I 

114TH CONGRESS 

2D SESSION H. R. 5383 

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 

JUNE 3, 2016 

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 of 2016’’. 

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) $225,000 (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 2016, 

12 the $225,000 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 2015’ 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) IDENTIFICATION NUMBERS.— 


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1 ‘‘(A) IN GENERAL.—No credit shall be al2 lowed under this section to a taxpayer with re3 spect to the qualified tuition and related ex4 penses of an eligible student unless the tax5 payer includes the name and taxpayer identi6 fication number of such eligible student on the 

7 return of tax for the taxable year. 

8 ‘‘(B) STUDENT.—The requirements of sub9 paragraph (A) shall not be treated as met un10 less the individual’s taxpayer identification 

11 number was issued on or before the due date 

12 for filing the return of tax for the taxable year. 

13 ‘‘(C) TAXPAYER.—No credit shall be al14 lowed under this section if the identifying num15 ber of the taxpayer was issued after the due 

16 date for filing the return for the taxable year. 

17 ‘‘(D) INSTITUTION.—No credit shall be al18 lowed under this section unless the taxpayer in19 cludes the employer identification number of 

20 any institution to which qualified tuition and 

21 related expenses were paid with respect to the 

22 individual. 

23 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR24 SHIPS, ETC.— 


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1 ‘‘(A) IN GENERAL.—The amount of quali2 fied tuition and related expenses otherwise 

3 taken into account under this section with re4 spect to an individual for an academic period 

5 shall be reduced (before the application of sub6 sections (b) and (c)) by the sum of any 

7 amounts paid for the benefit of such individual 

8 which are allocable to such period as— 

9 ‘‘(i) a qualified scholarship which is 

10 excludable from gross income under section 

11 117, 

12 ‘‘(ii) an educational assistance allow13 ance under chapter 30, 31, 32, 34, or 35 

14 of title 38, United States Code, or under 

15 chapter 1606 of title 10, United States 

16 Code, and 

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

18 bequest, devise, or inheritance within the 

19 meaning of section 102(a)) for such indi20 vidual’s educational expenses, or attrib21 utable to such individual’s enrollment at an 

22 eligible educational institution, which is ex23 cludable from gross income under any law 

24 of the United States. 


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1 ‘‘(B) COORDINATION WITH PELL GRANTS

2 NOT USED FOR QUALIFIED TUITION AND RE3 LATED EXPENSES.—Any amount determined 

4 with respect to an individual under subpara5 graph (A) which is attributable to a Federal 

6 Pell Grant under section 401 of the Higher 

7 Education Act of 1965 shall be reduced (but 

8 not below zero) by the amount of the expenses 

9 (other than qualified tuition and related ex10 penses) which are taken into account in deter11 mining the cost of attendance (as defined in 

12 section 472 of the Higher Education Act of 

13 1965, as in effect on the date of the enactment 

14 of the Middle Class College Tuition Tax Credit 

15 Expansion Act of 2016) of such individual at 

16 an eligible educational institution for the aca17 demic period for which the credit under this 

18 section is being determined. 

19 ‘‘(4) TREATMENT OF EXPENSES PAID BY DE20 PENDENT.—If a deduction under section 151 with 

21 respect to an individual is allowed to another tax22 payer for a taxable year beginning in the calendar 

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


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

2 section to such individual for such individual’s 

3 taxable year, and 

4 ‘‘(B) qualified tuition and related expenses 

5 paid by such individual during such individual’s 

6 taxable year shall be treated for purposes of 

7 this section as paid by such other taxpayer. 

8 ‘‘(5) TREATMENT OF CERTAIN PREPAY9 MENTS.—If qualified tuition and related expenses 

10 are paid by the taxpayer during a taxable year for 

11 an academic period which begins during the first 3 

12 months following such taxable year, such academic 

13 period shall be treated for purposes of this section 

14 as beginning during such taxable year. 

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

16 shall be allowed under this section for any expense 

17 for which a deduction is allowed under any other 

18 provision of this chapter. 

19 ‘‘(7) NO CREDIT FOR MARRIED INDIVIDUALS

20 FILING SEPARATE RETURNS.—If the taxpayer is a 

21 married individual (within the meaning of section 

22 7703), this section shall apply only if the taxpayer 

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

24 taxable year. 


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

2 a nonresident alien individual for any portion of the 

3 taxable year, this section shall apply only if such in4 dividual is treated as a resident alien of the United 

5 States for purposes of this chapter by reason of an 

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

7 ‘‘(9) RESTRICTIONS ON TAXPAYERS WHO IM8 PROPERLY CLAIMED CREDIT IN PRIOR YEAR.— 

9 ‘‘(A) TAXPAYERS MAKING PRIOR FRAUDU10 LENT OR RECKLESS CLAIMS.— 

11 ‘‘(i) IN GENERAL.—No credit shall be 

12 allowed under this section for any taxable 

13 year in the disallowance period. 

14 ‘‘(ii) DISALLOWANCE PERIOD.—For 

15 purposes of clause (i), the disallowance pe16 riod is— 

17 ‘‘(I) the period of 10 taxable 

18 years after the most recent taxable 

19 year for which there was a final deter20 mination that the taxpayer’s claim of 

21 credit under this section was due to 

22 fraud, and 

23 ‘‘(II) the period of 2 taxable 

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1 mination that the taxpayer’s claim of 

2 credit under this section was due to 

3 reckless or intentional disregard of 

4 rules and regulations (but not due to 

5 fraud). 

6 ‘‘(B) TAXPAYERS MAKING IMPROPER

7 PRIOR CLAIMS.—In the case of a taxpayer who 

8 is denied credit under this section for any tax9 able year as a result of the deficiency proce10 dures under subchapter B of chapter 63, no 

11 credit shall be allowed under this section for 

12 any subsequent taxable year unless the taxpayer 

13 provides such information as the Secretary may 

14 require to demonstrate eligibility for such cred15 it. 

