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 Work-
force, 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. 
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 Equity Act of 2005’’.
SEC. 2. EXPANSION OF DEDUCTION FOR INTEREST ON EDU-
CATION LOANS. 
(a) REPEAL OF DOLLAR LIMITATION; INCREASE IN 
PHASEOUT BEGINNING POINT.—Subsection (b) of section 
221 of the Internal Revenue Code of 1986 (relating to 
maximum deduction) is amended to read as follows: 
‘‘(b) LIMITATION BASED ON MODIFIED ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—The amount which would 
(but for this subsection) be allowable as a deduction 
under this section shall be reduced (but not below 
zero) by the amount determined under paragraph 
(2). 
‘‘(2) AMOUNT
OF
REDUCTION.—The amount 
determined under this paragraph is the amount 
which bears the same ratio to the amount which 
would be so taken into account as— 
‘‘(A) the excess of— 
‘‘(i) the taxpayer’s modified adjusted 
gross income for such taxable year, over 
‘‘(ii) $100,000 ($200,000 in the case 
of a joint return), bears to 
‘‘(B) $15,000 ($30,000 in the case of a 
joint return).
‘‘(3) MODIFIED
ADJUSTED
GROSS
INCOME.— 
The term ‘modified adjusted gross income’ means 
adjusted gross income determined— 
‘‘(A) without regard to this section and 
sections 199, 222, 911, 931, and 933, and 
‘‘(B) after application of sections 86, 135, 
137, 219, and 469.’’. 
(b) CONFORMING AMENDMENT.—Section 221(f)(1) 
of such Code is amended to read as follows: 
‘‘(1) IN GENERAL.—In the case of a taxable 
year beginning after 2006, the $100,000 and 
$200,000 amounts in subsection (b) shall each be in-
creased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2005’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005.
SEC. 3. DEDUCTION FOR QUALIFIED TUITION AND RE-
LATED EXPENSES MADE PERMANENT. 
(a) REPEAL OF TERMINATION.—Section 222 of the 
Internal Revenue Code of 1986 is amended by striking 
subsection (e). 
(b) CONFORMING AMENDMENTS.—Subparagraph (B) 
of section 222(b)(2) of such Code is amended— 
(1) by striking ‘‘2004 or 2005’’ and inserting 
‘‘2004 or thereafter’’, and 
(2) in the heading by striking ‘‘and 2005’’ and 
inserting ‘‘and thereafter’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 4. EDUCATION SAVINGS ACCOUNTS. 
(a) INCREASE IN ALLOWABLE CONTRIBUTIONS.— 
(1) IN
GENERAL.—Clause (iii) of section 
530(b)(1)(A) of the Internal Revenue Code of 1986 
is amended by striking ‘‘$2,000’’ and inserting 
‘‘$5,000’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
4973(e)(1)(A) of such Code is amended by striking 
‘‘$2,000’’ and inserting ‘‘$5,000’’. 
(b) REPORTS.—Subsection (h) of section 530 of such 
Code is amended by striking the period at the end of the 
last sentence and inserting ‘‘, except that reports shall be
so filed and furnished for any calendar year not later than 
June 30 of the following year.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 5. ALLOWANCE OF ROOM, BOARD, AND SPECIAL 
NEEDS SERVICES IN THE CASE OF SCHOLAR-
SHIPS AND TUITION REDUCTION PROGRAMS 
WITH RESPECT TO HIGHER EDUCATION. 
(a) IN GENERAL.—Paragraph (1) of section 117(b) 
of the Internal Revenue Code of 1986 (defining qualified 
scholarship) is amended by inserting before the period at 
the end the following: ‘‘or, in the case of enrollment or 
attendance at an eligible educational institution, for quali-
fied higher education expenses.’’. 
(b) DEFINITIONS.—Subsection (b) of section 117 of 
such Code is amended by adding at the end the following 
new paragraph: 
‘‘(3) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES; ELIGIBLE
EDUCATIONAL
INSTITUTION.— 
The terms ‘qualified higher education expenses’ and 
‘eligible educational institution’ have the meanings 
given such terms in section 529(e).’’. 
(c) TUITION REDUCTION PROGRAMS.—Paragraph 
(5) of section 117(d) of such Code (relating to special
rules for teaching and research assistants) is amended by 
striking ‘‘shall be applied as if it did not contain the 
phrase ‘(below the graduate level)’.’’ and inserting 
‘‘shall be applied— 
‘‘(A) as if it did not contain the phrase 
‘(below the graduate level)’, and 
‘‘(B) by substituting ‘qualified higher edu-
cation expenses’ for ‘tuition’ the second place it 
appears.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenses paid after December 
31, 2005 (in taxable years ending after such date), for 
education furnished in academic periods beginning after 
such date. 
