I
107TH CONGRESS
1ST SESSION
H. R. 1777
To amend the Internal Revenue Code of 1986 to make higher education
more affordable by providing a tax deduction for higher education ex-
penses, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 9, 2001
Mr. HOLT 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 Speak-
er, in each case for consideration of such provisions as fall within the ju-
risdiction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to make
higher education more affordable by providing a tax de-
duction for higher education expenses, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Higher Education Af-
fordability and Fairness Act’’.
SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.
(a) DEDUCTION ALLOWED.—Part VII of subchapter
B of chapter 1 of the Internal Revenue Code of 1986 (re-
lating to additional itemized deductions for individuals) is
amended by redesignating section 222 as section 223 and
by inserting after section 221 the following:
‘‘SEC. 222. HIGHER EDUCATION EXPENSES.
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an
individual, there shall be allowed as a deduction an
amount equal to the qualified tuition and related expenses
paid by the taxpayer during the taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) LIMITATION FOR FIRST 2 YEARS OF POST-
SECONDARY EDUCATION.—For any taxable year pre-
ceding a taxable year described in paragraph (2),
the amount of qualified tuition and related expenses
which may be taken into account under subsection
(a) shall not exceed—
‘‘(A) except as provided in subparagraph
(B), the excess (if any) of—
‘‘(i) the lesser of—
‘‘(I) $10,000 for each eligible
student, or
‘‘(II) $15,000, over
‘‘(ii) the amount of such expenses
which are taken into account in deter-
mining the credit allowable to the taxpayer
or 
any 
other 
person 
under 
section
25A(a)(1) with respect to such expenses,
and
‘‘(B) in the case of a taxpayer with respect
to which the credit under section 25A(a)(1) is
reduced to zero by reason of section 25A(d)(1),
$5,000.
‘‘(2) LIMITATION
FOR
SECOND
YEARS
OF
POSTSECONDARY EDUCATION.—For any taxable year
if an eligible student has completed (before the be-
ginning of such taxable year) the first 2 years of
postsecondary education at an eligible educational
institution, the amount of qualified tuition and re-
lated expenses which may be taken into account
under subsection (a) shall not exceed—
‘‘(A) except as provided in subparagraph
(B) or (C), $10,000,
‘‘(B) in the case of a taxpayer with respect
to which a credit under section 25A(a)(1) would
be reduced to zero by reason of section
25A(d)(1), $5,000, and
‘‘(C) in the case of taxpayer with respect
to whom the credit under section 25A(a)(2) is
allowed for such taxable year, zero.
‘‘(3) DEDUCTION ALLOWED ONLY FOR 4 TAX-
ABLE YEARS FOR EACH ELIGIBLE STUDENT.—A de-
duction may not be allowed under subsection (a)
with respect to the qualified tuition and related ex-
penses of an eligible student for any taxable year if
such a deduction was allowable with respect to such
expenses for such student for any 4 prior taxable
years.
‘‘(c) QUALIFIED
TUITION
AND
RELATED
EX-
PENSES.—For purposes of this section, the term ‘qualified
tuition and related expenses’ has the meaning given such
term by section 25A(f)(1) (determined with regard to sec-
tion 25A(c)(2)(B)).
‘‘(d) ELIGIBLE STUDENT.—For purposes of this sec-
tion, the term ‘eligible student’ has the meaning given
such term by section 25A(b)(3).
‘‘(e) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) IDENTIFICATION REQUIREMENT.—No de-
duction shall be allowed under subsection (a) to a
taxpayer with respect to an eligible student unless
the taxpayer includes the name, age, and taxpayer
identification number of such eligible student on the
return of tax for the taxable year.
‘‘(2) NO DOUBLE BENEFIT.—
‘‘(A) COORDINATION WITH EXCLUSIONS.—
The amount of qualified tuition and related ex-
penses otherwise taken into account under sub-
section (a) with respect to an eligible student
shall be reduced (before the application of sub-
section (b)) by the amount of such expenses
which are taken into account in determining the
exclusion under section 135 or 530(d)(2) for
the taxable year.
‘‘(B) DEPENDENTS.—No deduction shall
be allowed under subsection (a) to any indi-
vidual with respect to whom a deduction under
section 151 is allowable to another taxpayer for
a taxable year beginning in the calendar year in
which such individual’s taxable year begins.
‘‘(3) LIMITATION ON TAXABLE YEAR OF DE-
DUCTION.—
‘‘(A) IN GENERAL.—A deduction shall be
allowed under subsection (a) for qualified tui-
tion and related expenses for any taxable year
only to the extent such expenses are in connec-
tion with enrollment at an institution of higher
education during the taxable year.
‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—
Subparagraph (A) shall not apply to qualified
tuition and related expenses paid during a tax-
able year if such expenses are in connection
with an academic term beginning during such
taxable year or during the first 3 months of the
next taxable year.
