II

106TH CONGRESS

1ST SESSION S. 1974

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 a tax credit for student education loans.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 19, 1999

Mr. SCHUMER (for himself, Ms. SNOWE, Mr. BAYH, and Mr. SMITH of Oregon) 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 a tax credit

for student education 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’’.

6 SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

7 (a) DEDUCTION ALLOWED.—Part VII of subchapter

8 B of chapter 1 of the Internal Revenue Code of 1986 (re-
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1 lating to additional itemized deductions for individuals) is

2 amended by redesignating section 222 as section 223 and

3 by inserting after section 221 the following:

4 ‘‘SEC. 222. HIGHER EDUCATION EXPENSES.

5 ‘‘(a) ALLOWANCE OF DEDUCTION.—

6 ‘‘(1) IN GENERAL.—In the case of an indi7 vidual, there shall be allowed as a deduction an

8 amount equal to the applicable dollar amount of the

9 qualified higher education expenses paid by the tax10 payer during the taxable year.

11 ‘‘(2) APPLICABLE DOLLAR AMOUNT.—The ap12 plicable dollar amount for any taxable year shall be

13 determined as follows:

Applicable

‘‘Taxable year: dollar amount:

2001 ......................................................................................... $4,000

2002 ......................................................................................... $8,000

2003 and thereafter ................................................................. $12,000.

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—
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1 ‘‘(A) the excess of—

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

3 gross income for such taxable year, over

4 ‘‘(ii) $62,450 ($104,050 in the case of

5 a joint return, $89,150 in the case of a re6 turn filed by a head of household, and

7 $52,025 in the case of a return by a mar8 ried individual filing separately), bears to

9 ‘‘(B) $15,000.

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

11 For purposes of this subsection, the term ‘modified

12 adjusted gross income’ means the adjusted gross in13 come of the taxpayer for the taxable year

14 determined—

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

16 sections 911, 931, and 933, and

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

18 135, 219, 220, and 469.

19 For purposes of the sections referred to in subpara20 graph (B), adjusted gross income shall be deter21 mined without regard to the deduction allowed under

22 this section.

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

24 For purposes of this section—
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1 ‘‘(1) QUALIFIED HIGHER EDUCATION EX2 PENSES.—

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

4 higher education expenses’ means tuition and

5 fees charged by an educational institution and

6 required for the enrollment or attendance of—

7 ‘‘(i) the taxpayer,

8 ‘‘(ii) the taxpayer’s spouse,

9 ‘‘(iii) any dependent of the taxpayer

10 with respect to whom the taxpayer is al11 lowed a deduction under section 151, or

12 ‘‘(iv) any grandchild of the taxpayer,

13 as an eligible student at an institution of higher

14 education.

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

16 for qualified higher education expenses of any

17 individual shall be taken into account under

18 subsection (a) only to the extent such

19 expenses—

20 ‘‘(i) are attributable to courses of in21 struction for which credit is allowed toward

22 a baccalaureate degree by an institution of

23 higher education or toward a certificate of

24 required course work at a vocational

25 school, and
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1 ‘‘(ii) are not attributable to any grad2 uate program of such individual.

3 ‘‘(C) EXCEPTION FOR NONACADEMIC

4 FEES.—Such term does not include any student

5 activity fees, athletic fees, insurance expenses,

6 or other expenses unrelated to a student’s aca7 demic course of instruction.

8 ‘‘(D) ELIGIBLE STUDENT.—For purposes

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

10 means a student who—

11 ‘‘(i) meets the requirements of section

12 484(a)(1) of the Higher Education Act of

13 1965 (20 U.S.C. 1091(a)(1)), as in effect

14 on the date of the enactment of this sec15 tion, and

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

17 normal full-time work load for the course

18 of study the student is pursuing, as deter19 mined by the institution of higher edu20 cation.

21 ‘‘(E) IDENTIFICATION REQUIREMENT.—No

22 deduction shall be allowed under subsection (a)

23 to a taxpayer with respect to an eligible student

24 unless the taxpayer includes the name, age, and

25 taxpayer identification number of such eligible
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1 student on the return of tax for the taxable

2 year.

