mination that the taxpayer’s claim of 
credit under this section was due to 
reckless or intentional disregard of 
rules and regulations (but not due to 
fraud). 
‘‘(B) 
TAXPAYERS
MAKING
IMPROPER 
PRIOR CLAIMS.—In the case of a taxpayer who 
is denied credit under this section for any tax-
able year as a result of the deficiency proce-
dures under subchapter B of chapter 63, no 
credit shall be allowed under this section for 
any subsequent taxable year unless the taxpayer 
provides such information as the Secretary may 
require to demonstrate eligibility for such cred-
it. 
‘‘(e) ELECTION NOT TO HAVE SECTION APPLY.—A 
taxpayer may elect not to have this section apply with re-
spect to the qualified tuition and related expenses of an 
individual for any taxable year. 
‘‘(f) DEFINITIONS.—For purposes of this section: 
‘‘(1) ELIGIBLE STUDENT.—The term ‘eligible 
student’ means, with respect to any taxable year, an 
individual who— 
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‘‘(A) is enrolled for at least one academic 
period which begins during such taxable year at 
an eligible educational institution, and 
‘‘(B) meets the requirements of section 
484(a)(1) of the Higher Education Act of 1965, 
as in effect on the date of the enactment of the 
Middle Class College Tuition Tax Credit Ex-
pansion Act of 2016. 
‘‘(2) QUALIFIED
TUITION
AND
RELATED
EX-
PENSES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
tuition and related expenses’ means tuition, 
fees, and course materials required for the en-
rollment or attendance of— 
‘‘(i) the taxpayer, 
‘‘(ii) the taxpayer’s spouse, or 
‘‘(iii) any dependent of the taxpayer 
with respect to whom the taxpayer is al-
lowed a deduction under section 151, 
at an eligible educational institution for courses 
of instruction of such individual at such institu-
tion. 
‘‘(B) EXCEPTION FOR EDUCATION INVOLV-
ING SPORTS, ETC.—Such term does not include 
expenses with respect to any course or other 
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education involving sports, games, or hobbies, 
unless such course or other education is part of 
the individual’s degree program. 
‘‘(C) 
EXCEPTION
FOR
NONACADEMIC 
FEES.—Such term does not include student ac-
tivity fees, athletic fees, insurance expenses, or 
other expenses unrelated to an individual’s aca-
demic course of instruction. 
‘‘(D) 
COMPUTER
TECHNOLOGY
AND 
EQUIPMENT.—Such term includes expenses for 
the purchase of computer technology or equip-
ment (as defined in section 170(e)(6)(F)(i)), or 
Internet access and related services, only to the 
extent the purchase of such technology, equip-
ment, or services is specifically required by the 
individual’s academic course of instruction or 
degree program. 
‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 
The term ‘eligible educational institution’ means an 
institution— 
‘‘(A) which is described in section 481 of 
the Higher Education Act of 1965, as in effect 
on the date of the enactment of the Middle 
Class College Tuition Tax Credit Expansion Act 
of 2016, and 
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‘‘(B) which is eligible to participate in a 
program under title IV of such Act. 
‘‘(g) PORTION OF CREDIT REFUNDABLE.—Fifty per-
cent of the credit allowed under this section (determined 
after application of subsections (c)(1) and (d) and without 
regard to this subsection and subsection (c)(2), as the case 
may be) shall be treated as a credit allowable under sub-
part C (and not allowed under this section). The preceding 
sentence shall not apply to any taxpayer for any taxable 
year if such taxpayer is a child to whom subsection (g) 
of section 1 applies for such taxable year. 
‘‘(h) REGULATIONS.—The Secretary may prescribe 
such regulations as may be necessary or appropriate to 
carry out this section, including regulations providing for 
a recapture of the credit allowed under this section in 
cases where there is a refund in a subsequent taxable year 
of any amount which was taken into account in deter-
mining the amount of such credit.’’. 
(b) CLERICAL AMENDMENT.—The item relating to 
section 25A in the table of sections for subpart A of part 
IV of subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended to read as follows: 
‘‘Sec. 25A. American Opportunity Tax Credit.’’. 
