Consolidation of education tax incentives into higher education and skills obtainment credit

(a)

In General

Section 25A of the Internal Revenue Code of 1986 (relating to Hope and Lifetime Learning credits) is amended to read as follows:

25A.

Higher education and skills obtainment credit

(a)

Allowance of credit

In the case of any eligible student for whom an election is in effect under this section for any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of— (1)100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $2,000, plus (2)25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000. (b)

Limitations

(1)

Credit allowed only for 4 taxable years

The credit under subsection (a) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) 4 years of any combination of postsecondary education at an eligible educational institution and instruction described in subsection (c)(2)(B). (2)

Limitation based on household income

The amount which would (but for this paragraph) be taken into account under subsection (a) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which would be so taken into account as the excess (if any) of— (A)the household income of the taxpayer for such taxable year over 400 percent of the poverty line, bears to (B)the amount equal to 500 percent of the poverty line minus the amount equal to 400 percent of the poverty line. (c)

Definitions

For purposes of this section— (1)

Eligible student

The term eligible student means, with respect to any academic period, any individual who— (A)meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on the date of the enactment of the Taxpayer Relief Act of 1997, and (B)in the case of a student enrolled in a degree program, is carrying at least ½ the normal full-time work load for the course of study the student is pursuing. (2)

Qualified tuition and related expenses

The term qualified tuition and related expenses means tuition, fees, and costs of course materials— (A)for education during the taxable year with respect to the attendance at an eligible educational institution during any academic period beginning in such taxable year of— (i)the taxpayer, (ii)the taxpayer’s spouse, or (iii)any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151, and (B)for a course of instruction from an eligible provider to acquire or improve job skills of the individual during the taxable year (for education furnished during any academic period beginning in such taxable year). (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 Taxpayer Relief Act of 1997, and (B)which is eligible to participate in a program under title IV of the Higher Education Act of 1965. (4)

Poverty line

(A)

In general

The term poverty line has the meaning given that term in section 2110(c)(5) of the Social Security Act (42 U.S.C. 1397jj(c)(5)) with respect to the taxpayer’s family of the size involved. (B)

Poverty line used

The poverty line used shall be the most recently published poverty line as of the 1st day of the regular enrollment period for coverage during such calendar year. (5)

Eligible provider

The term eligible provider means provider of training services (within the meaning of section 134(d)(4)(D) of the Workforce Investment Act of 1998) (29 U.S.C. 2864(d)(4)(D)) who is identified in accordance with section 122(e)(3) of such Act (29 U.S.C. 2842(e)(3)). (d)

Special rules

(1)

Identification requirements

No credit shall be allowed under subsection (a) to a taxpayer with respect to an eligible student unless the taxpayer includes on the return of tax for the taxable year— (A)the name and social security number of such student, and (B)the employer identification number, name, and address of any institution or eligible provider to which tuition, fees, and costs of course materials were paid with respect to such student. (2)

Adjustment for certain scholarships

The expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsections (a) and (b)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as— (A)a qualified scholarship which is excludable from gross income under section 117, (B)an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under chapter 1606 of title 10, United States Code, (C)a Federal Pell Grant or a Federal supplemental educational opportunity grant under subparts 1 and 3, respectively, of part A of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070a and 1070b et seq., respectively), and (D)a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such student’s educational expenses, or attributable to such individual’s enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States. (3)

Treatment of expenses paid by dependent

If a deduction under section 151 with respect to an individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins— (A)no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year, and (B)amounts paid by such individual during such individual’s taxable year shall be treated for purposes of this section as paid by such other taxpayer. (4)

Treatment of certain prepayments

If tuition, fees, or costs of course materials are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year. (5)

Denial of double benefit

No credit shall be allowed under this section for any expense for which deduction is allowed under any other provision of this chapter. (6)

No credit for married individuals filing separate returns

If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year. (7)

Nonresident aliens

If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013. (8)

Supporting information

No expense shall be taken into account under this section for a taxable year unless the taxpayer submits with the return of tax for the taxable year information supporting such expense. (e)

Election not To have section apply

A taxpayer may elect not to have this section apply with respect to the expenses of an individual for any taxable year. (f)

Verification and confirmation of certain information

In carrying out this section, the Secretary shall utilize information from the Secretary of Education to confirm and verify information relating to educational institutions and students, including the Integrated Postsecondary Education Data System and the National Student Loan Data System. (g)

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 expense which was taken into account in determining the amount of such credit.

