $6,000. 

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 30 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) $80,000 ($160,000 in the 

24 case of a joint return), 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 ‘‘(2) LIMITATION BASED ON AMOUNT OF

11 TAX.—In the case of a taxable year to which section 

12 26(a)(2) does not apply, the credit allowed under 

13 this section shall not exceed the excess of— 

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

15 (as defined in section 26(b)) plus the tax im16 posed by section 55, over 

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

18 under this subpart (other than this subsection 

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

20 for the taxable year. 

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

22 For purposes of this section: 

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

24 case of qualified tuition and related expenses with 

25 respect to any individual, the aggregate amount of 


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1 the credits claimed under this section for all taxable 

2 years shall not exceed $15,000, determined without 

3 regard to whether— 

4 ‘‘(A) such credits are claimed on the re5 turn of tax filed by the individual or by another 

6 taxpayer, or 

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

8 the individual or by another taxpayer. 

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

10 under this section to a taxpayer with respect to the 

11 qualified tuition and related expenses of an eligible 

12 student unless the taxpayer includes the name and 

13 taxpayer identification number of such eligible stu14 dent on the return of tax for the taxable year. 

15 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR16 SHIPS, ETC.— 

17 ‘‘(A) IN GENERAL.—The amount of quali18 fied tuition and related expenses otherwise 

19 taken into account under this section with re20 spect to an individual for an academic period 

21 shall be reduced (before the application of sub22 sections (b) and (c)) by the sum of any 

23 amounts paid for the benefit of such individual 

24 which are allocable to such period as— 


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1 ‘‘(i) a qualified scholarship which is 

2 excludable from gross income under section 

3 117, 

4 ‘‘(ii) an educational assistance allow5 ance under chapter 30, 31, 32, 34, or 35 

6 of title 38, United States Code, or under 

7 chapter 1606 of title 10, United States 

8 Code, and 

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

10 bequest, devise, or inheritance within the 

11 meaning of section 102(a)) for such indi12 vidual’s educational expenses, or attrib13 utable to such individual’s enrollment at an 

14 eligible educational institution, which is ex15 cludable from gross income under any law 

16 of the United States. 

17 ‘‘(B) COORDINATION WITH PELL GRANTS

18 NOT USED FOR QUALIFIED TUITION AND RE19 LATED EXPENSES.—Any amount determined 

20 with respect to an individual under subpara21 graph (A) which is attributable to a Federal 

22 Pell Grant under section 401 of the Higher 

23 Education Act of 1965 shall be reduced (but 

24 not below zero) by the amount of the expenses 

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1 penses) which are taken into account in deter2 mining the cost of attendance (as defined in 

3 section 472 of the Higher Education Act of 

4 1965, as in effect on the date of the enactment 

5 of the American Opportunity Tax Credit Per6 manence and Consolidation Act of 2012) of 

7 such individual at an eligible educational insti8 tution for the academic period for which the 

9 credit under this section is being determined. 

10 ‘‘(4) TREATMENT OF EXPENSES PAID BY DE11 PENDENT.—If a deduction under section 151 with 

12 respect to an individual is allowed to another tax13 payer for a taxable year beginning in the calendar 

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

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

16 section to such individual for such individual’s 

17 taxable year, and 

18 ‘‘(B) qualified tuition and related expenses 

19 paid by such individual during such individual’s 

20 taxable year shall be treated for purposes of 

21 this section as paid by such other taxpayer. 

22 ‘‘(5) TREATMENT OF CERTAIN PREPAY23 MENTS.—If qualified tuition and related expenses 

24 are paid by the taxpayer during a taxable year for 

25 an academic period which begins during the first 3 


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1 months following such taxable year, such academic 

2 period shall be treated for purposes of this section 

3 as beginning during such taxable year. 

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

5 shall be allowed under this section for any expense 

6 for which a deduction is allowed under any other 

7 provision of this chapter. 

8 ‘‘(7) NO CREDIT FOR MARRIED INDIVIDUALS

9 FILING SEPARATE RETURNS.—If the taxpayer is a 

10 married individual (within the meaning of section 

11 7703), this section shall apply only if the taxpayer 

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

13 taxable year. 

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

15 a nonresident alien individual for any portion of the 

16 taxable year, this section shall apply only if such in17 dividual is treated as a resident alien of the United 

18 States for purposes of this chapter by reason of an 

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

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

21 taxpayer may elect not to have this section apply with re22 spect to the qualified tuition and related expenses of an 

23 individual for any taxable year. 

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


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

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

3 individual who— 

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

5 period which begins during such taxable year at 

6 an eligible educational institution, and 

7 ‘‘(B) meets the requirements of section 

8 484(a)(1) of the Higher Education Act of 1965, 

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

10 American Opportunity Tax Credit Permanence 

11 and Consolidation Act of 2012. 

12 ‘‘(2) QUALIFIED TUITION AND RELATED EX13 PENSES.— 

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

15 tuition and related expenses’ means tuition, 

16 fees, and course materials required for the en17 rollment or attendance of— 

18 ‘‘(i) the taxpayer, 

19 ‘‘(ii) the taxpayer’s spouse, or 

20 ‘‘(iii) any dependent of the taxpayer 

21 with respect to whom the taxpayer is al22 lowed a deduction under section 151, 

23 at an eligible educational institution for courses 

24 of instruction of such individual at such institu25 tion. 


