I 

109TH CONGRESS 

1ST SESSION H. R. 1380 

To amend the Internal Revenue Code of 1986 to expand incentives for 

education. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 17, 2005 

Mr. ENGLISH of Pennsylvania (for himself, Mr. FORD, Mr. SENSENBRENNER, 

Mr. HOLT, Mr. WAXMAN, Mr. PLATTS, and Mr. PALLONE) 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 expand 

incentives for education. 

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 ‘‘Higher Education Af5 fordability and Equity Act of 2005’’. 
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1 SEC. 2. EXPANSION OF DEDUCTION FOR INTEREST ON EDU2 CATION LOANS. 

3 (a) REPEAL OF DOLLAR LIMITATION; INCREASE IN

4 PHASEOUT BEGINNING POINT.—Subsection (b) of section 

5 221 of the Internal Revenue Code of 1986 (relating to 

6 maximum deduction) is amended to read as follows: 

7 ‘‘(b) LIMITATION BASED ON MODIFIED ADJUSTED

8 GROSS INCOME.— 

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

10 (but for this subsection) be allowable as a deduction 

11 under this section shall be reduced (but not below 

12 zero) by the amount determined under paragraph 

13 (2). 

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

15 determined under this paragraph is the amount 

16 which bears the same ratio to the amount which 

17 would be so taken into account as— 

18 ‘‘(A) the excess of— 

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

20 gross income for such taxable year, over 

21 ‘‘(ii) $100,000 ($200,000 in the case 

22 of a joint return), bears to 

23 ‘‘(B) $15,000 ($30,000 in the case of a 

24 joint return). 
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1 ‘‘(3) MODIFIED ADJUSTED GROSS INCOME.— 

2 The term ‘modified adjusted gross income’ means 

3 adjusted gross income determined— 

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

5 sections 199, 222, 911, 931, and 933, and 

6 ‘‘(B) after application of sections 86, 135, 

7 137, 219, and 469.’’. 

8 (b) CONFORMING AMENDMENT.—Section 221(f)(1) 

9 of such Code is amended to read as follows: 

10 ‘‘(1) IN GENERAL.—In the case of a taxable 

11 year beginning after 2006, the $100,000 and 

12 $200,000 amounts in subsection (b) shall each be in13 creased by an amount equal to— 

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

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for the calendar 

17 year in which the taxable year begins, deter18 mined by substituting ‘calendar year 2005’ for 

19 ‘calendar year 1992’ in subparagraph (B) 

20 thereof.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 December 31, 2005. 
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1 SEC. 3. DEDUCTION FOR QUALIFIED TUITION AND RE2 LATED EXPENSES MADE PERMANENT. 

3 (a) REPEAL OF TERMINATION.—Section 222 of the 

4 Internal Revenue Code of 1986 is amended by striking 

5 subsection (e). 

6 (b) CONFORMING AMENDMENTS.—Subparagraph (B) 

7 of section 222(b)(2) of such Code is amended— 

8 (1) by striking ‘‘2004 or 2005’’ and inserting 

9 ‘‘2004 or thereafter’’, and 

10 (2) in the heading by striking ‘‘and 2005’’ and 

11 inserting ‘‘and thereafter’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2005. 

15 SEC. 4. EDUCATION SAVINGS ACCOUNTS. 

16 (a) INCREASE IN ALLOWABLE CONTRIBUTIONS.— 

17 (1) IN GENERAL.—Clause (iii) of section 

18 530(b)(1)(A) of the Internal Revenue Code of 1986 

19 is amended by striking ‘‘$2,000’’ and inserting 

20 ‘‘$5,000’’. 

21 (2) CONFORMING AMENDMENT.—Section 

22 4973(e)(1)(A) of such Code is amended by striking 

23 ‘‘$2,000’’ and inserting ‘‘$5,000’’. 

24 (b) REPORTS.—Subsection (h) of section 530 of such 

25 Code is amended by striking the period at the end of the 

26 last sentence and inserting ‘‘, except that reports shall be 
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1 so filed and furnished for any calendar year not later than 

2 June 30 of the following year.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2005. 

6 SEC. 5. ALLOWANCE OF ROOM, BOARD, AND SPECIAL 

7 NEEDS SERVICES IN THE CASE OF SCHOLAR8 SHIPS AND TUITION REDUCTION PROGRAMS 

9 WITH RESPECT TO HIGHER EDUCATION. 

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

11 of the Internal Revenue Code of 1986 (defining qualified 

12 scholarship) is amended by inserting before the period at 

13 the end the following: ‘‘or, in the case of enrollment or 

14 attendance at an eligible educational institution, for quali15 fied higher education expenses.’’. 

16 (b) DEFINITIONS.—Subsection (b) of section 117 of 

17 such Code is amended by adding at the end the following 

18 new paragraph: 

19 ‘‘(3) QUALIFIED HIGHER EDUCATION EX20 PENSES; ELIGIBLE EDUCATIONAL INSTITUTION.— 

21 The terms ‘qualified higher education expenses’ and 

22 ‘eligible educational institution’ have the meanings 

23 given such terms in section 529(e).’’. 

