II 

111TH CONGRESS 

1ST SESSION S. 250 

To amend the Internal Revenue Code of 1986 to provide a higher education 

opportunity credit in place of existing education tax incentives. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 14, 2009 

Mr. SCHUMER (for himself, Mr. BAYH, Mrs. BOXER, Mrs. MURRAY, Mr. 

BROWN, Mr. CASEY, Mr. LIEBERMAN, Mr. MERKLEY, and Mrs. 

MCCASKILL) 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 provide 

a higher education opportunity credit in place of existing 

education tax incentives. 

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 Op5 portunity Act of 2009’’. 

6 SEC. 2. HIGHER EDUCATION OPPORTUNITY CREDIT. 

7 (a) IN GENERAL.—Section 25A of the Internal Rev8 enue Code of 1986 (relating to Hope and Lifetime Learn9 ing credits) is amended to read as follows: 


wwoods2 on PRODPC68 with BILLS
2 

•S 250 IS

1 ‘‘SEC. 25A. HIGHER EDUCATION OPPORTUNITY CREDIT. 

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of any 

3 eligible student for whom an election is in effect under 

4 this section for any taxable year, there shall be allowed 

5 as a credit against the tax imposed by this chapter for 

6 the taxable year in an amount equal to the lesser of— 

7 ‘‘(1) the sum of— 

8 ‘‘(A) 100 percent of so much of the quali9 fied tuition and related expenses paid by the 

10 taxpayer during the taxable year (for education 

11 furnished to the eligible student during any 

12 academic period beginning in such taxable year) 

13 as does not exceed $2,000, 

14 ‘‘(B) 50 percent of so much of such ex15 penses as exceeds $2,000 but does not exceed 

16 $4,000, and 

17 ‘‘(C) 25 percent of so much of such ex18 penses as exceeds $4,000 but does not exceed 

19 $8,000, or 

20 ‘‘(2) the excess (if any) of $16,000 over the ag21 gregate credits allowed under this section with re22 spect to such eligible student for all prior taxable 

23 years. 

24 ‘‘(b) LIMITATIONS.— 

25 ‘‘(1) LIMITATION BASED ON MODIFIED AD26 JUSTED GROSS INCOME.— 


wwoods2 on PRODPC68 with BILLS
3 

•S 250 IS

1 ‘‘(A) IN GENERAL.—The amount which 

2 would (but for this paragraph) be taken into ac3 count under subsection (a) for the taxable year 

4 shall be reduced (but not below zero) by the 

5 amount determined under subparagraph (B). 

6 ‘‘(B) AMOUNT OF REDUCTION.—The 

7 amount determined under this subparagraph is 

8 the amount which bears the same ratio to the 

9 amount which would be so taken into account 

10 as— 

11 ‘‘(i) the excess of— 

12 ‘‘(I) the taxpayer’s modified ad13 justed gross income for such taxable 

14 year, over 

15 ‘‘(II) $70,000 ($140,000 in the 

16 case of a joint return), bears to 

17 ‘‘(ii) $10,000 ($20,000 in the case of 

18 a joint return). 

19 ‘‘(C) MODIFIED ADJUSTED GROSS IN20 COME.—The term ‘modified adjusted gross in21 come’ means the adjusted gross income of the 

22 taxpayer for the taxable year increased by any 

23 amount excluded from gross income under sec24 tion 911, 931, or 933. 


wwoods2 on PRODPC68 with BILLS
4 

•S 250 IS

1 ‘‘(2) LIMITATION BASED ON AMOUNT OF

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

3 26(a)(2) does not apply, the credit allowed under 

4 subsection (a) for any taxable year shall not exceed 

5 the excess of— 

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

7 (as defined in section 26(b)) plus the tax im8 posed by section 55, over 

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

10 under this subpart (other than this section and 

11 sections 23, 24, and 25B) and section 27 for 

12 the taxable year. 

13 ‘‘(3) CREDIT ALLOWED ONLY FOR 3 ELIGIBLE

14 STUDENTS.—The credit under subsection (a) to any 

15 taxpayer shall not be allowed with respect to more 

16 than 3 eligible students for any taxable year. 

17 ‘‘(4) OTHER LIMITATIONS.— 

18 ‘‘(A) CREDIT ALLOWED ONLY FOR FIRST 2

19 YEARS OF GRADUATE EDUCATION.—An election 

20 to have this section apply with respect to any 

21 eligible student may not be made for any tax22 able year if the student has completed (before 

23 the beginning of such taxable year) 2 years of 

24 graduate education at one or more eligible edu25 cational institutions. 


wwoods2 on PRODPC68 with BILLS
5 

•S 250 IS

1 ‘‘(B) CREDIT ALLOWED FOR YEAR ONLY IF

2 INDIVIDUAL IS AT LEAST 1/2 TIME STUDENT

3 FOR PORTION OF YEAR.—The credit under sub4 section (a) shall not be allowed for a taxable 

5 year with respect to the qualified tuition and re6 lated expenses of an individual unless such indi7 vidual is an eligible student for at least one aca8 demic period which begins during such year. 

