[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1512 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1512



 To amend the Internal Revenue Code of 1986 to provide incentives for 
    public-private educational partnerships for public educational 
 institutions serving disadvantaged students and to provide tax relief 
           to families who are struggling to pay for college.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 1, 1997

  Mr. Rangel 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 provide incentives for 
    public-private educational partnerships for public educational 
 institutions serving disadvantaged students and to provide tax relief 
           to families who are struggling to pay for college.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Education 
Opportunities Tax Act of 1997''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

             TITLE I--PUBLIC-PRIVATE EDUCATION PARTNERSHIPS

SEC. 101. PURPOSE.

    The purpose of this title is to facilitate the establishment of 
working partnerships of educators, businesses, labor, and community 
groups to--
            (1) enhance the academic curriculum for education or 
        training below the college level,
            (2) increase graduation and employment rates,
            (3) better prepare students for the rigors of college and 
        the increasingly complex workforce, and
            (4) promote the global leadership position of the United 
        States economy,
by providing a no-cost source of capital to cover the cost of 
establishing specialized academies in distressed areas (referred to as 
``education zones'') and by providing tax credits to employers who hire 
recent graduates of such academies.

SEC. 102. INCENTIVES FOR EDUCATION ZONES.

    (a) In General.--Part III of subchapter U of chapter 1 (relating to 
additional incentives for empowerment zones), as amended by subsection 
(b), is amended by inserting after subpart B the following new subpart:

              ``Subpart C--Incentives for Education Zones

                              ``Sec. 1397B. Credit to holders of 
                                        qualified zone academy bonds.
                              ``Sec. 1397C. Credit for employing recent 
                                        qualified zone academy 
                                        graduates.