(b)

Repeal of deduction for qualified tuition and related expenses

(1)

In general

Part VII of subchapter B of chapter 1 of such Code (relating to additional itemized deductions for individuals) is amended by striking section 222. (2)

Clerical amendment

The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 222. (c)

Information Returns

(1)

In general

Section 6050S(e) of such Code is amended by striking subsection (g)(2) and inserting subsection (d)(2). (2)

Attendance

Paragraph (2) of section 6050S(b) of such Code is amended by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph:

(C)the status of the individual for each academic period of the year for which payments are received as— (i)a full-time or part-time student, (ii)if a part-time student, whether the individual is at least half time, and (iii)whether the student is a graduate student.

(d)

Omission of identification information and number of years credit is claimed treated as mathematical or clerical error

Subparagraph (J) of section 6213(g)(2) of such Code is amended to read as follows:

(J)in the case of information required under section 25A (relating to higher education obtainment credit)— (i)an omission of a correct social security number and employer identification number of any institution required to be included on a return under subsection (d)(1) of such section, and (ii)an entry on the return claiming the credit in violation of the limitation under subsection (b)(1) of such return,

(e)

Conforming amendments

(1)Section 62(a) of such Code is amended by striking paragraph (18). (2)Subparagraph (A) of section 86(b)(2) of such Code is amended by striking 222,. (3)Subparagraph (B) of section 72(t)(7) of such Code is amended by striking section 25A(g)(2) and inserting section 25A(d)(2). (4)Subparagraph (A) of section 135(c)(4) of such Code is amended by striking 222,. (5)Subparagraph (A) of section 137(b)(3) of such Code is amended by striking 222,. (6)Subparagraph (A) of section 199(d)(2) of such Code is amended by striking 222,. (7)Clause (ii) of section 219(g)(3)(A) of such Code is amended by striking 222,. (8)Clause (i) of section 221(b)(2)(C) of such Code is amended by striking 222,. (9)Clause (iii) of section 469(i)(3)(F) of such Code is amended by striking 221, and 222 and inserting and 221. (10)Subsection (d) of section 221 of such Code is amended— (A)by striking section 25A(g)(2) in paragraph (2)(B) and inserting section 25A(d)(2), and (B)by striking section 25A(f)(2) in the second sentence of paragraph (2) and inserting section 25A(c)(3). (11)Section 221(d)(3) of such Code is amended by striking section 25A(b)(3) and inserting section 25A(c)(3). (12)Subclause (I) of section 529(c)(3)(B)(v) of such Code is amended by striking section 25A(g)(2) and inserting 25A(d)(2). (13)Clause (i) of section 529(e)(3)(B) of such Code is amended by striking section 25A(b)(3) and inserting section 221(c)(3). (14)Subclause (I) of section 530(d)(2)(C)(i) of such Code is amended by striking section 25A(g)(2) and inserting section 25A(d)(2). (15)Clause (iii) of section 530(d)(4)(B) of such Code is amended by striking section 25A(g)(2) and inserting 25A(d)(2). (16)Section 1400O of such Code is amended by adding at the end the following flush sentence:

For purposes of this section, any reference to section 25A shall be treated as a reference to such section as in effect on the day before the date of the enactment of this sentence.

(17)The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 25A and inserting the following:

Sec. 25A. Higher education and skills obtainment credit.

(f)

Sense of Congress

It is the sense of Congress that any savings in revenues resulting from the enactment of this section shall be applied to the currently projected Pell Grant funding shortfall beginning in 2015 and to deficit reduction. (g)

Effective date

The amendments made by this section shall apply to expenses paid after December 31, 2013, for education furnished in academic periods beginning after such date.