I
104TH CONGRESS
2D SESSION
H. R. 2877
To amend the Internal Revenue Code of 1986 to allow a deduction for
the payment of tuition for higher education and interest on student loans.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 24, 1996
Mr. MCHALE 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 allow a
deduction for the payment of tuition for higher education
and interest on student loans.
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 Tax
Relief Act of 1996’’.
SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.
(a) DEDUCTION ALLOWED.—Part VII of subchapter
B of chapter 1 of the Internal Revenue Code of 1986 (re-
lating to additional itemized deductions for individuals) is
amended by redesignating section 220 as section 221 and
by inserting after section 219 the following new section:
‘‘SEC. 220. HIGHER EDUCATION TUITION AND FEES; INTER-
EST ON STUDENT LOANS.
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an
individual, there shall be allowed as a deduction an
amount equal to the sum of—
‘‘(1) the qualified higher education expenses,
plus
‘‘(2) interest on qualified higher education
loans,
paid by the taxpayer during the taxable year.
‘‘(b) QUALIFIED HIGHER EDUCATION EXPENSES.—
For purposes of this section—
‘‘(1) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition and
fees required for the enrollment 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,
as an eligible student at an institution of higher
education.
‘‘(B) EXCEPTION FOR EDUCATION INVOLV-
ING SPORTS, ETC.—Such term does not include
expenses with respect to any course or other
education involving sports, games, or hobbies
unless such expenses—
‘‘(i) are part of a degree program, or
‘‘(ii) are deductible under this chapter
without regard to this section.
‘‘(C) 
EXCEPTION
FOR
NONACADEMIC
FEES.—Such term does not include any student
activity fees, athletic fees, insurance expenses,
or other expenses unrelated to a student’s aca-
demic course of instruction.
‘‘(D) ELIGIBLE STUDENT.—For purposes
of subparagraph (A), the term ‘eligible student’
means a student who meets the requirements of
section 484(a)(1) of the Higher Education Act
of 1965 (20 U.S.C. 1091(a)(1)).
‘‘(2) DOLLAR LIMITATION.—
‘‘(A) IN
GENERAL.—The amount taken
into account under paragraph (1) for any tax-
able year shall not exceed $10,000.
‘‘(B) PHASE-IN.—In the case of taxable
years beginning in 1996, 1997, 1998, and
1999, the following amounts shall be sub-
stituted for ‘$10,000’ in subparagraph (A):
‘‘For taxable years
The substitute
beginning in:
amount is:
1996 ...............................................................
$2,000
1997 ...............................................................
4,000
1998 ...............................................................
6,000
1999 ...............................................................
8,000.
‘‘(3) LIMITATION
BASED
ON
MODIFIED
AD-
JUSTED GROSS INCOME.—
‘‘(A) IN
GENERAL.—If the modified ad-
justed gross income of the taxpayer for the tax-
able year exceeds $70,000 ($100,000 in the
case of a joint return), the amount which would
(but for this paragraph) be taken into account
under paragraph (1) shall be reduced (but not
below zero) by the amount which bears the
same ratio to the amount which would be taken
into account as such excess bears to $20,000.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 1996, the $70,000 and $100,000
amounts contained in subparagraph (A) shall
be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment
under section 1(f)(3) for the calendar year
in which the taxable year begins, except
that section 1(f)(3)(B) shall be applied by
substituting ‘1995’ for ‘1992’.
‘‘(C) ROUNDING.—If any amount as ad-
justed under subparagraph (B) is not a mul-
tiple of $50, such amount shall be rounded to
the nearest multiple of $50 (or if such amount
is a multiple of $25, such amount shall be
rounded to the next highest multiple of $50).
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means the adjusted gross income of the
taxpayer for the taxable year determined—
‘‘(i) without regard to this section and
sections 911, 931, and 933, and
‘‘(ii) after the application of sections
86, 135, 219, and 469.
‘‘(4) INSTITUTION OF HIGHER EDUCATION.—
The term ‘institution of higher education’ means an
institution which—
‘‘(A) is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C.
1088), and
‘‘(B) is eligible to participate in programs
under title IV of such Act.
‘‘(c) QUALIFIED HIGHER EDUCATION LOAN.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified higher
education loan’ means a loan to a student which is—
‘‘(A) made, insured, or guaranteed by the
Federal Government,
‘‘(B) made by a State or a political sub-
division of a State,
‘‘(C) made from the proceeds of a qualified
student loan bond under section 144(b), or
‘‘(D) made by an institution of higher edu-
cation (as defined in section 1201(a) of the
Higher Education Act of 1965 (20 U.S.C.
