II 

111TH CONGRESS 

1ST SESSION S. 2851 

To make permanent certain education tax incentives, to modify rules relating 

to college savings plans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 8, 2009 

Mr. GRASSLEY introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To make permanent certain education tax incentives, to modify rules relating to college savings plans, 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. AMENDMENT OF 1986 CODE. 

4 Except as otherwise expressly provided, whenever in 

5 this Act an amendment or repeal is expressed in terms 

6 of an amendment to, or repeal of, a section or other provi7 sion, the reference shall be considered to be made to a 

8 section or other provision of the Internal Revenue Code 

9 of 1986. 

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1 SEC. 2. PERMANENT EXTENSION AND INCREASE OF AMER2 ICAN OPPORTUNITY TAX CREDIT. 

3 (a) PERMANENT EXTENSION OF CREDIT; INCREASE

4 OF CREDIT AMOUNT.—Section 25A is amended— 

5 (1) by striking ‘‘$1,000’’ each place it appears 

6 in subsection (b)(1) and inserting ‘‘$2,000’’, 

7 (2) by striking ‘‘the applicable limit’’ in sub8 section (b)(1)(B) and inserting ‘‘$4,000’’, 

9 (3) by striking paragraph (4) of subsection (b), 

10 (4) by striking ‘‘2 TAXABLE YEARS’’ in the 

11 heading of subparagraph (A) of subsection (b)(2) 

12 and inserting ‘‘4 TAXABLE YEARS’’, 

13 (5) by striking ‘‘2 prior taxable years’’ in sub14 section (b)(2)(A) and inserting ‘‘4 prior taxable 

15 years’’, 

16 (6) by striking ‘‘2 YEARS’’ in the heading of 

17 subparagraph (C) of subsection (b)(2) and inserting 

18 ‘‘4 YEARS’’, 

19 (7) by striking ‘‘first 2 years’’ in subsection 

20 (b)(2)(C) and inserting ‘‘first 4 years’’, 

21 (8) by striking ‘‘tuition and fees’’ in subpara22 graph (A) of subsection (f)(1) and inserting ‘‘tuition, 

23 fees, and course materials’’, 

24 (9) by striking paragraphs (1) and (2) of sub25 section (d) and inserting the following new para26 graphs: 

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1 ‘‘(1) HOPE SCHOLARSHIP CREDIT.—The 

2 amount which would (but for this paragraph) be 

3 taken into account under paragraph (1) of sub4 section (a) for the taxable year shall be reduced (but 

5 not below zero) by the amount which bears the same 

6 ratio to the amount which would be so taken into ac7 count as— 

8 ‘‘(A) the excess of— 

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

10 gross income for such taxable year, over 

11 ‘‘(ii) $80,000 ($160,000 in the case of 

12 a joint return), bears to 

13 ‘‘(B) $10,000 ($20,000 in the case of a 

14 joint return). 

15 ‘‘(2) LIFETIME LEARNING CREDIT.—The 

16 amount which would (but for this paragraph) be 

17 taken into account under paragraph (2) of sub18 section (a) for the taxable year shall be reduced (but 

19 not below zero) by the amount which bears the same 

20 ratio to the amount which would be so taken into ac21 count as— 

22 ‘‘(A) the excess of— 

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

24 gross income for such taxable year, over 

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1 ‘‘(ii) $40,000 ($80,000 in the case of 

2 a joint return), bears to 

3 ‘‘(B) $10,000 ($20,000 in the case of a 

4 joint return).’’, 

5 (10) by striking ‘‘DOLLAR LIMITATION ON

6 AMOUNT OF CREDIT’’ in the heading of paragraph 

7 (1) of subsection (h) and inserting ‘‘HOPE SCHOLAR8 SHIP CREDIT’’, 

9 (11) by striking ‘‘2001’’ in subsection (h)(1)(A) 

10 and inserting ‘‘2011’’, 

11 (12) by striking ‘‘the $1,000 amounts under 

12 subsection (b)(1)’’ in subsection (h)(1)(A) and in13 serting ‘‘the dollar amounts under subsections (b)(1) 

14 and (d)(1)’’, 

15 (13) by striking ‘‘calendar year 2000’’ in sub16 section (h)(1)(A)(ii) and inserting ‘‘calendar year 

17 2010’’, 

18 (14) by striking ‘‘If any amount’’ and all that 

19 follows in subparagraph (B) of subsection (h)(1) and 

20 inserting ‘‘If any amount under subsection (b)(1) as 

21 adjusted under subparagraph (A) is not a multiple 

22 of $100, such amount shall be rounded to the next 

23 lowest multiple of $100. If any amount under sub24 section (d)(1) as adjusted under subparagraph (A) is 

