I
105TH CONGRESS
1ST SESSION
H. R. 1819
To amend the Internal Revenue Code of 1986 to provide for the establishment
of lifetime learning accounts for the purpose of accumulating funds
to pay the qualified expenses related to higher education and job training
of the taxpayer and the taxpayer’s family.
IN THE HOUSE OF REPRESENTATIVES
JUNE 5, 1997
Mr. ROTHMAN (for himself, Mr. FROST, and Ms. CHRISTIAN-GREEN) intro-
duced 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 Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to provide
for the establishment of lifetime learning accounts for
the purpose of accumulating funds to pay the qualified
expenses related to higher education and job training
of the taxpayer and the taxpayer’s family.
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 ‘‘Lifetime Learning Af-
fordability Act of 1997’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds that—
(1) the rising costs of higher education are put-
ting lifetime learning and training opportunities out
of reach for millions of Americans;
(2) individuals who complete at least 2 years of
college generally earn more than those with only a
high school diploma;
(3) offering tax incentives to help American
families save for education expenses will lead to
more Americans going to college; and
(4) ensuring the American workforce is well
educated and well trained throughout their lifetime
will give our Nation a significant competitive advan-
tage in the global marketplace.
(b) PURPOSE.—The purpose of this Act is to ensure
that all Americans are given an opportunity to obtain the
education and job training they need to compete in the
world’s rapidly changing marketplace.
TITLE I—LIFETIME LEARNING
ACCOUNTS
SEC. 101. DEDUCTION FOR CONTRIBUTIONS TO LIFETIME
LEARNING ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 221 as section 222 and by insert-
ing after section 220 the following new section:
‘‘SEC. 221. LIFETIME LEARNING ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction an amount
equal to the amount paid in cash for the taxable year by
the taxpayer to a lifetime learning account established for
the purpose of accumulating funds to pay the qualified
expenses related to higher education or job training of the
taxpayer or any family member of the taxpayer.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM DEDUCTION.—The amount al-
lowable as a deduction under subsection (a) to the
taxpayer for any taxable year shall not exceed
$4,000 ($2,000 in the case of a married individual
filing a separate return) for amounts paid for the
benefit of the taxpayer and each family member of
the taxpayer.
‘‘(2) DEDUCTION NOT TO EXCEED COMPENSA-
TION.—The amount allowable as a deduction under
subsection (a) shall not exceed the amount of the
taxpayer’s gross income for the taxable year.
‘‘(3) MAXIMUM
AMOUNT
OF
DEPOSIT
FOR
WHICH DEDUCTION IS ALLOWABLE IN CASE OF MUL-
TIPLE CONTRIBUTORS.—With respect to a lifetime
learning account of a beneficiary who has not at-
tained age 22 before the close of the calendar year
in which such payment is made, the total amount al-
lowable as a deduction under subsection (a) for the
taxable year of the beneficiary is $4,000 ($2,000 in
the case of a married individual filing a separate re-
turn). The allocation of such deduction among con-
tributors shall be in accordance with regulations pre-
scribed by the Secretary.
‘‘(4) DEDUCTIONS
AFTER
BENEFICIARY
AT-
TAINS AGE 22.—
‘‘(A) LIMITED
TO
DEPOSITS
BY
BENE-
FICIARY; MAXIMUM AMOUNT.—In the case of a
beneficiary of a lifetime learning account who
has attained age 22 before the close of the cal-
endar year—
‘‘(i) no deduction for any payment in
that calendar year shall be allowed under
subsection (a) to any individual other than
the beneficiary or the spouse of the bene-
ficiary (where a joint return is filed), and
‘‘(ii) the amount allowable as such de-
duction for any taxable year shall not ex-
ceed $2,000.
‘‘(B) NO DEDUCTION AFTER BENEFICIARY
ATTAINS
AGE
40.—No deduction shall be al-
lowed for any payment to a lifetime learning ac-
count established for the benefit of an individ-
ual who has attained age 40 before the close of
the calendar year in which such payment is
made.
‘‘(5) ACCOUNT MAY NOT BE ESTABLISHED FOR
BENEFIT OF MORE THAN 1 INDIVIDUAL.—A lifetime
learning account may not be established for the ben-
efit of more than 1 individual.