1141(a))).
‘‘(2) LIMITATION.—
‘‘(A) IN GENERAL.—The amount of inter-
est on a qualified higher education loan which
is taken into account under subsection (a)(2)
shall be reduced by the amount which bears the
same ratio to such amount of interest as—
‘‘(i) the proceeds from such loan used
for qualified higher education expenses,
bears to
‘‘(ii) the total proceeds from such
loan.
‘‘(B) QUALIFIED HIGHER EDUCATION EX-
PENSES.—For purposes of subparagraph (A),
the term ‘qualified higher education expenses’
has the meaning given such term by subsection
(b), except that—
‘‘(i) such term shall include reason-
able living expenses while away from home,
and
‘‘(ii) the limitations of paragraphs (2)
and (3) of subsection (b) shall not apply.
‘‘(d) COORDINATION WITH OTHER PROVISIONS.—
‘‘(1) NO DOUBLE BENEFIT.—
‘‘(A) IN GENERAL.—No deduction shall be
allowed under subsection (a) for qualified high-
er education expenses or interest on qualified
higher education loans with respect to which a
deduction is allowed under any other provision
of this chapter.
‘‘(B) SAVINGS BOND EXCLUSION.—A de-
duction shall be allowed under subsection (a)(1)
for qualified higher education expenses only to
the extent the amount of such expenses exceeds
the amount excludable under section 135 for
the taxable year.
‘‘(2) QUALIFIED RESIDENCE INTEREST.—If a
deduction is allowed under subsection (a)(2) for in-
terest which is also qualified residence interest under
section 163(h), such interest shall not be taken into
account under section 163(h).
‘‘(e) SPECIAL RULES.—
‘‘(1) ELECTION.—If a deduction is allowable
under more than one provision of this chapter with
respect to qualified higher education expenses, the
taxpayer may elect the provision under which the de-
duction is allowed.
‘‘(2) LIMITATION ON TAXABLE YEAR OF DE-
DUCTION.—
‘‘(A) IN GENERAL.—A deduction shall be
allowed under subsection (a)(1) for any taxable
year only to the extent the qualified higher edu-
cation expenses are in connection with attend-
ance at an institution of higher education dur-
ing the taxable year.
‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—
Subparagraph (A) shall not apply to qualified
higher education expenses paid during a taxable
year which are in connection with attendance at
an institution of higher education which begins
during the first 2 months of the following tax-
able year.
‘‘(3) ADJUSTMENT
FOR
CERTAIN
SCHOLAR-
SHIPS AND VETERANS BENEFITS.—The amount of
qualified higher education expenses otherwise taken
into account under subsection (a)(1) with respect to
the education of an individual shall be reduced (be-
fore the application of subsection (b)) by the sum of
the amounts received with respect to such individual
for the taxable year as—
‘‘(A) a qualified scholarship which under
section 117 is not includable in gross income,
‘‘(B) an educational assistance allowance
under chapter 30, 31, 32, 34, or 35 of title 38,
United States Code, or
‘‘(C) a payment (other than a gift, be-
quest, devise, or inheritance within the meaning
of section 102(a)) for educational expenses, or
attributable to attendance at an eligible edu-
cational institution, which is exempt from in-
come taxation by any law of the United States.
‘‘(4) NO
DEDUCTION
FOR
MARRIED
INDIVID-
UALS FILING SEPARATE RETURNS.—If the taxpayer
is a married individual (within the meaning of sec-
tion 7703), this section shall apply only if the tax-
payer and his spouse file a joint return for the tax-
able year.
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary or ap-
propriate to carry out this section, including regula-
tions requiring recordkeeping and information re-
porting.’’
(b) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED GROSS INCOME.—Section 62(a) of such Code is
amended by inserting after paragraph (15) the following
new paragraph:
‘‘(16) 
HIGHER
EDUCATION
TUITION
AND
FEES.—The deduction allowed by section 219.’’
(c) CONFORMING AMENDMENT.—The table of sec-
tions for part VII of subchapter B of chapter 1 of such
Code is amended by striking the item relating to section
220 and inserting:
‘‘Sec. 220. Higher education tuition and fees.
‘‘Sec. 221. Cross reference.’’
(d) EFFECTIVE DATES.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
Æ