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1 not a multiple of $1,000, such amount shall be 

2 rounded to the next lowest multiple of $1,000.’’, 

3 (15) by inserting ‘‘OF LIFETIME LEARNING

4 CREDIT’’ after ‘‘INCOME LIMITS’’ in the heading of 

5 paragraph (2) of subsection (h), 

6 (16) by adding at the end of subsection (b) the 

7 following new paragraphs: 

8 ‘‘(4) CREDIT ALLOWED AGAINST ALTERNATIVE

9 MINIMUM TAX.—In the case of a taxable year to 

10 which section 26(a)(2) does not apply, so much of 

11 the credit allowed under subsection (a) as is attrib12 utable to the Hope Scholarship Credit shall not ex13 ceed 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 Any reference in this section or section 24, 25, 25B, 

22 26, 904, or 1400C to a credit allowable under this 

23 subsection shall be treated as a reference to so much 

24 of the credit allowable under subsection (a) as is at25 tributable to the Hope Scholarship Credit. 

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1 ‘‘(5) PORTION OF CREDIT MADE REFUND2 ABLE.—40 percent of so much of the credit allowed 

3 under subsection (a) as is attributable to the Hope 

4 Scholarship Credit (determined after the application 

5 of subsection (d)(1) and without regard to this para6 graph and section 26(a)(2) or paragraph (4), as the 

7 case may be) shall be treated as a credit allowable 

8 under subpart C (and not allowed under subsection 

9 (a)). The preceding sentence shall not apply to any 

10 taxpayer for any taxable year if such taxpayer is a 

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

12 such taxable year.’’, and 

13 (17) by striking subsection (i). 

14 (b) CONFORMING AMENDMENTS.— 

15 (1) Section 24(b)(3)(B) is amended by striking 

16 ‘‘25A(i)’’ and inserting ‘‘25A(b)’’. 

17 (2) Section 25(e)(1)(C)(ii) is amended by strik18 ing ‘‘25A(i)’’ and inserting ‘‘25A(b)’’. 

19 (3) Section 26(a)(1) is amended by striking 

20 ‘‘25A(i)’’ and inserting ‘‘25A(b)’’. 

21 (4) Section 25B(g)(2) is amended by striking 

22 ‘‘25A(i)’’ and inserting ‘‘25A(b)’’. 

23 (5) Section 904(i) is amended by striking 

24 ‘‘25A(i)’’ and inserting ‘‘25A(b)’’. 

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1 (6) Section 1400C(d)(2) is amended by striking 

2 ‘‘25A(i)’’ and inserting ‘‘25A(b)’’. 

3 (7) Section 6211(b)(4)(A) is amended by strik4 ing ‘‘25A by reason of subsection (i)(6) thereof’’ and 

5 inserting ‘‘25A by reason of subsection (b)(5) there6 of’’. 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2010. 

10 (d) APPLICATION OF EGTRRA SUNSET.—The 

11 amendment made by subsection (b)(1) shall be subject to 

12 title IX of the Economic Growth and Tax Relief Reconcili13 ation Act of 2001 in the same manner as the provision 

14 of such Act to which such amendment relates. 

15 SEC. 3. PERMANENT EXTENSION OF CERTAIN EGTRRA PRO16 VISIONS RELATING TO EDUCATION. 

17 (a) IN GENERAL.—Title IX of the Economic Growth 

18 and Tax Relief Reconciliation Act of 2001 shall not apply 

19 to the amendments made by sections 401, 402, 411, 412, 

20 413, and 431 of such Act. 

21 (b) CONFORMING AMENDMENT.—Section 222 is 

22 amended by striking subsection (e). 

23 (c) EFFECTIVE DATE.—The amendment made by 

24 subsection (b) shall apply to taxable years beginning after 

25 December 31, 2009. 

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1 SEC. 4. PERMANENT EXTENSION OF DEDUCTION FOR CER2 TAIN EXPENSES OF ELEMENTARY AND SEC3 ONDARY SCHOOL TEACHERS. 

4 (a) IN GENERAL.—Subparagraph (D) of section 

5 62(a)(2) is amended by striking ‘‘during 2002, 2003, 

6 2004, 2005, 2006, 2007, 2008, or 2009’’ and inserting 

7 ‘‘after 2001’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2009. 

11 SEC. 5. PERMANENT EXTENSION OF QUALIFIED ZONE 

12 ACADEMY BONDS. 

13 (a) IN GENERAL.—Paragraph (1) of section 54E(c) 

14 is amended by striking ‘‘and, except as provided in para15 graph (4), zero thereafter’’ and inserting ‘‘and, except as 

16 provided in paragraph (5), $700,000,000 for each cal17 endar year thereafter’’. 