‘‘(6) INCOME LIMITATION BASED ON INCOME
OF
PARENTS
OR
LEGAL
GUARDIAN
OF
BENE-
FICIARY.—No deduction shall be allowed under sub-
section (a) for a payment by a taxpayer to the life-
time learning account of a beneficiary if the adjusted
gross income of the parents or legal guardian of
such beneficiary (other than a beneficiary described
by paragraph (4)(A)) exceeds $85,000 ($125,000 in
the case of a joint return and $62,500 in the case
of a married individual filing a separate return). For
purposes of the preceding sentence, rules similar to
rules of section 152(e) (relating to support test in
case of child of divorced parents, etc.).
‘‘(7) NO
CONTRIBUTION
IF
BALANCE
IN
AC-
COUNT EXCEEDS $100,000.—No amount may be con-
tributed, or rolled over under clause (ii) of sub-
section (c)(1)(E), to a lifetime learning account if
the balance of such account exceeds $100,000.
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) 
LIFETIME
LEARNING
ACCOUNT.—The
term ‘lifetime learning account’ means a trust cre-
ated or organized in the United States exclusively
for the purpose of paying the qualified expenses of
the account holder related to higher education or job
training, but only if the written governing instru-
ment creating the trust meets the following require-
ments:
‘‘(A) No contribution will be accepted un-
less it is in cash, and contributions will not be
accepted for the taxable year in excess of an ag-
gregate of $4,000 ($2,000 in the case of a ben-
eficiary who has attained the age of 22).
‘‘(B) The trustee is a bank (as defined in
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary
that the manner in which that person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts.
‘‘(D) The assets of the trust shall not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(E) On the termination date—
‘‘(i) the balance in the account shall
be distributed to the individual for whose
benefit the account is established, or
‘‘(ii) at the election of such individual,
from amounts in the account, not to exceed
$50,000 in the aggregate—
‘‘(I) shall be treated for purposes
of this title as a lifetime learning ac-
count for each of those designated
family members of such individual
who does not have a lifetime learning
account and who has not attained the
age of 18 before the close of the cal-
endar year in which such date occurs,
‘‘(II) shall be rolled over in ac-
cordance with subsection (d)(4) into
the lifetime learning account of each
of those designated family members of
such individual who has a lifetime
learning account and who has not at-
tained the age of 18 before the close
of the calendar year in which such
date occurs,
‘‘(III) shall be contributed to an
eligible educational institution, or
‘‘(IV) shall be contributed to an
organization 
described 
in 
section
501(c) that is exempt from taxation
under section 501(a) whose purpose is
providing scholarships at eligible edu-
cational institutions.
Amounts contributed under subclause (III)
or (IV) shall not be treated as a charitable
contribution (as defined in section 170(c).
‘‘(2) FAMILY
MEMBER.—The term ‘family
member’ means—
‘‘(A) any individual with a relationship to
the taxpayer specified in section 267(c)(4),
‘‘(B) with respect to only to contributions
for which a deduction is allowed by subsection
(a), any sibling of either parent of the account
holder and the spouse of any such sibling, and
‘‘(C) in the case of lifetime learning ac-
count of a minor, or of an individual who is
mentally incompetent or under other legal dis-
ability adjudged by a court of competent juris-
diction, such term includes the person who is
constituted guardian or other fiduciary by the
law of the State of residence of such minor or
individual or is otherwise legally vested with the
care of the minor or individual, or the estate
thereof.
‘‘(3) TERMINATION
DATE.—The term ‘termi-
nation date’ means—
‘‘(A) the date the beneficiary attains age
591⁄2, or
‘‘(B) the date of the beneficiary’s death.
‘‘(4) QUALIFIED EXPENSES.—The term ‘quali-
fied expenses’ means—
‘‘(A) educational expenses, and
‘‘(B) job training expenses.
