I
105TH CONGRESS
1ST SESSION
H. R. 1632
To amend the Internal Revenue Code of 1986 to permanently extend the
exclusion for employer-provided educational assistance programs, to re-
store such exclusion for graduate level courses, and to allow a deduction
for interest on education loans.
IN THE HOUSE OF REPRESENTATIVES
MAY 15, 1997
Mr. PAYNE introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to permanently
extend the exclusion for employer-provided educational
assistance programs, to restore such exclusion for grad-
uate level courses, and to allow a deduction for interest
on education loans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. EMPLOYER-PROVIDED EDUCATIONAL ASSIST-
ANCE.
(a) PERMANENT EXTENSION.—Section 127 of the
Internal Revenue Code of 1986 (relating to exclusion for
educational assistance programs) is amended by striking
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subsection (d) and by redesignating subsection (e) as sub-
section (d).
(b) RESTORATION OF EXCLUSION FOR GRADUATE
EDUCATION.—The last sentence of paragraph (1) of sec-
tion 127(c) of such Code is amended by striking ‘‘, and
such term also does not include any payment for, or the
provision of any benefits with respect to, any graduate
level course of a kind normally taken by an individual pur-
suing a program leading to a law, business, medical, or
other advanced academic or professional degree’’.
(c) EFFECTIVE DATES.—
(1) EXTENSION.—The amendments made by
subsection (a) shall apply to taxable years beginning
after December 31, 1996.
(2) GRADUATE EDUCATION.—The amendment
made by subsection (b) shall apply with respect to
expenses relating to courses beginning after Decem-
ber 31, 1996.
SEC. 2. DEDUCTION FOR INTEREST ON EDUCATION LOANS.
(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:
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‘‘SEC. 221. INTEREST ON EDUCATION LOANS.
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an
individual, there shall be allowed as a deduction for the
taxable year an amount equal to the interest paid by the
taxpayer during the taxable year on any qualified edu-
cation loan.
‘‘(b) LIMITATION BASED ON MODIFIED ADJUSTED
GROSS INCOME.—
‘‘(1) IN GENERAL.—The amount allowed as a
deduction under subsection (a) shall be reduced (but
not below zero) by the amount determined under
paragraph (2).
‘‘(2) AMOUNT
OF
REDUCTION.—The amount
determined under this paragraph equals the amount
which bears the same ratio to the deduction (deter-
mined without regard to this subsection) as—
‘‘(A) the excess of—
‘‘(i) the taxpayer’s modified adjusted
gross income for such taxable year, over
‘‘(ii) $50,000 ($80,000 in the case of
a joint return), bears to
‘‘(B) $20,000.
‘‘(3) MODIFIED
ADJUSTED
GROSS
INCOME.—
For purposes of paragraph (2), the term ‘modified
adjusted gross income’ means the adjusted gross in-
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come of the taxpayer for the taxable year deter-
mined—
‘‘(A) without regard to this section and
sections 911, 931, and 933, and
‘‘(B) after the application of sections 86,
135, 137, 219, and 469.
For purposes of sections 86, 135, 219, and 469, ad-
justed gross income shall be determined without re-
gard to the deduction allowed under this section.
‘‘(4) INFLATION ADJUSTMENT.—
‘‘(A) IN GENERAL.—In the case of a tax-
able year beginning after 1997, the $50,000
and $80,000 amounts in paragraph (2)(A)(ii)
shall each be increased by an amount equal
to—
‘‘(i) such dollar amounts, multiplied
by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar
year 1996’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not a multiple
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of $5,000, such amount shall be rounded to the
next lowest multiple of $5,000.
‘‘(c) DEPENDENTS NOT ELIGIBLE
FOR DEDUC-
TION.—No deduction shall be allowed by this section to
an individual for the taxable year if a deduction under sec-
tion 151 with respect to such individual is allowed to an-
other taxpayer for the taxable year beginning in the cal-
endar year in which such individual’s taxable year begins.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED EDUCATION LOAN.—The term
‘qualified education loan’ means any indebtedness
incurred to pay qualified higher education ex-
penses—
‘‘(A) which are incurred on behalf of the
taxpayer or the taxpayer’s spouse,
‘‘(B) which are paid or incurred within a
reasonable period of time before or after the in-
debtedness is incurred, and
‘‘(C) which are attributable to education
furnished during a period during which the re-
cipient was at least a half-time student.
Such term includes indebtedness used to refinance
indebtedness which qualifies as a qualified education
loan. The term ‘qualified education loan’ shall not
include any indebtedness owed to a person who is re-