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

17 taxpayer may elect not to have this section apply with re18 spect to the qualified tuition and related expenses of an 

19 individual for any taxable year. 

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

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

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

23 individual who— 


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

2 period which begins during such taxable year at 

3 an eligible educational institution, and 

4 ‘‘(B) meets the requirements of section 

5 484(a)(1) of the Higher Education Act of 1965, 

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

7 Middle Class College Tuition Tax Credit Ex8 pansion Act of 2016. 

9 ‘‘(2) QUALIFIED TUITION AND RELATED EX10 PENSES.— 

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

12 tuition and related expenses’ means tuition, 

13 fees, and course materials required for the en14 rollment or attendance of— 

15 ‘‘(i) the taxpayer, 

16 ‘‘(ii) the taxpayer’s spouse, or 

17 ‘‘(iii) any dependent of the taxpayer 

18 with respect to whom the taxpayer is al19 lowed a deduction under section 151, 

20 at an eligible educational institution for courses 

21 of instruction of such individual at such institu22 tion. 

23 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV24 ING SPORTS, ETC.—Such term does not include 

25 expenses with respect to any course or other 


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1 education involving sports, games, or hobbies, 

2 unless such course or other education is part of 

3 the individual’s degree program. 

4 ‘‘(C) EXCEPTION FOR NONACADEMIC

5 FEES.—Such term does not include student ac6 tivity fees, athletic fees, insurance expenses, or 

7 other expenses unrelated to an individual’s aca8 demic course of instruction. 

9 ‘‘(D) COMPUTER TECHNOLOGY AND

10 EQUIPMENT.—Such term includes expenses for 

11 the purchase of computer technology or equip12 ment (as defined in section 170(e)(6)(F)(i)), or 

13 Internet access and related services, only to the 

14 extent the purchase of such technology, equip15 ment, or services is specifically required by the 

16 individual’s academic course of instruction or 

17 degree program. 

18 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

19 The term ‘eligible educational institution’ means an 

20 institution— 

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

22 the Higher Education Act of 1965, as in effect 

23 on the date of the enactment of the Middle 

24 Class College Tuition Tax Credit Expansion Act 

25 of 2016, and 


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

2 program under title IV of such Act. 

3 ‘‘(g) PORTION OF CREDIT REFUNDABLE.—Fifty per4 cent of the credit allowed under this section (determined 

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

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

7 may be) shall be treated as a credit allowable under sub8 part C (and not allowed under this section). The preceding 

9 sentence shall not apply to any taxpayer for any taxable 

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

11 of section 1 applies for such taxable year. 

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

13 such regulations as may be necessary or appropriate to 

14 carry out this section, including regulations providing for 

15 a recapture of the credit allowed under this section in 

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

17 of any amount which was taken into account in deter18 mining the amount of such credit.’’. 

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

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

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

22 Code of 1986 is amended to read as follows: 

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

23 (c) CONFORMING AMENDMENTS.— 


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

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

3 inserting ‘‘25A(d)(3)’’. 

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

5 Code is amended— 

6 (A) by striking ‘‘25A(g)(2)’’ in subpara7 graph (B) and inserting ‘‘25A(d)(3)’’, and 

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

9 ‘‘25A(f)(3)’’. 

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

11 Code is amended by striking ‘‘25A(b)(3)’’ and in12 serting ‘‘25A(f)(1) (but only with respect to a student who is carrying at least 1 13 ⁄2 the normal full-time 

14 workload for the course of study the student is pur15 suing)’’. 

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

17 Code is amended— 

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

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

20 (B) by striking ‘‘HOPE AND LIFETIME

21 LEARNING CREDITS’’ in the heading and insert22 ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 

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

24 Code is amended by striking ‘‘25A(b)(3)’’ and in25 serting ‘‘25A(f)(1) (but only with respect to a stuVerDate Sep 11 2014 22:24 Jun 03, 2016 Jkt 059200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H5383.IH H5383

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dent who is carrying at least 1 1 ⁄2 the normal full-time 

2 workload for the course of study the student is pur3 suing)’’. 

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

5 such Code is amended— 

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

7 and inserting ‘‘25A(d)(3)’’, and 

8 (B) by striking ‘‘HOPE AND LIFETIME

9 LEARNING CREDITS’’ in the heading and insert10 ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 

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

12 Code is amended by striking ‘‘25A(g)(2)’’ and in13 serting ‘‘25A(d)(3)’’. 

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

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

16 ‘‘25A(f)(3)’’, 

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

18 of the enactment of this section)’’ after 

19 ‘‘25A(b)(1)’’ in paragraph (2), and 

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

21 of the enactment of this section)’’ after 

22 ‘‘25A(c)(1)’’ in paragraph (3). 

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

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

25 inserting ‘‘subsection (d)(3)’’. 


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

2 such Code is amended by striking ‘‘subsection 

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

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

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

6 inserting ‘‘25A(d)(2)’’. 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2015. 

10 SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM 

11 GROSS INCOME. 

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

13 of the Internal Revenue Code of 1986 is amended by strik14 ing ‘‘received by an individual’’ and all that follows and 

15 inserting ‘‘received by an individual— 

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

17 to the extent the individual establishes that, in 

18 accordance with the conditions of the grant, 

19 such amount was used for qualified tuition and 

20 related expenses, or 

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

22 401 of the Higher Education Act of 1965 (as 

23 in effect on the date of the enactment of the 

24 Middle Class College Tuition Tax Credit Ex25 pansion Act of 2016).’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2013. 

Æ 


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