‘‘(5) EDUCATIONAL EXPENSES.—
‘‘(A) IN GENERAL.—
‘‘(i) EDUCATIONAL
EXPENSES.—The
term ‘educational expenses’ means—
‘‘(I) tuition and fees required for
the enrollment or attendance of a stu-
dent at an eligible educational institu-
tion,
‘‘(II) fees, books, supplies, and
equipment required for courses of in-
struction at an eligible educational in-
stitution, and
‘‘(III) a reasonable allowance for
meals and lodging while attending an
eligible educational institution (not to
exceed the amounts specified in regu-
lations prescribed by the Secretary).
‘‘(ii) EXCEPTION FOR EDUCATION IN-
VOLVING
SPORTS, ETC.—Such term does
not include expenses with respect to any
course or other education involving sports,
games, or hobbies, unless such course or
other education is part of the individual’s
degree program.
‘‘(iii) EXCEPTION FOR NONACADEMIC
FEES.—Such term does not include stu-
dent activity fees, athletic fees, insurance
expenses, or other expenses unrelated to
the individual’s academic course of instruc-
tion.
‘‘(B) ELIGIBLE
EDUCATIONAL
INSTITU-
TION.—The term ‘eligible educational institu-
tion’ means—
‘‘(i) an institution of higher education,
or
‘‘(ii) a vocational school.
‘‘(C) 
INSTITUTION
OF
HIGHER
EDU-
CATION.—The term ‘institution of higher edu-
cation’ means the institutions described in sec-
tion 1201(a) or 481(a) of the Higher Education
Act of 1965.
‘‘(D) VOCATIONAL
SCHOOL.—The term
‘vocational school’ means an area vocational
education school as defined in subparagraph
(C) or (D) of section 521(4) of the Carl D. Per-
kins Vocational and Applied Technology Edu-
cation Act to the extent such school is located
within any State (as defined in such section).
‘‘(6) JOB TRAINING EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘job training
expenses’ means—
‘‘(i) tuition and fees required for the
enrollment or attendance of—
‘‘(I) a student at an eligible edu-
cational institution, or
‘‘(II) a worker in an applicable
training program,
‘‘(ii) fees, books, supplies, and equip-
ment required for—
‘‘(I) courses of instruction at an
eligible educational institution, or
‘‘(II) for an applicable training
program, and
‘‘(iii) a reasonable allowance for meals
and lodging while attending an eligible
educational institution or an applicable
training program (not to exceed the
amounts specified in regulations prescribed
by the Secretary).
‘‘(B) EXCEPTION FOR EDUCATION INVOLV-
ING SPORTS, ETC.—Such term does not include
expenses with respect to any job training involv-
ing sports, games, or hobbies, unless such train-
ing is to improve the individual’s job skills or
for the individual to acquire new job skills.
‘‘(C) 
EXCEPTION
FOR
NONACADEMIC
FEES.—Such term does not include student ac-
tivity fees, athletic fees, insurance expenses, or
other expenses unrelated to the individual’s job
training.
‘‘(D) APPLICABLE TRAINING PROGRAM.—
The 
term 
‘applicable 
training 
program’
means—
‘‘(i) any applicable program (as de-
fined in section 314(g) of the Job Training
Partnership Act), and
‘‘(ii) any training program approved
under section 236 of the Trade Act of
1974.
‘‘(7) DENIAL
OF
DEDUCTION
FOR
AMOUNTS
PAID FROM ACCOUNT.—If any amount paid or dis-
tributed from a lifetime learning account is not in-
cluded in gross income by reason of being used to
pay any qualified expense, such expense shall not be
taken into account in determining the amount of any
deduction under section 212, 217, or any other pro-
vision of this chapter.
‘‘(8) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A taxpayer shall be deemed to have made a
contribution on the last day of the preceding taxable
year if the contribution is made on account of such
taxable year and is made not later than the time
prescribed by law for filing the return for such tax-
able year (including extensions thereof).
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount paid from a
lifetime learning account shall be included in the
gross income of the beneficiary of such account for
the taxable year in which the payment is received.