9 ‘‘(C) DENIAL OF CREDIT IF STUDENT CON10 VICTED OF A FELONY DRUG OFFENSE.—The 

11 credit under subsection (a) shall not be allowed 

12 for qualified tuition and related expenses for 

13 the enrollment or attendance of a student for 

14 any academic period if such student has been 

15 convicted of a Federal or State felony offense 

16 consisting of the possession or distribution of a 

17 controlled substance before the end of the tax18 able year with or within which such period 

19 ends. 

20 ‘‘(c) DEFINITIONS.—For purposes of this sub21 section— 

22 ‘‘(1) ELIGIBLE STUDENT.— 

23 ‘‘(A) IN GENERAL.—The term ‘eligible stu24 dent’ means, with respect to any academic pe25 riod, a student who— 


wwoods2 on PRODPC68 with BILLS
6 

•S 250 IS

1 ‘‘(i) meets the requirements of section 

2 484(a)(1) of the Higher Education Act of 

3 1965 (20 U.S.C. 1091(a)(1)), as in effect 

4 on the date of the enactment of the Tax5 payer Relief Act of 1997, and 

‘‘(ii) is carrying at least 1 6 ⁄2 the normal 

7 full-time work load for the course of study 

8 the student is pursuing. 

9 ‘‘(B) WAIVER OF ENROLLMENT REQUIRE10 MENT FOR CERTAIN WORKERS.—Subparagraph 

11 (A) shall be applied without regard to clause 

12 (ii) if the student is employed for at least 25 

13 hours per week during the academic period. 

14 ‘‘(2) QUALIFIED TUITION AND RELATED EX15 PENSES.— 

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

17 tuition and related expenses’ means tuition and 

18 fees required for the enrollment or attendance 

19 of an eligible student who is— 

20 ‘‘(i) the taxpayer, 

21 ‘‘(ii) the taxpayer’s spouse, or 

22 ‘‘(iii) any dependent of the taxpayer 

23 with respect to whom the taxpayer is al24 lowed a deduction under section 151, 


wwoods2 on PRODPC68 with BILLS
7 

•S 250 IS

1 at an eligible educational institution for courses 

2 of instruction of such individual at such institu3 tion. 

4 ‘‘(B) INCLUSION OF CERTAIN EXPENSES

5 FOR BOOKS.— 

6 ‘‘(i) IN GENERAL.—For purposes of 

7 subparagraph (A), tuition and fees shall 

8 include 50 percent of amounts paid or in9 curred for books. 

10 ‘‘(ii) LIMITATION.—The amount of 

11 tuition and fees taken into account under 

12 subparagraph (A) by reason of clause (i) 

13 for any taxable year shall not exceed $400 

14 with respect to any eligible student. 

15 ‘‘(C) EXCEPTION FOR EDUCATION INVOLV16 ING SPORTS, ETC.—Such term does not include 

17 expenses with respect to any course or other 

18 education involving sports, games, or hobbies, 

19 unless such course or other education is part of 

20 the individual’s degree program. 

21 ‘‘(D) EXCEPTION FOR NONACADEMIC

22 FEES.—Such term does not include student ac23 tivity fees, athletic fees, insurance expenses, or 

24 other expenses unrelated to an individual’s aca25 demic course of instruction. 


wwoods2 on PRODPC68 with BILLS
8 

•S 250 IS

1 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

2 The term ‘eligible educational institution’ means an 

3 institution— 

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

5 the Higher Education Act of 1965 (20 U.S.C. 

6 1088), as in effect on the date of the enactment 

7 of the Taxpayer Relief Act of 1997, and 

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

9 program under title IV of the Higher Education 

10 Act of 1965. 

11 ‘‘(d) ELECTION NOT TO HAVE SECTION APPLY.— 

12 A taxpayer may elect not to have this section apply with 

13 respect to the qualified tuition and related expenses of an 

14 individual for any taxable year. 

15 ‘‘(e) SPECIAL RULES.— 

16 ‘‘(1) IDENTIFICATION REQUIREMENT.—No 

17 credit shall be allowed under subsection (a) to a tax18 payer with respect to the qualified tuition and re19 lated expenses of an individual unless the taxpayer 

20 includes the name and taxpayer identification num21 ber of such individual on the return of tax for the 

22 taxable year. 

23 ‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLAR24 SHIPS, ETC.—The amount of qualified tuition and 

25 related expenses otherwise taken into account under 


wwoods2 on PRODPC68 with BILLS
9 

•S 250 IS

1 subsection (a) with respect to an individual for an 

2 academic period shall be reduced (before the applica3 tion of subsections (a), (b), and (c)) by the sum of 

4 any amounts paid for the benefit of such individual 

5 which are allocable to such period as— 

6 ‘‘(A) a qualified scholarship which is ex7 cludable from gross income under section 117, 

8 ‘‘(B) an educational assistance allowance 

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

10 United States Code, or under chapter 1606 of 

11 title 10, United States Code, and 

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

14 of section 102(a)) for such individual’s edu15 cational expenses, or attributable to such indi16 vidual’s enrollment at an eligible educational in17 stitution, which is excludable from gross income 

18 under any law of the United States. 