SEC. 6. TREATMENT OF PREPAYMENT AND SAVINGS PLANS 
UNDER 
STUDENT 
FINANCIAL 
AID 
NEEDS 
ANALYSIS. 
(a) DEFINITION OF ASSETS.—Subsection (f) of sec-
tion 480 of the Higher Education Act of 1965 (20 U.S.C. 
1087vv(j)) is amended— 
(1) in paragraph (1) by inserting ‘‘qualified 
education benefit (except as provided in paragraph 
(3)),’’ after ‘‘tax shelters,’’; and 
(2) by adding at the end the following new 
paragraphs:
‘‘(3) A qualified education benefit shall not be consid-
ered an asset of the student under section 475 of this part. 
‘‘(4) For purposes of this subsection, the term ‘quali-
fied education benefit’ means— 
‘‘(A) a program which is described in clause (i) 
of section 529(b)(1)(A) of the Internal Revenue 
Code of 1986 and which meets the requirements of 
section 529(b)(1)(B) of such Code; 
‘‘(B) a State tuition program described in 
clause (ii) of section 529(b)(1)(A) of the Internal 
Revenue Code of 1986 which meets the requirements 
of section 529(b)(1)(B) of such Code; and 
‘‘(C) a Coverdell education savings account (as 
defined in section 530(b)(1) of the Internal Revenue 
Code of 1986).’’. 
(b) DEFINITION
OF OTHER FINANCIAL ASSIST-
ANCE.—Subsection (j) of section 480 of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1087vv(j)) is amended— 
(1) by striking ‘‘; Tuition Prepayment Plans’’ 
in the heading of such subsection; 
(2) by striking ‘‘(1) For purposes’’ and insert-
ing ‘‘For purposes’’; and 
(3) by striking paragraph (2). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to determinations of
need under part F of title IV of the Higher Education 
Act of 1965 for academic years beginning on or after July 
1, 2006. 
SEC. 7. EXPANSION OF EDUCATIONAL EXPENSES ALLOWED 
AS PART OF HOPE SCHOLARSHIP CREDIT. 
(a) QUALIFIED TUITION AND RELATED EXPENSES 
EXPANDED TO INCLUDE BOOKS, SUPPLIES, AND EQUIP-
MENT.—Paragraph (1) of section 25A(f) of the Internal 
Revenue Code of 1986 (defining qualified tuition and re-
lated expenses) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(D) ADDITIONAL
EXPENSES
ALLOWED 
FOR
HOPE
SCHOLARSHIP
CREDIT.—For pur-
poses of the Hope Scholarship Credit, such 
term shall include fees, books, supplies, and 
equipment required for courses of instruction at 
the eligible educational institution.’’. 
(b) HOPE SCHOLARSHIP CREDIT NOT REDUCED BY 
FEDERAL PELL GRANTS
AND SUPPLEMENTAL EDU-
CATIONAL OPPORTUNITY GRANTS.—Subsection (g) of sec-
tion 25A of such Code (relating to special rules) is amend-
ed by adding at the end the following new paragraph: 
‘‘(8) PELL AND SEOG GRANTS.—For purposes 
of the Hope Scholarship Credit, paragraph (2) shall 
not apply to amounts paid for an individual as a
Federal Pell Grant or a Federal supplemental edu-
cational opportunity grant under subparts 1 and 3, 
respectively, of part A of title IV of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1070a and 1070b et 
seq., respectively).’’. 
(c) EXPANDED HOPE EXPENSES NOT SUBJECT TO 
INFORMATION REPORTING REQUIREMENTS.—Subsection 
(e) of section 6050S of such Code (relating to definitions) 
is amended by striking ‘‘subsection (g)(2)’’ and inserting 
‘‘subsections (f)(1)(D) and (g)(2)’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenses paid after December 
31, 2005 (in tax years ending after such date), for edu-
cation furnished in academic periods beginning after such 
date. 
SEC. 8. REPEAL OF EGTRRA SUNSET APPLICABILITY TO 
CERTAIN EDUCATION PROVISIONS. 
Title IX of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001 (relating to sunset of provisions 
of such Act) shall not apply to subtitles A, B, and D of 
title IV of such Act. 
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