Consolidation of certain tax benefits for educational expenses

(a)

American opportunity tax credit

Section 25A of the Internal Revenue Code of 1986 is amended to read as follows:

25A.

American opportunity tax credit

(a)

In general

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year, with respect to each eligible student, 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 so much of such expenses so paid as exceeds the dollar amount in effect under paragraph (1) but does not exceed twice such dollar amount. (b)

Portion of credit refundable

So much of the credit allowable under subsection (a) with respect to each eligible student (determined without regard to this subsection and section 26(a) and after application of all other provisions of this section) as does not exceed $1,500 shall be treated as a credit allowable under subpart C (and not under this part). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section 1(g) applies for such taxable year. (c)

Limitation based on modified adjusted gross income

(1)

In general

The amount allowable as a credit under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this subsection and subsection (b) but after application of all other provisions of this section) as— (A)the excess of— (i)the taxpayer’s modified adjusted gross income for such taxable year, over (ii)$80,000 (twice such amount in the case of a joint return), bears to (B)$10,000 (twice such amount in the case of a joint return). (2)

Modified adjusted gross income

For purposes of this subsection, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (d)

Other limitations

No credit shall be allowed under this section with respect to any eligible student for any taxable year if— (1)such student was taken into account in determining the credit allowed under this section (by the taxpayer or any other individual) for any 4 prior taxable years, or (2)such student has completed (before the beginning of such taxable year) the first 4 years of postsecondary education at an eligible educational institution. (e)

Definitions

For purposes of this section— (1)

Eligible student

The term eligible student means, with respect to any academic period, a student 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 August 5, 1997, and (B)is carrying at least 1/2 the normal full-time work load for the course of study the student is pursuing. (2)

Qualified tuition and related expenses

(A)

In general

The term qualified tuition and related expenses means tuition, fees, and course materials, required for 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 allowed a deduction under section 151,

at an eligible educational institution for courses of instruction of such individual at such institution.

(B)

Exception for education involving sports, etc

Such term does not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part of the individual’s degree program. (C)

Exception for nonacademic fees

Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction. (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 (20 U.S.C. 1088), as in effect on August 5, 1997, and (B)which is eligible to participate in a program under title IV of such Act. (f)

Special rules

(1)

Identification requirement

No credit shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual, and the employer identification number of any institution to which such expenses were paid, on the return of tax for the taxable year. (2)

Adjustment for certain scholarships, etc

(A)

In general

The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsection (c)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as— (i)a qualified scholarship which is excludable from gross income under section 117, (ii)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, and (iii)a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual'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. (B)

Coordination with Pell Grants not used for qualified tuition and related expenses

For purposes of subparagraph (A), the amount of any Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) shall be reduced (but not below zero) by the amount of expenses (other than qualified tuition and related expenses) which are taken into account in determining the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, as in effect on the date of the enactment of this paragraph) of such individual at an eligible educational institution for the academic period for which the credit under this section is being determined. (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)qualified tuition and related expenses 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 qualified tuition and related expenses 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 amount for which a 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. (g)

Inflation adjustment

(1)

In general

In the case of a taxable year beginning after 2018, the $2,000 amount in subsection (a)(1), the $1,500 amount in subsection (b), and the $80,000 amount in subsection (c)(1)(A)(ii) shall each be increased by an amount equal to— (A)such dollar amount, multiplied by (B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 1992 in subparagraph (B) thereof. (2)

Rounding

If any amount as adjusted under paragraph (1) is not a multiple of $100 ($1,000 in the case of the amount in subsection (c)(1)(A)(ii)), such amount shall be rounded to the next lowest multiple of $100 ($1,000 in the case of the amount in subsection (c)(1)(A)(ii)). (h)

Regulations

The Secretary may prescribe such regulations or other guidance 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 determining the amount of such credit.

(b)

Requirement to report tuition paid rather than tuition billed

Section 6050S(b)(2)(B)(i) is amended by striking or the aggregate amount billed. (c)

Repeal of deduction for qualified tuition and related expenses

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

Conforming amendments

(1)Section 62(a) of such Code is amended by striking paragraph (18). (2)Section 72(t)(7)(B) of such Code is amended by striking section 25A(g)(2) and inserting section 25A(f)(2). (3)Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 199(d)(2)(A), 219(g)(3)(A)(ii), and 221(b)(2)(C)(i) of such Code are each amended by striking 222,. (4)Section 469(i)(3)(F)(iii) of such Code is amended by striking 221, and 222 and inserting and 221. (5)Section 529(c)(3)(B)(v)(I) of such Code is amended by striking section 25A(g)(2) and inserting section 25A(f)(2). (6)Section 529(e)(3)(B)(i) of such Code is amended by striking section 25A(b)(3) and inserting section 25A(d). (7)Section 530(d)(2)(C) of such Code is amended— (A)by striking section 25A(g)(2) in clause (i)(I) and inserting section 25A(f)(2), and (B)by striking

Hope and Lifetime Learning credits

in the heading and inserting

American opportunity tax credit

. (8)Section 530(d)(4)(B)(iii) of such Code is amended by striking section 25A(g)(2) and inserting section 25A(d)(4)(B). (9)Section 6050S(e) of such Code is amended by striking subsection (g)(2) and inserting subsection (f)(2). (10)Section 6211(b)(4)(A) of such Code is amended by striking subsection (i)(6) and inserting subsection (b). (11)Section 6213(g)(2)(J) of such Code is amended by striking TIN required under section 25A(g)(1) and inserting TIN, and employer identification number, required under section 25A(f)(1). (12)Section 1004(c) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended— (A)in paragraph (1)— (i)by striking section 25A(i)(6) each place it appears and inserting section 25A(b), (ii)by striking “with respect to taxable years beginning after 2008 and before 2018” in subparagraph (A) and inserting “with respect to each taxable year”, and (iii)by striking “for taxable years beginning after 2008 and before 2018” in subparagraph (B) and inserting “for each taxable year”, (B)in paragraph (2), by striking Section 25A(i)(6) and inserting Section 25A(b), and (C)in paragraph (3)(C), by striking subsection (i)(6) and inserting subsection (b). (13)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 by striking the item relating to section 25A and inserting the following new item:

Sec. 25A. American opportunity tax credit.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2014.