‘‘(iii) Financial aid administrators at 
participating institutions shall be allowed 
to use their discretion in awarding finan-
cial aid to participating students, as out-
lined under section 479A and section 
480(d)(7). 
‘‘(E) DATA MATCH WITH THE INTERNAL 
REVENUE
SERVICE.—The Secretary shall in-
clude in this demonstration project a data 
match with the Internal Revenue Service in 
order to verify data provided by participating 
students and gauge the feasibility of imple-
menting such a data match for all students ap-
plying for aid under this title. 
‘‘(F) EVALUATION.—The Secretary shall 
conduct a rigorous evaluation of this dem-
onstration program in order to measure its ben-
efits and adverse effects as indicated under sub-
paragraph (A). 
‘‘(G) OUTREACH.—The Secretary shall 
make appropriate efforts in order to notify 
States of the demonstration program under this 
paragraph. Upon determination of participating 
States, the Secretary shall continue to make ef-
forts to notify institutions and dependent stu-
dents within participating States of the oppor-
tunity to participate in the demonstration pro-
gram and of the participation requirements.’’
(C) by striking subsection (b); 
(D) by redesignating subsections (c), (d), 
and (e) as subsections (b), (c), and (d), respec-
tively. 
(2) MASTER CALENDAR.—Section 482(a)(1)(B) 
(20 U.S.C. 1089) is amended to read as follows: 
‘‘(B) by March 1: proposed modifications, 
updates, and notices pursuant to sections 
479(c)(2)(C), 478, and 483(a)(6) published in 
the Federal Register;’’. 
(c) INCREASING ACCESS TO TECHNOLOGY.—Section 
483 (20 U.S.C. 1087ss) is further amended by adding at 
the end the following: 
‘‘(e) ADDRESSING THE DIGITAL DIVIDE.—The Sec-
retary shall utilize savings accrued by moving more appli-
cants to the electronic forms described in subsection (a)(4) 
to improve access to the electronic forms described in sub-
section (a)(4) for applicants meeting the requirements of 
section 479(c).’’
(d) SIMPLIFY THE TREATMENT OF INCOME: REDUC-
ING UNTAXED INCOME AND BENEFITS.—Subsection (b)
of section 480 (20 U.S.C. 1087vv(b)) is amended to read 
as follows: 
‘‘(b) UNTAXED INCOME AND BENEFITS.—
‘‘(1) The term ‘untaxed income and benefits’ 
means—
‘‘(A) child support received; 
‘‘(B) workman’s compensation; 
‘‘(C) veteran’s benefits such as death pen-
sion, dependency, and indemnity compensation, 
but excluding veterans’ education benefits as 
defined in subsection (c); 
‘‘(D) interest on tax-free bonds; 
‘‘(E) housing, food, and other allowances 
(excluding rent subsidies for low-income hous-
ing) for military, clergy, and others (including 
cash payments and cash value of benefits); 
‘‘(F) cash support or any money paid on 
the student‘s behalf, except, for dependent stu-
dents, funds provided by the student’s parents; 
‘‘(G) untaxed portion of pensions; 
‘‘(H) payments to individual retirement ac-
counts and Keogh accounts excluded from in-
come for Federal income tax purposes; and 
‘‘(I) any other untaxed income and bene-
fits, such as Black Lung Benefits, Refugee As-
sistance, railroad retirement benefits, or Job 
Training Partnership Act noneducational bene-
fits or benefits received through participation in 
employment and training activities under title I 
of the Workforce Investment Act of 1998. 
‘‘(2) The term ‘untaxed income and benefits’ 
shall not include the amount of additional child tax 
credit claimed for Federal income tax purposes.’’. 
(e) REDUCING THE NUMBER OF QUESTIONS.—Sec-
tion 484 (20 U.S.C. 1091) is amended by striking sub-
section (r). 