(c) CONFORMING AMENDMENTS.— 
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(1) Subparagraph (B) of section 72(t)(7) of 
such Code is amended by striking ‘‘25A(g)(2)’’ and 
inserting ‘‘25A(d)(3)’’. 
(2) Paragraph (2) of section 221(d) of such 
Code is amended— 
(A) by striking ‘‘25A(g)(2)’’ in subpara-
graph (B) and inserting ‘‘25A(d)(3)’’, and 
(B) by striking ‘‘25A(f)(2)’’ and inserting 
‘‘25A(f)(3)’’. 
(3) Paragraph (3) of section 221(d) of such 
Code is amended by striking ‘‘25A(b)(3)’’ and in-
serting ‘‘25A(f)(1) (but only with respect to a stu-
dent who is carrying at least 1⁄2 the normal full-time 
workload for the course of study the student is pur-
suing)’’. 
(4) Clause (v) of section 529(c)(3)(B) of such 
Code is amended— 
(A) by striking ‘‘25A(g)(2)’’ in subclause 
(I) and inserting ‘‘25A(d)(3)’’, and 
(B) by striking ‘‘HOPE
AND
LIFETIME 
LEARNING CREDITS’’ in the heading and insert-
ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 
(5) Clause (i) of section 529(e)(3)(B) of such 
Code is amended by striking ‘‘25A(b)(3)’’ and in-
serting ‘‘25A(f)(1) (but only with respect to a stu-
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dent who is carrying at least 1⁄2 the normal full-time 
workload for the course of study the student is pur-
suing)’’. 
(6) Subparagraph (C) of section 530(d)(2) of 
such Code is amended— 
(A) by striking ‘‘25A(g)(2)’’ in clause (i)(I) 
and inserting ‘‘25A(d)(3)’’, and 
(B) by striking ‘‘HOPE
AND
LIFETIME 
LEARNING CREDITS’’ in the heading and insert-
ing ‘‘AMERICAN OPPORTUNITY CREDIT’’. 
(7) Clause (iii) of section 530(d)(4)(B) of such 
Code is amended by striking ‘‘25A(g)(2)’’ and in-
serting ‘‘25A(d)(3)’’. 
(8) Section 1400O of such Code is amended— 
(A) by striking ‘‘25A(f)(2)’’ and inserting 
‘‘25A(f)(3)’’, 
(B) by inserting ‘‘(as in effect on the date 
of the enactment of this section)’’ after 
‘‘25A(b)(1)’’ in paragraph (2), and 
(C) by inserting ‘‘(as in effect on the date 
of the enactment of this section)’’ after 
‘‘25A(c)(1)’’ in paragraph (3). 
(9) Subsection (e) of section 6050S of such 
Code is amended by striking ‘‘subsection (g)(2)’’ and 
inserting ‘‘subsection (d)(3)’’. 
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(10) Subparagraph (A) of section 6211(b)(4) of 
such Code is amended by striking ‘‘subsection 
(i)(6)’’ and inserting ‘‘subsection (g)’’. 
(11) Subparagraph (J) of section 6213(g)(2) of 
such Code is amended by striking ‘‘25A(g)(1)’’ and 
inserting ‘‘25A(d)(2)’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2015. 
SEC. 3. EXPANSION OF PELL GRANT EXCLUSION FROM 
GROSS INCOME. 
(a) IN GENERAL.—Paragraph (1) of section 117(b) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘received by an individual’’ and all that follows and 
inserting ‘‘received by an individual— 
‘‘(A) as a scholarship or fellowship grant 
to the extent the individual establishes that, in 
accordance with the conditions of the grant, 
such amount was used for qualified tuition and 
related expenses, or 
‘‘(B) as a Federal Pell Grant under section 
401 of the Higher Education Act of 1965 (as 
in effect on the date of the enactment of the 
Middle Class College Tuition Tax Credit Ex-
pansion Act of 2016).’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
Æ 
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