‘‘(iii) EXCEPTION, DEPENDENT CARE 
CENTERS.—Rules similar to the rules of 
subparagraphs (B), (C), and (D) of section 
21(b)(2) shall apply, except the term ‘child 
and dependent care expenses’ shall be sub-
stituted for the term ‘employment-related 
expenses’ each place it appears in such 
subparagraphs. 
‘‘(F) CHILD AND DEPENDENT CARE EX-
PENSES
ONLY
QUALIFIED
EXPENSES
WHEN 
CLAIMED
BY
ELIGIBLE
STUDENT.—Amounts 
paid for an expense described in subparagraph 
(E) which may be taken into account under this 
paragraph for a taxable year by a taxpayer who 
is not an eligible student shall not exceed $0. 
‘‘(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 Expand 
American Educational Opportunity Act of 
2021, and 
‘‘(B) which is eligible to participate in a 
program under title IV of such Act. 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
‘‘(g) PORTION OF CREDIT REFUNDABLE.—The less-
er of— 
‘‘(1) the credit allowed under this section for a 
taxable year (determined after application of sub-
sections (c)(1) and (d) and without regard to this 
subsection and section 26(a)(2), as the case may 
be), or 
‘‘(2) $1,500, 
shall be treated as a credit allowable under subpart 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) RESTRICTIONS ON TAXPAYERS WHO IMPROP-
ERLY CLAIMED CREDIT IN PRIOR YEAR.— 
‘‘(1) TAXPAYERS MAKING PRIOR FRAUDULENT 
OR RECKLESS CLAIMS.— 
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under this section for any taxable year in 
the disallowance period. 
‘‘(B) DISALLOWANCE
PERIOD.—For pur-
poses of clause (i), the disallowance period is— 
‘‘(i) the period of 10 taxable years 
after the most recent taxable year for 
which there was a final determination that 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00014
Fmt 6652
Sfmt 6201
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
the taxpayer’s claim of credit under this 
section was due to fraud, and 
‘‘(ii) the period of 2 taxable years 
after the most recent taxable year for 
which there was a final determination 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). 
‘‘(2) TAXPAYERS
MAKING
IMPROPER
PRIOR 
CLAIMS.—In the case of a taxpayer who is denied 
credit under this section for any taxable year as a 
result of the deficiency procedures 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 Sec-
retary may require to demonstrate eligibility for 
such credit. 
‘‘(i) INFLATION ADJUSTMENT.—In the case of any 
taxable year beginning in a calendar year after 2021, each 
dollar amount in subsections (b) and (c)(2), and (d)(1) 
shall be increased by an amount equal to— 
‘‘(1) such dollar amount, multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6201
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
the taxable year begins, determined by substituting 
‘calendar year 2020’ for ‘calendar year 2016’ in sub-
paragraph (B) thereof. 
In the case of subsections (b) and (d)(1), any increase de-
termined under the preceding sentence shall be rounded 
to the nearest multiple of $50. In the case of subsection 
(c)(2), any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of $500. 
‘‘(j) 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) RETENTION OF LIMITATION.— 
(1) IN GENERAL.—Subparagraph (D) of section 
25A(b)(2) of the Internal Revenue Code of 1986, as 
in effect before the enactment of the Expand Amer-
ican Educational Opportunity Act of 2021, is hereby 
transferred to section 25A of such Code, as amended 
by subsection (a), and is inserted as a new sub-
section (d)(9) of section 25A, as so amended. 
(2) CONFORMING AMENDMENT.—Paragraph (9) 
of section 25A(d) of such Code, as transferred and 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00016
Fmt 6652
Sfmt 6201
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
inserted by paragraph (1), is amended by striking 
‘‘The Hope Scholarship Credit under subsection 
(a)(1)’’ and inserting ‘‘The credit under subsection 
(a)’’. 
(c) CONFORMING AMENDMENTS.— 
(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 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00017
Fmt 6652
Sfmt 6201
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
(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-
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)(iii) of 
such Code is amended by striking ‘‘25A(g)(2)’’ and 
inserting ‘‘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 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00018
Fmt 6652
Sfmt 6201
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
(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)’’. 
(10) Subparagraph (A) of section 6211(b)(4) of 
such Code is amended by striking ‘‘subsection 
(i)(6)’’ and inserting ‘‘subsection (g)’’. 
(11) Section 6213(g)(2) of such Code is amend-
ed— 
(A) in subparagraph (J), by striking 
‘‘25A(g)(1)’’ and inserting ‘‘25A(d)(2)’’, and 
(B) in subparagraph (Q), by striking 
‘‘25A(i)(8)(B)’’ and inserting ‘‘25A(h)(2)’’ and 
by striking ‘‘25A(i)’’ and inserting ‘‘25A’’. 
(12) Subsection (g) of section 6695(g) of such 
Code is amended by striking ‘‘25A(a)(1)’’ and in-
serting ‘‘25A(a)’’. 
(d) 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.’’. 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00019
Fmt 6652
Sfmt 6211
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2020. 
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— 
‘‘(1) 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 
‘‘(2) 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 Expand Amer-
ican Educational Opportunity Act of 2021).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2020. 
Æ 
VerDate Sep 11 2014 
03:33 Jul 21, 2021
Jkt 019200
PO 00000
Frm 00020
Fmt 6652
Sfmt 6301
E:\BILLS\H4174.IH
H4174
ctelli on DSK11ZRN23PROD with BILLS