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

4 The term ‘institution of higher education’ means an

5 institution which—

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

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

8 1088), as in effect on the date of the enactment

9 of this section, and

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

11 under title IV of such Act.

12 ‘‘(d) SPECIAL RULES.—

13 ‘‘(1) NO DOUBLE BENEFIT.—

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

15 allowed under subsection (a) for any expense

16 for which a deduction is allowable to the tax17 payer under any other provision of this chapter

18 unless the taxpayer irrevocably waives his right

19 to the deduction of such expense under such

20 other provision.

21 ‘‘(B) DENIAL OF DEDUCTION IF CREDIT

22 ELECTED.—No deduction shall be allowed

23 under subsection (a) for a taxable year with re24 spect to the qualified higher education expenses

25 of an individual if the taxpayer elects to have
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1 section 25A apply with respect to such indi2 vidual for such year.

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

4 be allowed under subsection (a) to any indi5 vidual with respect to whom a deduction under

6 section 151 is allowable to another taxpayer for

7 a taxable year beginning in the calendar year in

8 which such individual’s taxable year begins.

9 ‘‘(D) COORDINATION WITH EXCLUSIONS.—

10 A deduction shall be allowed under subsection

11 (a) for qualified higher education expenses only

12 to the extent the amount of such expenses ex13 ceeds the amount excludable under section 135

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

15 ‘‘(2) LIMITATION ON TAXABLE YEAR OF DE16 DUCTION.—

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

18 allowed under subsection (a) for qualified high19 er education expenses for any taxable year only

20 to the extent such expenses are in connection

21 with enrollment at an institution of higher edu22 cation during the taxable year.

23 ‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—

24 Subparagraph (A) shall not apply to qualified

25 higher education expenses paid during a taxable
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1 year if such expenses are in connection with an

2 academic term beginning during such taxable

3 year or during the first 3 months of the next

4 taxable year.

5 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR6 SHIPS AND VETERANS BENEFITS.—The amount of

7 qualified higher education expenses otherwise taken

8 into account under subsection (a) with respect to the

9 education of an individual shall be reduced (before

10 the application of subsection (b)) by the sum of the

11 amounts received with respect to such individual for

12 the taxable year as—

13 ‘‘(A) a qualified scholarship which under

14 section 117 is not includable in gross income,

15 ‘‘(B) an educational assistance allowance

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

17 United States Code, or

18 ‘‘(C) a payment (other than a gift, be19 quest, devise, or inheritance within the meaning

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

21 attributable to enrollment at an eligible edu22 cational institution, which is exempt from in23 come taxation by any law of the United States.

24 ‘‘(4) NO DEDUCTION FOR MARRIED INDIVID25 UALS FILING SEPARATE RETURNS.—If the taxpayer
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1 is a married individual (within the meaning of sec2 tion 7703), this section shall apply only if the tax3 payer and the taxpayer’s spouse file a joint return

4 for the taxable year.

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

6 a nonresident alien individual for any portion of the

7 taxable year, this section shall apply only if such in8 dividual is treated as a resident alien of the United

9 States for purposes of this chapter by reason of an

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

11 ‘‘(6) REGULATIONS.—The Secretary may pre12 scribe such regulations as may be necessary or ap13 propriate to carry out this section, including regula14 tions requiring recordkeeping and information re15 porting.’’

16 (b) DEDUCTION ALLOWED IN COMPUTING AD17 JUSTED GROSS INCOME.—Section 62(a) of such Code is

18 amended by inserting after paragraph (17) the following:

19 ‘‘(18) HIGHER EDUCATION EXPENSES.—The

20 deduction allowed by section 222.’’

21 (c) CONFORMING AMENDMENT.—The table of sec22 tions for part VII of subchapter B of chapter 1 of such

23 Code is amended by striking the item relating to section

24 222 and inserting the following:

‘‘Sec. 222. Higher education expenses.

‘‘Sec. 223. Cross reference.’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to payments made in taxable years

3 beginning after December 31, 1999.