18 (b) INFLATION ADJUSTMENT.—Subsection (c) of sec19 tion 54E is amended by adding at the end the following 

20 new paragraph: 

21 ‘‘(5) INFLATION ADJUSTMENT.—In the case of 

22 any calendar year after 2011, the $700,000,000 

23 amount in paragraph (1) shall be increased by an 

24 amount equal to— 

25 ‘‘(A) such amount, multiplied by 

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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for such calendar 

3 year by substituting ‘calendar year 2010’ for 

4 ‘calendar year 1992’ in subparagraph (B) 

5 thereof. 

6 If any increase determined under this paragraph is 

7 not a multiple of $1,000,000, such increase shall be 

8 rounded to the next lowest multiple of $1,000,000.’’. 

9 (c) CREDITS NOT TO BE STRIPPED.—Section 54E 

10 is amended by adding at the end the following new sub11 section: 

12 ‘‘(e) CREDITS NOT TO BE STRIPPED.—Subsection 

13 (i) of section 54A shall not apply with respect to any quali14 fied zone academy bond.’’. 

15 (d) DAVIS-BACON RULES NOT TO APPLY TO QZABS

16 OR SCHOOL CONSTRUCTION BONDS.—Section 1601 of the 

17 American Recovery and Reinvestment Act of 2009 is 

18 amended by striking paragraphs (3) and (4), by inserting 

19 ‘‘and’’ at the end of paragraph (2), and by redesignating 

20 paragraph (5) as paragraph (3). 

21 (e) EFFECTIVE DATES.— 

22 (1) IN GENERAL.—Except as provided in para23 graph (2), the amendments made by this section 

24 shall apply to obligations issued after December 31, 

25 2010. 

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1 (2) DAVIS-BACON RULES.—The amendments 

2 made by subsection (d) shall apply to obligations 

3 issued after the date of the enactment of this Act. 

4 SEC. 6. PERMANENT EXTENSION OF SCHOOL CONSTRUC5 TION BONDS. 

6 (a) IN GENERAL.—Subsection (c) of section 54F is 

7 amended— 

8 (1) by striking paragraph (3), 

9 (2) by inserting ‘‘and’’ at the end of paragraph 

10 (1), and 

11 (3) by striking ‘‘for 2010, and’’ in paragraph 

12 (2) and inserting ‘‘thereafter.’’. 

13 (b) ALLOCATIONS FOR INDIAN SCHOOLS.—Para14 graph (4) of section 54F(d) is amended by striking ‘‘for 

15 calendar year 2010’’ and inserting ‘‘for each calendar year 

16 after 2009’’. 

17 (c) EXTENSION OF SMALL ISSUER EXCEPTION.— 

18 (1) IN GENERAL.—Clause (vii) of section 

19 148(f)(4)(D) is amended by striking ‘‘$10,000,000’’ 

20 and inserting ‘‘$15,000,000’’. 

21 (2) ELIMINATION OF EGTRRA SUNSET.—Title 

22 IX of the Economic Growth and Tax Relief Rec23 onciliation Act of 2001 shall not apply to the amend24 ments made by section 421 of such Act. 

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1 (d) CREDITS NOT TO BE STRIPPED.—Section 54F 

2 is amended by adding at the end the following new sub3 section: 

4 ‘‘(f) CREDITS NOT TO BE STRIPPED.—Subsection (i) 

5 of section 54A shall not apply with respect to any qualified 

6 school construction bond.’’. 

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

8 this section shall apply to obligations issued after Decem9 ber 31, 2010. 

10 SEC. 7. PERMANENT EXTENSION AND MODIFICATION OF 

11 SECTION 529 RULES. 

12 (a) IN GENERAL.—Clause (iii) of section 

13 529(e)(3)(A) is amended by striking ‘‘in 2009 or 2010’’. 

14 (b) ABILITY TO CHANGE INVESTMENT OPTIONS.— 

15 Subsection (e) of section 529 is amended by adding at the 

16 end the following new paragraph: 

17 ‘‘(6) ALLOWABLE CHANGE OF INVESTMENT OP18 TIONS.—A program shall not fail to be treated as 

19 meeting the requirements of subsection (b)(4) mere20 ly because such program allows a designated bene21 ficiary to change investment options under the plan 

22 not more than 4 times per year.’’. 

23 (c) EFFECTIVE DATES.— 

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1 (1) EXTENSION.—The amendment made by 

2 subsection (a) shall apply to taxable years beginning 

3 after December 31, 2010. 

4 (2) INVESTMENT OPTIONS.—The amendment 

5 made by subsection (b) shall apply to taxable years 

6 beginning after December 31, 2009. 

Æ 

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