24 (c) TUITION REDUCTION PROGRAMS.—Paragraph 

25 (5) of section 117(d) of such Code (relating to special 
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1 rules for teaching and research assistants) is amended by 

2 striking ‘‘shall be applied as if it did not contain the 

3 phrase ‘(below the graduate level)’.’’ and inserting 

4 ‘‘shall be applied— 

5 ‘‘(A) as if it did not contain the phrase 

6 ‘(below the graduate level)’, and 

7 ‘‘(B) by substituting ‘qualified higher edu8 cation expenses’ for ‘tuition’ the second place it 

9 appears.’’. 

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

11 this section shall apply to expenses paid after December 

12 31, 2005 (in taxable years ending after such date), for 

13 education furnished in academic periods beginning after 

14 such date. 

15 SEC. 6. TREATMENT OF PREPAYMENT AND SAVINGS PLANS 

16 UNDER STUDENT FINANCIAL AID NEEDS 

17 ANALYSIS. 

18 (a) DEFINITION OF ASSETS.—Subsection (f) of sec19 tion 480 of the Higher Education Act of 1965 (20 U.S.C. 

20 1087vv(j)) is amended— 

21 (1) in paragraph (1) by inserting ‘‘qualified 

22 education benefit (except as provided in paragraph 

23 (3)),’’ after ‘‘tax shelters,’’; and 

24 (2) by adding at the end the following new 

25 paragraphs: 
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1 ‘‘(3) A qualified education benefit shall not be consid2 ered an asset of the student under section 475 of this part. 

3 ‘‘(4) For purposes of this subsection, the term ‘quali4 fied education benefit’ means— 

5 ‘‘(A) a program which is described in clause (i) 

6 of section 529(b)(1)(A) of the Internal Revenue 

7 Code of 1986 and which meets the requirements of 

8 section 529(b)(1)(B) of such Code; 

9 ‘‘(B) a State tuition program described in 

10 clause (ii) of section 529(b)(1)(A) of the Internal 

11 Revenue Code of 1986 which meets the requirements 

12 of section 529(b)(1)(B) of such Code; and 

13 ‘‘(C) a Coverdell education savings account (as 

14 defined in section 530(b)(1) of the Internal Revenue 

15 Code of 1986).’’. 

16 (b) DEFINITION OF OTHER FINANCIAL ASSIST17 ANCE.—Subsection (j) of section 480 of the Higher Edu18 cation Act of 1965 (20 U.S.C. 1087vv(j)) is amended— 

19 (1) by striking ‘‘; Tuition Prepayment Plans’’ 

20 in the heading of such subsection; 

21 (2) by striking ‘‘(1) For purposes’’ and insert22 ing ‘‘For purposes’’; and 

23 (3) by striking paragraph (2). 

24 (c) EFFECTIVE DATE.—The amendments made by 

25 this section shall apply with respect to determinations of 
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1 need under part F of title IV of the Higher Education 

2 Act of 1965 for academic years beginning on or after July 

3 1, 2006. 

4 SEC. 7. EXPANSION OF EDUCATIONAL EXPENSES ALLOWED 

5 AS PART OF HOPE SCHOLARSHIP CREDIT. 

6 (a) QUALIFIED TUITION AND RELATED EXPENSES

7 EXPANDED TO INCLUDE BOOKS, SUPPLIES, AND EQUIP8 MENT.—Paragraph (1) of section 25A(f) of the Internal 

9 Revenue Code of 1986 (defining qualified tuition and re10 lated expenses) is amended by adding at the end the fol11 lowing new subparagraph: 

12 ‘‘(D) ADDITIONAL EXPENSES ALLOWED

13 FOR HOPE SCHOLARSHIP CREDIT.—For pur14 poses of the Hope Scholarship Credit, such 

15 term shall include fees, books, supplies, and 

16 equipment required for courses of instruction at 

17 the eligible educational institution.’’. 

18 (b) HOPE SCHOLARSHIP CREDIT NOT REDUCED BY

19 FEDERAL PELL GRANTS AND SUPPLEMENTAL EDU20 CATIONAL OPPORTUNITY GRANTS.—Subsection (g) of sec21 tion 25A of such Code (relating to special rules) is amend22 ed by adding at the end the following new paragraph: 

23 ‘‘(8) PELL AND SEOG GRANTS.—For purposes 

24 of the Hope Scholarship Credit, paragraph (2) shall 

25 not apply to amounts paid for an individual as a 
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1 Federal Pell Grant or a Federal supplemental edu2 cational opportunity grant under subparts 1 and 3, 

3 respectively, of part A of title IV of the Higher Edu4 cation Act of 1965 (20 U.S.C. 1070a and 1070b et 

5 seq., respectively).’’. 

6 (c) EXPANDED HOPE EXPENSES NOT SUBJECT TO

7 INFORMATION REPORTING REQUIREMENTS.—Subsection 

8 (e) of section 6050S of such Code (relating to definitions) 

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

10 ‘‘subsections (f)(1)(D) and (g)(2)’’. 

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

12 this section shall apply to expenses paid after December 

13 31, 2005 (in tax years ending after such date), for edu14 cation furnished in academic periods beginning after such 

15 date. 

16 SEC. 8. REPEAL OF EGTRRA SUNSET APPLICABILITY TO 

17 CERTAIN EDUCATION PROVISIONS. 

18 Title IX of the Economic Growth and Tax Relief Rec19 onciliation Act of 2001 (relating to sunset of provisions 

20 of such Act) shall not apply to subtitles A, B, and D of 

21 title IV of such Act. 

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