4 SEC. 3. CREDIT FOR INTEREST ON HIGHER EDUCATION

5 LOANS.

6 (a) IN GENERAL.—Subpart A of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code of

8 1986 (relating to nonrefundable personal credits) is

9 amended by inserting after section 25A the following new

10 section:

11 ‘‘SEC. 25B. INTEREST ON HIGHER EDUCATION LOANS.

12 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in13 dividual, there shall be allowed as a credit against the tax

14 imposed by this chapter for the taxable year an amount

15 equal to the interest paid by the taxpayer during the tax16 able year on any qualified education loan.

17 ‘‘(b) MAXIMUM CREDIT.—

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (2), the credit allowed by subsection (a) for

20 the taxable year shall not exceed $1,500.

21 ‘‘(2) LIMITATION BASED ON MODIFIED AD22 JUSTED GROSS INCOME.—

23 ‘‘(A) IN GENERAL.—If the modified ad24 justed gross income of the taxpayer for the tax25 able year exceeds $50,000 ($80,000 in the case
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1 of a joint return), the amount which would (but

2 for this paragraph) be allowable as a credit

3 under this section shall be reduced (but not

4 below zero) by the amount which bears the

5 same ratio to the amount which would be so al6 lowable as such excess bears to $20,000.

7 ‘‘(B) MODIFIED ADJUSTED GROSS IN8 COME.—The term ‘modified adjusted gross in9 come’ means adjusted gross income determined

10 without regard to sections 911, 931, and 933.

11 ‘‘(C) INFLATION ADJUSTMENT.—In the

12 case of any taxable year beginning after 2002,

13 the $50,000 and $80,000 amounts referred to

14 in subparagraph (A) shall be increased by an

15 amount equal to—

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

17 ‘‘(ii) the cost-of-living adjustment de18 termined under section (1)(f)(3) for the

19 calendar year in which the taxable year be20 gins, by substituting ‘2001’ for ‘1992’.

21 ‘‘(D) ROUNDING.—If any amount as ad22 justed under subparagraph (C) is not a multiple

23 of $50, such amount shall be rounded to the

24 nearest multiple of $50.
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1 ‘‘(c) DEPENDENTS NOT ELIGIBLE FOR CREDIT.—No

2 credit shall be allowed by this section to an individual for

3 the taxable year if a deduction under section 151 with re4 spect to such individual is allowed to another taxpayer for

5 the taxable year beginning in the calendar year in which

6 such individual’s taxable year begins.

7 ‘‘(d) LIMIT ON PERIOD CREDIT ALLOWED.—A credit

8 shall be allowed under this section only with respect to

9 interest paid on any qualified education loan during the

10 first 60 months (whether or not consecutive) in which in11 terest payments are required. For purposes of this para12 graph, any loan and all refinancings of such loan shall be

13 treated as 1 loan.

14 ‘‘(e) DEFINITIONS.—For purposes of this section—

15 ‘‘(1) QUALIFIED EDUCATION LOAN.—The term

16 ‘qualified education loan’ has the meaning given

17 such term by section 221(e)(1).

18 ‘‘(2) DEPENDENT.—The term ‘dependent’ has

19 the meaning given such term by section 152.

20 ‘‘(f) SPECIAL RULES.—

21 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit

22 shall be allowed under this section for any amount

23 taken into account for any deduction under any

24 other provision of this chapter.
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1 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE2 TURN.—If the taxpayer is married at the close of

3 the taxable year, the credit shall be allowed under

4 subsection (a) only if the taxpayer and the tax5 payer’s spouse file a joint return for the taxable

6 year.

7 ‘‘(3) MARITAL STATUS.—Marital status shall be

8 determined in accordance with section 7703.’’

9 (b) CONFORMING AMENDMENT.—The table of sec10 tions for subpart A of part IV of subchapter A of chapter

11 1 is amended by inserting after the item relating to section

12 25A the following new item:

‘‘Sec. 25B. Interest on higher education loans.’’

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

14 this section shall apply to any qualified education loan (as

15 defined in section 25B(e)(1) of the Internal Revenue Code

16 of 1986, as added by this section) incurred on, before, or

17 after the date of the enactment of this Act, but only with

18 respect to any loan interest payment due after December

19 31, 2000.

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