(f) ALLOWANCE FOR STATE AND OTHER TAXES.—
(1) ALLOWANCE
FOR
STATE
AND
LOCAL 
TAXES.—Section 478 (20 U.S.C. 1087rr) is amend-
ed—
(A) by striking subsection (g); and 
(B) by redesignating subsection (h) as sub-
section (g). 
(2) HOLDING STUDENTS HARMLESS.—Section 
475(c) (20 U.S.C. 1087oo(c)) is amended—
(A) in paragraph (1): 
(i) by striking subparagraph (B); and 
(ii) by redesignating subparagraphs 
(C), (D), (E), and (F) as subparagraphs 
(B), (C), (D), and (E), respectively;
(B) by striking paragraph (2); 
(C) by striking paragraph (4) and insert-
ing the following: 
‘‘(4) INCOME
PROTECTION
ALLOWANCE.—The 
income protection allowance is determined by the fol-
lowing table (or a successor table prescribed by the 
Secretary under section 478):
‘‘Income Protection Allowance 
Family Size 
Number in College 
(including 
student) 
For each 
additional 
subtract: 
$15,207
$12,599
................
................
................
$3,641
18,937
16,350
$13,742
................
................
23,388
20,779
18,193
$15,596
................
27,595
24,986
22,400
19,802
$17,216
32,268
29,670
27,084
24,487
21,900
For each ad-
ditional add: 
2,586
2,586
2,586
2,586
2,586
’’; 
and 
(D) by redesignating paragraphs (3), (4) 
and (5) as paragraphs (2), (3) and (4), respec-
tively. 
(3) DEPENDENT
STUDENT
INCREASE
IN
IN-
COME
PROTECTION
ALLOWANCE.—Section 475(g) 
(20 U.S.C. 1087oo(g)) is amended—
(A) in paragraph (2)—
(i) by striking subparagraph (B); 
(ii) by striking subparagraph (D) and 
inserting the following:
‘‘(D) an income protection allowance of 
$2,589 (or a successor amount prescribed by 
the Secretary under section 478); and’’
(iii) by redesignating subparagraphs 
(C), (D), (E), and (F) as subparagraphs 
(B), (C), (D), and (E), respectively; 
(B) by striking paragraph (3); and 
(C) by redesignating paragraphs (4), (5), 
and (6) as paragraphs (3), (4), and (5), respec-
tively. 
(4) INDEPENDENT
STUDENT
(WITHOUT
DE-
PENDENTS) INCREASE IN INCOME PROTECTION AL-
LOWANCE.—Section 476(b) (20 U.S.C. 1087pp(b)) 
is amended—
(A) in subparagraph (A) of paragraph 
(1)—
(i) by striking clause (ii); 
(ii) by striking subclauses (I), (II) and 
(III) of clause (iv) and inserting the fol-
lowing: 
‘‘(I) $5,874 for single students; 
‘‘(II) $5,874 for married stu-
dents who are both enrolled pursuant 
to subsection (a)(2); and
‘‘(III) $9,395 for married stu-
dents where one is enrolled pursuant 
to subsection (a)(2);’’; and 
(iii) by redesignating clauses (iii), (iv), 
(v), (vi), as clauses (ii), (iii), (iv), and (v), 
respectively; 
(B) by striking paragraph (2); and 
(C) by redesignating paragraphs (3), (4), 
and (5) as paragraphs (2), (3), and (4), respec-
tively. 
(5) INDEPENDENT
STUDENT
(WITH
DEPEND-
ENTS) INCREASE IN INCOME PROTECTION ALLOW-
ANCE.—Section 477(b) (20 U.S.C. 1087qq(b)) is 
amended—
(A) in paragraph (1)—
(i) by striking subparagraph (B); and 
(ii) by redesignating (C), (D), (E), 
and (F) as subparagraphs (B), (C), (D), 
and (E), respectively; 
(B) by striking paragraph (2); 
(C) by striking paragraph (4) and insert-
ing the following: 
‘‘(4) INCOME
PROTECTION
ALLOWANCE.—The 
income protection allowance is determined by the fol-
lowing table (or a successor table prescribed by the 
Secretary under section 478):
‘‘Income Protection Allowance 
Family Size 
Number in College 
(including 
student) 
For each 
additional 
subtract: 
$16,935
$12,599
................