19 ‘‘(3) 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— 


wwoods2 on PRODPC68 with BILLS
10 

•S 250 IS

1 ‘‘(A) no credit shall be allowed under sub2 section (a) to such individual for such individ3 ual’s 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 ‘‘(4) 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 ‘‘(5) 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 ‘‘(6) 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. 


wwoods2 on PRODPC68 with BILLS
11 

•S 250 IS

1 ‘‘(7) 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 ‘‘(f) REGULATIONS.—The Secretary may prescribe 

8 such regulations as may be necessary or appropriate to 

9 carry out this section, including regulations providing for 

10 a recapture of the credit allowed under this section in 

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

12 of any amount which was taken into account in deter13 mining the amount of such credit.’’. 

14 (b) REPEAL OF DEDUCTION FOR QUALIFIED TUI15 TION AND RELATED EXPENSES.— 

16 (1) IN GENERAL.—Part VII of subchapter B of 

17 chapter 1 of the Internal Revenue Code of 1986 is 

18 amended by striking section 222 (relating to quali19 fied tuition and related expenses). 

20 (2) CLERICAL AMENDMENT.—The table of sec21 tion for part VII of subchapter B of chapter 1 of 

22 such Code is amended by striking the item relating 

23 to section 222. 

24 (c) CONFORMING AMENDMENTS.— 


wwoods2 on PRODPC68 with BILLS
12 

•S 250 IS

1 (1) Paragraph (1) of section 26(a) of the Inter2 nal Revenue Code of 1986 is amended by inserting 

3 ‘‘25A,’’ after ‘‘24,’’. 

4 (2) Section 62(a) of such Code is amended by 

5 striking paragraph (18). 

6 (3) Subparagraph (B) of section 72(t)(7) of 

7 such Code is amended by striking ‘‘section 

8 25A(g)(2)’’ and inserting ‘‘section 25A(e)(2)’’. 

9 (4) Section 221(d) of such Code is amended— 

10 (A) by striking ‘‘section 25A(g)(2)’’ in 

11 paragraph (2)(B) and inserting ‘‘section 

12 25A(e)(2)’’, 

13 (B) by striking ‘‘section 25A(f)(2)’’ in 

14 paragraph (2)(B) and inserting ‘‘section 

15 25A(c)(3)’’, and 

16 (C) by striking ‘‘section 25A(b)(3)’’ in 

17 paragraph (3) and inserting ‘‘section 

18 25A(c)(1)’’. 

19 (5) Section 529 of such Code is amended— 

20 (A) by striking ‘‘section 25A(g)(2)’’ in sub21 clause (I) of subsection (c)(3)(B)(v) and insert22 ing ‘‘section 25(e)(2)’’, and 

23 (B) by striking ‘‘section 25A(b)(3)’’ in 

24 clause (i) of subsection (e)(3)(B) and inserting 

25 ‘‘section 25A(c)(1)’’. 


wwoods2 on PRODPC68 with BILLS
13 

•S 250 IS

1 (6) Section 530 of such Code is amended— 

2 (A) by striking ‘‘section 25A(g)(2)’’ in sub3 clause (I) of subsection (d)(2)(C)(i) and insert4 ing ‘‘section 25A(e)(2)’’, and 

5 (B) by striking ‘‘section 25A(g)(2)’’ in 

6 clause (iii) of subsection (d)(4)(B) and inserting 

7 ‘‘section 25A(e)(2)’’. 

8 (7) Section 1400O of such Code is amended by 

9 adding at the end the following flush sentence: 

10 ‘‘For purposes of this section, any reference to section 25A 

11 shall be treated as a reference to such section before the 

12 date of the enactment of this sentence.’’. 

13 (8) Subsection (e) of section 6050S of such 

14 Code is amended by striking ‘‘(without regard to 

15 subsection (g)(2) thereof)’’ and inserting ‘‘(without 

16 regard to subsection (e)(2) thereof)’’. 

17 (9) Subparagraph (J) of section 6213(g)(2) of 

18 such Code is amended by striking ‘‘section 

19 25A(g)(1)’’ and inserting ‘‘section 25A(e)(1)’’. 

20 (10) The table of sections for subpart A of part 

21 IV of subchapter A of chapter 1 of such Code is 

22 amended by striking the item relating to section 25A 

23 and inserting the following: 

‘‘Sec. 25A. Higher education opportunity credit.’’. 

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

25 this section shall apply to expenses paid after December 


wwoods2 on PRODPC68 with BILLS
14 

•S 250 IS

1 31, 2008 (in taxable years ending after such date), for 

2 education furnished in academic periods beginning after 

3 such date. 

Æ 


wwoods2 on PRODPC68 with BILLS