‘‘(2) AMOUNTS
USED
FOR
EDUCATION, JOB
TRAINING, OR EXPENSES.—If any payment from a
lifetime learning account is used to pay the qualified
expenses of the beneficiary of such account—
‘‘(A) paragraph (1) shall not apply, but
‘‘(B) such amount shall be included in
gross income of the beneficiary of such account
for—
‘‘(i) the 8th taxable year beginning
after the taxable year in which the pay-
ment is received, or
‘‘(ii) at the election of, and in the
amounts allocated by, the beneficiary, any
of the first eight taxable years beginning
after the taxable year in which the pay-
ment is received.
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution of any contribution
made during a taxable year to a lifetime learning ac-
count to the extent that such contribution exceeds
the amount allowable as a deduction under sub-
section (a) if—
‘‘(A) such distribution is received on or be-
fore the day prescribed by law (including exten-
sions of time) for filing such individual’s return
for such taxable year,
‘‘(B) no deduction is allowed under sub-
section (a) with respect to such excess contribu-
tion, and
‘‘(C) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (C) shall
be included in the gross income of the individual for
the taxable year in which such excess contribution
was made.
‘‘(4) TREATMENT AS OTHER LIFETIME LEARN-
ING ACCOUNTS AND NONTAXABLE CONTRIBUTIONS
THAT ARE NOT SUBJECT TO INCOME TAX INCLU-
SION.—The 
treatment 
described 
in 
subsection
(c)(1)(E)(ii) shall not be treated as a distribution for
purposes of this subsection. The preceding sentence
shall apply in the case of a rollover under subclause
(II) of such subsection to any amount (not to exceed
$50,000) paid or distributed on the termination date
out of a lifetime learning account to an individual
for whose benefit the account is maintained if the
entire amount received (including money and any
other property) is paid into the lifetime learning ac-
count for the benefit of a family member of such in-
dividual not later than the 60th day after the day
on which he received the payment or distribution.
‘‘(e) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION FROM TAX.—A lifetime learn-
ing account is exempt from taxation under this sub-
title unless such account has ceased to be a lifetime
learning account by reason of paragraph (2) or (3).
Notwithstanding the preceding sentence, any such
account is subject to the taxes imposed by section
511 (relating to imposition of tax on unrelated busi-
ness income of charitable, etc. organizations).
‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE
INDIVIDUAL ENGAGES IN PROHIBITED TRANSACTION
OR FAILS TO MAKE REQUIRED PAYMENT.—
‘‘(A) IN GENERAL.—
‘‘(i) PROHIBITED
TRANSACTION.—If
the individual for whose benefit a lifetime
learning account is established or any indi-
vidual who contributes to such account en-
gages in any transaction prohibited by sec-
tion 4975 with respect to the account, the
account shall cease to be a lifetime learn-
ing account as of the first day of the tax-
able year (of the individual so engaging in
such transaction) during which such trans-
action occurs.
‘‘(ii) FAILURE
TO
MAKE
REQUIRED
PAYMENT.—
‘‘(I) IN GENERAL.—In the case
of a beneficiary who incurs qualified
expenses (reduced by amounts de-
scribed in subclause (II)) but who
fails to make a payment for such ex-
penses from the beneficiary’s lifetime
learning account, the account shall
cease to be a lifetime learning account
as of the first day of the taxable year
of the beneficiary during which such
failure occurs.
‘‘(II) SCHOLARSHIPS
AND
EDU-
CATIONAL
BENEFITS.—The amounts
described in this clause are amounts
received by, or on behalf of, the bene-
ficiary that are described in section
135(c)(1) (relating to qualified United
States savings bond) and subpara-
graphs (A), (B), and (D) of section
135(d)(1) (relating to certain scholar-
ships and veterans benefits).
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a lifetime learning account
by reason of subparagraph (A) as of the first
day of any taxable year, paragraph (1) of sub-
section (d) shall apply as if there was a dis-
tribution on such first day in an amount equal
to the fair market value (on such first day) of
all assets in the account (on such first day).
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a lifetime learning account is estab-
lished, or any individual who contributes to such ac-
count, uses the account or any portion thereof as se-
curity for a loan, the portion so used shall be treated
‘‘(ii) the termination date occurs other
than by reason of the death of the account
beneficiary,
the tax liability under this chapter of such ben-
eficiary for the taxable year which includes the
termination date shall be increased by an
amount equal to 20 percent of the balance in
such account on such date.