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1 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV2 ING SPORTS, ETC.—Such term does not include 

3 expenses with respect to any course or other 

4 education involving sports, games, or hobbies, 

5 unless such course or other education is part of 

6 the individual’s degree program. 

7 ‘‘(C) EXCEPTION FOR NONACADEMIC

8 FEES.—Such term does not include student ac9 tivity fees, athletic fees, insurance expenses, or 

10 other expenses unrelated to an individual’s aca11 demic course of instruction. 

12 ‘‘(D) COMPUTER TECHNOLOGY AND

13 EQUIPMENT.—Such term includes expenses for 

14 the purchase of computer technology or equip15 ment (as defined in section 170(e)(6)(F)(i)), or 

16 Internet access and related services, only to the 

17 extent the purchase of such technology, equip18 ment, or services is specifically required by the 

19 individual’s academic course of instruction or 

20 degree program. 

21 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

22 The term ‘eligible educational institution’ means an 

23 institution— 

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

25 the Higher Education Act of 1965, as in effect 


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1 on the date of the enactment of the American 

2 Opportunity Tax Credit Permanence and Con3 solidation Act of 2012, and 

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

5 program under title IV of such Act. 

6 ‘‘(g) PORTION OF CREDIT REFUNDABLE.—Forty 

7 percent of the credit allowed under this section (deter8 mined after application of subsections (c)(1) and (d) and 

9 without regard to this subsection and section 26(a)(2) or 

10 subsection (c)(2), as the case may be) shall be treated as 

11 a credit allowable under subpart C (and not allowed under 

12 this section). The preceding sentence shall not apply to 

13 any taxpayer for any taxable year if such taxpayer is a 

14 child to whom subsection (g) of section 1 applies for such 

15 taxable year. 

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

17 such regulations as may be necessary or appropriate to 

18 carry out this section, including regulations providing for 

19 a recapture of the credit allowed under this section in 

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

21 of any amount which was taken into account in deter22 mining the amount of such credit.’’. 

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

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


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

2 Code of 1986 is amended to read as follows: 

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

3 (c) CONFORMING AMENDMENTS.— 

4 (1) Subparagraph (B) of section 24(b)(3) of the 

5 Internal Revenue Code of 1986 is amended by strik6 ing ‘‘25A(i)’’ and inserting ‘‘25A’’. 

7 (2) Clause (ii) of section 25(e)(1)(C) of such 

8 Code is amended by striking ‘‘25A(i)’’ and inserting 

9 ‘‘25A’’. 

10 (3) Paragraph (2) of section 25B(g) of such 

11 Code is amended by striking ‘‘25A(i)’’ and inserting 

12 ‘‘25A’’. 

13 (4) Paragraph (1) of section 26(a) of such Code 

14 is amended by striking ‘‘25A(i)’’ and inserting 

15 ‘‘25A’’. 

16 (5) 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 (6) 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 (7) 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 (8) Paragraph (1) of section 222(d) of such 

8 Code is amended— 

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

10 ‘‘25A(f)(2)’’, and 

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

12 ‘‘25A(d)(3)’’. 

13 (9) Clause (v) of section 529(c)(3)(B) of such 

14 Code is amended— 

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

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

17 (B) by striking ‘‘HOPE AND LIFETIME

18 LEARNING CREDITS’’ in the heading and insert19 ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 

20 (10) Clause (i) of section 529(e)(3)(B) of such 

21 Code is amended by striking ‘‘25A(b)(3)’’ and in22 serting ‘‘25A(f)(1) (but only with respect to a student who is carrying at least 1 23 ⁄2 the normal full-time 

24 workload for the course of study the student is pur25 suing)’’. 


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

2 such Code is amended— 

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

4 and inserting ‘‘25A(d)(3)’’, and 

5 (B) by striking ‘‘HOPE AND LIFETIME

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

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

9 Code is amended by striking ‘‘25A(g)(2)’’ and in10 serting ‘‘25A(d)(3)’’. 

11 (13) Subsection (i) of section 904 of such Code 

12 is amended by striking ‘‘25A(i)’’ and inserting 

13 ‘‘25A’’. 

14 (14) Paragraph (2) of section 1400C(d) of such 

15 Code is amended by striking ‘‘25A(i)’’ and inserting 

16 ‘‘25A’’. 

17 (15) Section 1400O of such Code is amended— 

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

19 ‘‘25A(f)(3)’’, 

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

21 of the enactment of this section)’’ after 

22 ‘‘25A(b)(1)’’ in paragraph (2), and 

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

24 of the enactment of this section)’’ after 

25 ‘‘25A(c)(1)’’ in paragraph (3). 


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

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

3 inserting ‘‘subsection (d)(3)’’. 

4 (17) Subparagraph (A) of section 6211(b)(4) of 

5 such Code is amended by striking ‘‘subsection 

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

7 (18) Subparagraph (J) of section 6213(g)(2) of 

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

9 inserting ‘‘25A(d)(2)’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2011. 

13 SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM 

14 GROSS INCOME. 

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

16 of the Internal Revenue Code of 1986 is amended by strik17 ing ‘‘received by an individual’’ and all that follows and 

18 inserting ‘‘received by an individual— 

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

20 extent the individual establishes that, in accordance 

21 with the conditions of the grant, such amount was 

22 used for qualified tuition and related expenses, or 

23 ‘‘(2) as a Federal Pell Grant under section 401 

24 of the Higher Education Act of 1965 (as in effect 

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1 portunity Tax Credit Permanence and Consolidation 

2 Act of 2012).’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2011. 

Æ 


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