‘‘(4) ADJUSTMENT
FOR
CERTAIN
SCHOLAR-
SHIPS AND VETERANS BENEFITS.—The amount of
qualified tuition and related expenses otherwise
taken into account under subsection (a) with respect
to the education of an individual shall be reduced
(before the application of subsection (b)) by the sum
of the amounts received with respect to such indi-
vidual for the taxable year as—
‘‘(A) a qualified scholarship which under
section 117 is not includable in gross income,
‘‘(B) an educational assistance allowance
under chapter 30, 31, 32, 34, or 35 of title 38,
United States Code, or
‘‘(C) a payment (other than a gift, be-
quest, devise, or inheritance within the meaning
of section 102(a)) for educational expenses, or
attributable to enrollment at an eligible edu-
cational institution, which is exempt from in-
come taxation by any law of the United States.
‘‘(5) NO
DEDUCTION
FOR
MARRIED
INDIVID-
UALS FILING SEPARATE RETURNS.—If the taxpayer
is a married individual (within the meaning of sec-
tion 7703), this section shall apply only if the tax-
payer and the taxpayer’s spouse file a joint return
for the taxable year.
‘‘(6) NONRESIDENT ALIENS.—If the taxpayer is
a nonresident alien individual for any portion of the
taxable year, this section shall apply only if such in-
dividual is treated as a resident alien of the United
States for purposes of this chapter by reason of an
election under subsection (g) or (h) of section 6013.
‘‘(7) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary or ap-
propriate to carry out this section, including regula-
tions requiring recordkeeping and information re-
porting.’’.
(b) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED GROSS INCOME.—Section 62(a) of the Internal
Revenue Code of 1986 is amended by inserting after para-
graph (17) the following:
‘‘(18) HIGHER
EDUCATION
EXPENSES.—The
deduction allowed by section 222.’’.
(c) DETERMINATION OF ADJUSTED GROSS INCOME
WITH RESPECT TO OTHER BENEFITS.—
(1) Section 21(a)(2) of the Internal Revenue
Code of 1986 is amended by inserting ‘‘(determined
without regard to section 222)’’ after ‘‘adjusted
gross income’’.
(2) Section 22(d) of such Code is amended—
(A) by inserting ‘‘(determined without re-
gard to section 222)’’ after ‘‘adjusted gross in-
come’’ the first place it appears, and
(B) by inserting ‘‘(as so determined)’’ after
‘‘adjusted gross income’’ the second place it ap-
pears.
(3) Section 23(b)(2)(B) of such Code is amend-
ed by inserting ‘‘222,’’ before ‘‘911’’.
(4) Section 24(b)(1) of such Code is amended
by inserting ‘‘222,’’ before ‘‘911’’.
(5) Section 86(b)(2)(A) of such Code is amend-
ed by inserting ‘‘222,’’ before ‘‘911’’.
(6) Section 137(b)(3)(A) of such Code is
amended by inserting ‘‘222,’’ before ‘‘911’’.
(7) 
Section 
151(d)(3) 
of 
such 
Code 
is
amended—
(A) by inserting ‘‘(determined without re-
gard to section 222)’’ after ‘‘adjusted gross in-
come’’ in subparagraph (A), and
(B) by inserting ‘‘(as so determined)’’ after
‘‘adjusted gross income’’ in subparagraph (B).
(8) Section 165(h)(2)(A)(ii) of such Code is
amended by inserting ‘‘(determined without regard
to section 222)’’ after ‘‘adjusted gross income’’.
(9) Section 213(a) of such Code is amended by
inserting ‘‘(determined without regard to section
222)’’ after ‘‘adjusted gross income’’.
(10) Section 219(g)(3)(A)(ii) of such Code is
amended by inserting ‘‘222,’’ after ‘‘221,’’.
(11) Section 221(b)(2)(C)(i) of such Code is
amended by inserting ‘‘222,’’ before ‘‘911’’.
(12) Section 403(b)(3)(D) of such Code is
amended—
(A) by inserting ‘‘(determined without re-
gard to section 222)’’ after ‘‘adjusted gross in-
come’’ in clause (ii), and
(B) by inserting ‘‘(as so determined)’’ after
‘‘adjusted gross income’’ in the matter following
clause (ii).
(13) Section 469(i)(3)(E)(iii) of such Code is
amended by striking ‘‘and 221’’ and inserting ‘‘,
221, and 222’’.
(14) Section 1400C(b)(2) of such Code is
amended by inserting ‘‘222,’’ before ‘‘911’’.
(d) CONFORMING AMENDMENTS.—The table of sec-
tions for part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by striking the
item relating to section 222 and inserting the following:
‘‘Sec. 222. Higher education expenses.
‘‘Sec. 223. Cross reference.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid after December
31, 2001 (in taxable years ending after such date), for
education furnished in academic periods beginning after
such date.
SEC. 3. EDUCATION TAX CREDIT FAIRNESS.
(a) IN GENERAL.—Section 25A(c)(1) of the Internal
Revenue Code of 1986 (relating to lifetime learning credit)
is amended by striking ‘‘2003’’ and inserting ‘‘2002’’.
(b) INCREASE IN AGI LIMITS.—
(1) IN
GENERAL.—Subsection (d) of section
25A of the Internal Revenue Code of 1986 is
amended to read as follows:
‘‘(d) LIMITATION BASED ON MODIFIED ADJUSTED
GROSS INCOME.—
‘‘(1) HOPE CREDIT.—
‘‘(A) IN
GENERAL.—The amount which
would (but for this subsection) be taken into ac-
count under subsection (a)(1) shall be reduced