‘‘(3) DISABILITY CASES.—Paragraphs (1) and
(2)(A) shall not apply if the distribution is made
after the account beneficiary becomes disabled with-
in the meaning of section 72(m)(7).
‘‘(4) DISQUALIFICATION CASES.—Any amount
treated under paragraph (2) or (3) of subsection (e)
as distributed from a lifetime learning account shall
be treated as a distribution to which the tax imposed
by paragraph (1) applies.
‘‘(g) COMMUNITY PROPERTY LAWS.—This section
shall be applied without regard to any community property
laws.
‘‘(h) REPORTS.—The trustee of a lifetime learning
account shall make such reports regarding such account
to the Secretary and to the individual for whose benefit
the account is maintained with respect to contributions,
distributions, and such other matters as the Secretary
‘‘(3) a lifetime learning account (within the
meaning of section 221(c)(1)), or’’, and
(4) by adding at the end the following new sub-
section:
‘‘(e) EXCESS CONTRIBUTIONS TO LIFETIME LEARN-
ING ACCOUNTS.—For purposes of this section, in the case
of a lifetime learning account, the term ‘excess contribu-
tions’ means the amount by which the amount contributed
for the taxable year to the account exceeds the amount
allowable as a deduction under section 221 for such tax-
able year. For purposes of this subsection, any contribu-
tion which is distributed out of the lifetime learning ac-
count in a distribution to which section 221(d)(3) applies
shall be treated as an amount not contributed.’’
(d) TAX ON PROHIBITED TRANSACTIONS.—
(1) Subsection (c) of section 4975 of such Code
(relating to prohibited transactions) is amended by
adding at the end the following new paragraph:
‘‘(5) SPECIAL RULE FOR LIFETIME LEARNING
ACCOUNTS.—An individual for whose benefit a life-
time learning account is established and any contrib-
utor to such account shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect
to such transaction, the account ceases to be a life-
time learning account by reason of the application of
section 221(e)(2)(A) to such account.’’
(2) Paragraph (1) of section 4975(e) of such
Code is amended by striking ‘‘or’’ at the end of sub-
paragraph (D), by redesignating subparagraph (E)
as subparagraph (F), and by inserting after sub-
paragraph (D) the following new subparagraph:
‘‘(E) a lifetime learning account described
in section 221(c)(1), or’’.
(e) FAILURE TO PROVIDE REPORTS ON LIFETIME
LEARNING ACCOUNTS.—
(1) Paragraph (2) of section 6693(a) of such
Code (relating to failure to provide reports on indi-
vidual retirement accounts or annuities) is amended
by striking ‘‘and’’ at the end of subparagraph (A),
by striking the period at the end of subparagraph
(B) and inserting ‘‘, and’’, and by adding at the end
the following new subparagraph:
‘‘(C) section 221(i) (relating to lifetime
learning accounts).’’.
(2) The heading for section 6693 of such Code
is amended to read as follows:
‘‘SEC. 6693. FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
RETIREMENT PLANS AND CERTAIN OTHER
SAVINGS PLANS.’’
(f) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the item relating to section 221 and insert-
ing the following new items:
‘‘Sec. 221. Lifetime learning accounts.
‘‘Sec. 222. Cross reference.’’
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following new item:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, medical savings accounts, lifetime learn-
ing accounts, certain 403(b) contracts, and certain
individual retirement annuities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by striking the
item relating to section 6693 and inserting the fol-
lowing new item:
‘‘Sec. 6693. Failure to provide reports on individual retirement
plans and certain other savings plans.’’
(g) TREATMENT OF LIFETIME LEARNING ACCOUNTS
UNDER FEDERAL STUDENT FINANCIAL AID.—Subpara-
graph (A) of sections 475(d)(2), 476(c)(2), and 477(c)(2)
of the Higher Education Act of 1965 (20 U.S.C.
1087oo(d)(2)(A), 1087pp(c)(2)(A), 1087rr(c)(2)(A)) are
each amended by inserting before the semicolon at the end
thereof the following: ‘‘, excluding any amounts held in
a lifetime learning account established in accordance with
section 221 of the Internal Revenue Code of 1986 (26
U.S.C. 221)’’.