................
................
$3,641
18,937
16,350
$13,742
................
................
23,384
20,779
18,193
$15,596
................
27,596
24,986
22,400
19,802
$17,216
32,268
29,670
27,084
24,487
21,900
For each ad-
ditional add: 
2,586
2,586
2,586
2,586
2,586
’’; 
and 
(D) by redesignating paragraphs (3), (4), 
and (5) as paragraphs (2), (3), and (4), respec-
tively. 
(6) CONFORMING
AMENDMENT: UPDATES.—
Section 478(b) (20 U.S.C. 1087rr(b)) is amended—
(A) in paragraph (1)—
(i) by striking ‘‘1993–1994’’ and in-
serting ‘‘2005–2006’’; 
(ii) 
by 
striking 
‘‘475(c)(4) 
and 
477(b)(4)’’ and inserting ‘‘475(c)(3) and 
477(b)(3)’’; and 
(iii) by striking ‘‘December 1992’’ and 
inserting ‘‘December 2004’’; and 
(B) in paragraph (2)—
(i) by striking ‘‘2000–2001’’ and in-
serting ‘‘2005–2006’’;
(ii) by striking ‘‘475(g)(2)(D) and 
476(b)(1)(A)(iv)’’ 
and 
inserting 
‘‘475(g)(2)(C) and 476(b)(1)(A)(iii)’’; and 
(iii) by striking ‘‘December 1999’’ and 
inserting ‘‘December 2004’’. 
(g) RELIEF FOR WORKING STUDENTS.—
(1) DEPENDENT STUDENTS.—Paragraph (4) of 
section 475(g) (20 U.S.C. 1087oo(g)(4)), as redesig-
nated by subsection (f)(3)(C), is amended to read as 
follows: 
‘‘(4) the student’s available income (determined 
in accordance with paragraph (1) of this subsection) 
is assessed at 40 percent.’’
(2) INDEPENDENT
STUDENTS
WITHOUT
DE-
PENDENTS OTHER THAN A SPOUSE.—Paragraph (4) 
of section 476(b) (20 U.S.C. 1087pp(b)), as redesig-
nated by subsection (f)(3)(C), is amended to read as 
follows: 
‘‘(4) ASSESSMENT
OF
AVAILABLE
INCOME.—
The family’s available income (determined in accord-
ance with paragraph (1)(A) of this subsection) is as-
sessed at 40 percent.’’. 
(h) SIMPLIFYING
FOR STUDENTS WITH SPECIAL 
CIRCUMSTANCES.—Section 480 (20 U.S.C. 1087vv) is
amended by striking subsection (d) and inserting the fol-
lowing: 
‘‘(d) INDEPENDENT STUDENT.—
‘‘(1) DEFINITION.—The term ‘independent’ 
when used with respect to a student, means any in-
dividual who—
‘‘(A) is 24 years of age or older by Decem-
ber 31 of the award year; 
‘‘(B) is an orphan, in foster care, or a 
ward of the court, or was in foster care or a 
ward of the court until the individual reached 
the age of 18; 
‘‘(C) is an emancipated youth as defined 
by his or her state of legal residence or is in 
legal guardianship as defined by section 475(7) 
of the Social Security Act; 
‘‘(D) is a veteran of the Armed Forces of 
the United States (as defined in subsection 
(c)(1)); 
‘‘(E) is a graduate or professional student; 
‘‘(F) is a married individual; 
‘‘(G) has legal dependents other than a 
spouse; or 
‘‘(H) is a student for whom a financial aid 
administrator makes a documented determina-