(h) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contributions made in tax-
able years beginning after December 31, 1997.
(2) EFFECTIVE DATE.—The amendments made
by subsection (g) shall apply to determinations of
need under title IV of the Higher Education Act of
1965 for periods of enrollment beginning on or after
July 1, 1998.
TITLE II—INCREASE IN MAXI-
MUM PELL GRANT AWARDS.
SEC. 201. INCREASE IN MAXIMUM PELL GRANTS.
(a) MAXIMUM PELL AMOUNTS.—Paragraph (2)(A)
of section 401(b) of the Higher Education Act of 1965
(20 U.S.C. 1070a(b)(2)(A)) is amended to read as follows:
‘‘(2)(A) The amount of the basic grant for a student
eligible under this part shall be $3,500, less an amount
equal to the amount determined to be the expected family
contribution with respect to that student for that year.’’.
(b) FUNDING OF PELL GRANTS.—Section 401 of the
Higher Education Act of 1965 (20 U.S.C. 1070a) is fur-
ther amended by striking subsections (g) and (h) and in-
serting the following:
‘‘(g) FUNDS FOR EXPENSES.—There shall be avail-
able to the Secretary, from funds not otherwise appro-
priated, such sums as may be necessary to provide funds
to be obligated for the costs of the grants under this sec-
tion in the maximum amounts authorized by this sec-
tion.’’.
(c) CONFORMING AMENDMENTS.—Section 401 of the
Higher Education Act of 1965 (20 U.S.C. 1070a) is fur-
ther amended—
(1) in paragraph (7) of subsection (b), by strik-
ing ‘‘the appropriate Appropriation Act for this sub-
part for such year’’ and inserting ‘‘subsection (g)’’;
(2) by striking paragraph (3) of such subsection
and redesignating paragraphs (4) through (8) of
such subsection as paragraphs (3) through (7), re-
spectively; and
(3) by redesignating subsection (i) as subsection
(h).
TITLE III—RESTORATION OF DE-
DUCTION FOR INTEREST ON
EDUCATIONAL LOANS
SEC. 301. RESTORATION OF DEDUCTION FOR INTEREST ON
EDUCATIONAL LOANS.
(a) IN GENERAL.—Paragraph (2) of section 163(h)
of the Internal Revenue Code of 1986 (defining personal
interest) is amended by striking ‘‘and’’ at the end of sub-
paragraph (D), by redesignating subparagraph (E) as sub-
paragraph (F), and by inserting after subparagraph (D)
the following new subparagraph:
‘‘(E) any interest on a qualified edu-
cational loan, and’’.
(b) QUALIFIED EDUCATIONAL LOAN DEFINED.—
Subsection (h) of section 163 of such Code is amended
by adding at the end the following new paragraph:
‘‘(6) QUALIFIED EDUCATIONAL LOAN.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified educational loan’
means any indebtedness incurred to pay quali-
fied educational expenses which are paid or in-
curred within a reasonable period of time before
or after the indebtedness is incurred.
‘‘(B) 
QUALIFIED
EDUCATIONAL
EX-
PENSES.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied educational expenses’ means qualified
tuition and related expenses of the tax-
payer, his spouse, or a dependent for at-
tendance at an educational institution de-
scribed in section 170(b)(1)(A)(ii).
‘‘(ii) QUALIFIED TUITION AND RELAT-
ED
EXPENSES.—The term ‘qualified tui-
tion and related expenses’ means—
‘‘(I) tuition and fees required for
enrollment or attendance at an edu-
cational institution described in sec-
tion 170(b)(1)(A)(ii),
‘‘(II) fees, books, supplies, and
equipment required for courses of in-
struction at such an institution, and
‘‘(III) reasonable living expenses
while away from home.
‘‘(C) DEPENDENT.—For purposes of this
paragraph, the term ‘dependent’ has the mean-
ing given such term by section 152.
‘‘(D) COORDINATION
WITH
PARAGRAPH
(3)(C)(ii).—Any qualified educational loan shall
not be taken into account for purposes of apply-
ing the limitation of paragraph (3)(C)(ii).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
Æ