``SEC. 1397B. CREDIT TO HOLDERS OF QUALIFIED ZONE ACADEMY BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
qualified zone academy bond on the credit allowance date of such bond 
which occurs during the taxable year, there shall be allowed as a 
credit against the tax imposed by this chapter for such taxable year 
the amount determined under subsection (b).
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any qualified zone 
        academy bond is the amount equal to the product of--
                    ``(A) the credit rate determined by the Secretary 
                under paragraph (2) for the month in which such bond 
                was issued, multiplied by
                    ``(B) the face amount of the bond held by the 
                taxpayer on the credit allowance date.
            ``(2) Determination.--During each calendar month, the 
        Secretary shall determine a credit rate which shall apply to 
        bonds issued during the following calendar month. The credit 
        rate for any month is the percentage which the Secretary 
        estimates will permit the issuance of qualified zone academy 
        bonds without discount and without interest cost to the issuer.
    ``(c) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under part IV of 
        subchapter A (other than subpart C thereof, relating to 
        refundable credits).
    ``(d) Qualified Zone Academy Bond.--For purposes of this section--
            ``(1) In general.--The term `qualified zone academy bond' 
        means any bond issued as part of an issue if--
                    ``(A) 95 percent or more of the proceeds of such 
                issue are to be used for a qualified purpose with 
                respect to a qualified zone academy,
                    ``(B) the bond is issued by a State or local 
                government within the jurisdiction of which such 
                academy is located,
                    ``(C) the issuer--
                            ``(i) designates such bond for purposes of 
                        this section, and
                            ``(ii) certifies that it has written 
                        assurances that the private business 
                        contribution requirement of paragraph (2) will 
                        be met with respect to such academy, and
                    ``(D) the term of each bond which is part of such 
                issue does not exceed the maximum term permitted under 
                paragraph (3).
            ``(2) Private business contribution requirement.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the private business contribution requirement of this 
                paragraph is met with respect to any issue if the 
                qualified zone academy has written commitments from 
                private entities to make qualified contributions having 
                a present value (as of the date of issuance of the 
                issue) of not less than 50 percent of the proceeds of 
                the issue.
                    ``(B) Qualified contributions.--For purposes of 
                subparagraph (A), the term `qualified contribution' 
                means any contribution (of a type and quality 
                acceptable to the academy) of--
                            ``(i) equipment for use in the qualified 
                        zone academy,
                            ``(ii) technical assistance in developing 
                        curriculum or in training teachers in order to 
                        promote appropriate market driven technology in 
                        the classroom,
                            ``(iii) services of employees as mentors or 
                        classroom teachers,
                            ``(iv) internships, fieldtrips, or other 
                        educational opportunities outside the academy 
                        for students, or
                            ``(v) any other property or service 
                        specified by the academy.
            ``(3) Term requirement.--During each calendar month, the 
        Secretary shall determine the maximum term permitted under this 
        paragraph for bonds issued during the following calendar month. 
        Such maximum term shall be the term which the Secretary 
        estimates will result in the present value of the obligation to 
        repay the principal on the bond being equal to 50 percent of 
        the face amount of the bond. Such present value shall be 
        determined using as a discount rate the average annual interest 
        rate of tax-exempt obligations having a term of 10 years or 
        more which are issued during the month. If the term as so 
        determined is not a multiple of a whole year, such term shall 
        be rounded to the next highest whole year.
            ``(4) Qualified zone academy.--
                    ``(A) In general.--The term `qualified zone 
                academy' means any public educational institution 
                described in subparagraph (B) which provides education 
                or training below the college level if such institution 
                is operated under a special academic program designed 
                in cooperation with business to enhance the academic 
                curriculum, increase graduation and employment rates, 
                and better prepare students for the rigors of college 
                and the increasingly complex workforce.
                    ``(B) Education zone institution.--For purposes of 
                subparagraph (A), an educational institution is 
                described in this subparagraph if--
                            ``(i) such institution is located in an 
                        empowerment zone or enterprise community 
                        (including any such zone or community 
                        designated after the date of the enactment of 
                        this section), or
                            ``(ii) there is a reasonable expectation 
                        (as of the date of issuance of the bonds) that 
                        at least 35 percent of the students attending 
                        such institution will be members of families 
                        which have incomes which on an annual basis are 
                        70 percent or less of the Bureau of Labor 
                        Statistics lower living standard.
            ``(5) Qualified purpose.--The term `qualified purpose' 
        means, with respect to any qualified zone academy--
                    ``(A) constructing or renovating such an academy,
                    ``(B) providing equipment for use at such academy,
                    ``(C) developing course materials for education to 
                be provided at such academy, and
                    ``(D) training teachers for such academy.
    ``(e) Limitation on Amount of Bonds Designated.--
            ``(1) National limitation.--There is a national zone 
        academy bond limitation for each calendar year. Such limitation 
        is $6,000,000,000 for 1998, 1999, and 2000 and zero thereafter.
            ``(2) Allocation of limitation.--The national zone academy 
        bond limitation for a calendar year shall be allocated by the 
        Secretary among the States on the basis of their respective 
        populations of individuals below the poverty line (as defined 
        by the Office of Management and Budget). The limitation amount 
        allocated to a State under the preceding sentence shall be 
        allocated by the State education agency to qualified zone 
        academies within such State.
            ``(3) Designation subject to limitation amount.--The 
        maximum aggregate face amount of bonds issued during any 
        calendar year which may be designated under subsection (d)(1) 
        with respect to any qualified zone academy shall not exceed the 
        limitation amount allocated to such academy under paragraph (2) 
        for such calendar year.
            ``(4) Carryover of used limitation.--If for any calendar 
        year--
                    ``(A) the limitation amount for any State, exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under subsection (d)(1) with 
                respect to qualified zone academies within such State,
        the limitation amount for such State for the following calendar 
        year shall be increased by the amount of such excess.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Credit allowance date.--The term `credit allowance 
        date' means, with respect to any issue, the last day of the 1-
        year period beginning on the date of issuance of such issue and 
        the last day of each successive 1-year period thereafter.
            ``(2) Bond.--The term `bond' includes any obligation.
            ``(3) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
    ``(g) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section.

``SEC. 1397C. CREDIT FOR EMPLOYING RECENT QUALIFIED ZONE ACADEMY 
              GRADUATES.

    ``(a) In General.--For purposes of subpart F of part IV of 
subchapter A (relating to rules for computing work opportunity credit), 
an individual shall be treated as a member of a targeted group if such 
individual is certified by the designated local agency (as defined in 
section 51(d)(10))--
            ``(1) as having graduated from a qualified zone academy (as 
        defined in section 1397B(d)(4)), and
            ``(2) as having a hiring date (as defined in section 
        51(d)(9)) which is not more than 6 months after the date of 
        such graduation.
    ``(b) Special Rules.--
            ``(1) Lower credit.--In the case of an individual who is a 
        member of a targeted group solely by reason of subsection (a), 
        section 51(a) shall be applied by substituting `20 percent' for 
        `35 percent'.
            ``(2) Credit permanent.--Paragraph (4) of section 51(c) 
        (relating to termination) shall not apply for purposes of 
        determining the credit allowable by reason of this section.''
    (b) Conforming Amendments.--
            (1) Subchapter U of chapter 1 (as in effect before the 
        amendment made by subsection (a)) is amended by redesignating 
        subpart C as subpart D, and by redesignating sections 1397B, 
        1397C, and 1397D as sections 1397D, 1397E, and 1397F, 
        respectively.
            (2) Subsection (b) of section 1394 is amended--
                    (A) by striking ``section 1397C'' in paragraph (2) 
                and inserting ``section 1397E'', and
                    (B) by striking ``section 1397B'' in paragraph (3) 
                and inserting ``section 1397D''.
            (3) The table of subparts for part III of subchapter U of 
        chapter 1 is amended by striking the last item and inserting 
        the following:

                              ``Subpart C. Incentives for education 
                                        zones.
                              ``Subpart D. General provisions.''
            (4) The table of sections for subpart D of such part III, 
        as so redesignated, is amended to read as follows:

                              ``Sec. 1397D. Enterprise zone business 
                                        defined.
                              ``Sec. 1397E. Qualified zone property 
                                        defined.''
            (5) The table of sections for part IV of subchapter U of 
        chapter 1 is amended to read as follows:

                              ``Sec. 1397F. Regulations.''
    (c) Effective Date.--The amendments made by this section--
            (1) to the extent related to 1397B of the Internal Revenue 
        Code of 1986 (as added by this section) shall apply to 
obligations issued after December 31, 1997, and
            (2) to the extent related to section 1397C of such Code (as 
        so added) shall apply to individuals who begin work for the 
        employer after such date.

                   TITLE II--HOPE SCHOLARSHIP CREDIT

SEC. 201. HOPE SCHOLARSHIP CREDIT.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 23 the following new section:

``SEC. 24. HOPE SCHOLARSHIP CREDIT.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year the amount of qualified higher education expenses 
paid by the taxpayer during such taxable year for education furnished 
during any academic period beginning in such year.
    ``(b) Limitations.--
            ``(1) Dollar limitation.--The amount allowed as a credit 
        under subsection (a) for any taxable year with respect to the 
        qualified higher education expenses of any 1 individual shall 
        not exceed $1,500 ($1,000 if the individual was an eligible 
        student in 2 or more prior taxable years).
            ``(2) Credit allowed for only 4 taxable years.--No credit 
        shall be allowed under subsection (a) for a taxable year with 
        respect to the qualified higher education expenses of an 
        individual unless the taxpayer elects to have this section 
        apply with respect to such individual for such year. An 
        election under this paragraph shall not take effect with 
        respect to an individual for any taxable year if an election 
        under this paragraph (by the taxpayer or any other individual) 
        is in effect with respect to such individual for any 4 prior 
        taxable years.
            ``(3) Credit allowed for year only if individual is at 
        least \1/2\ time student for portion of year.--No credit shall 
        be allowed under subsection (a) for a taxable year with respect 
        to the qualified higher education expenses of an individual 
        unless such individual is an eligible student for at least one 
        academic period which begins during such year.
            ``(4) Credit allowed only for first 4 years of 
        postsecondary education.--No credit shall be allowed under 
        subsection (a) for a taxable year with respect to the qualified 
        higher education expenses of an individual if the individual 
        has completed (before the beginning of such taxable year) the 
        first 4 years of postsecondary education at an institution of 
        higher education.
    ``(c) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount which would (but for this 
        subsection) be taken into account under subsection (a) for the 
        taxable year shall be reduced (but not below zero) by the 
        amount determined under paragraph (2).
            ``(2) Amount of reduction.--The amount determined under 
        this paragraph is the amount which bears the same ratio to the 
        amount which would be so taken into account as--
                    ``(A) the excess of--
                            ``(i) the taxpayer's modified adjusted 
                        gross income for such taxable year, over
                            ``(ii) $50,000 ($80,000 in the case of a 
                        joint return), bears to
                    ``(B) $20,000.
            ``(3) Modified adjusted gross income.--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) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under part IV of 
        subchapter A (other than subpart C thereof, relating to 
        refundable credits).
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified higher education expenses.--
                    ``(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 allowed a 
                        deduction under section 151,
                at an institution of higher education.
                    ``(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.
            ``(2) Institution of higher education.--The term 
        `institution of higher education' 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 the date of the enactment of this section, 
                and
                    ``(B) which is eligible to participate in a program 
                under title IV of such Act.
            ``(3) 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 the date of the enactment 
                of this section, and
                    ``(B) is carrying at least \1/2\ the normal full-
                time work load for the course of study the student is 
                pursuing.
    ``(f) 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--
            ``(1) no credit shall be allowed under subsection (a) to 
        such individual for such individual's taxable year, and
            ``(2) qualified higher education 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.
    ``(g) Treatment of Certain Prepayments.--If qualified higher 
education 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.
    ``(h) Special Rules.--
            ``(1) Denial of credit if individual convicted of drug 
        offense.--No credit shall be allowed under subsection (a) with 
        respect to the qualified higher education expenses of an 
        individual for any taxable year if the individual has been 
        convicted before the end of such year of a Federal or State 
        felony offense consisting of the possession or distribution of 
        a controlled substance.
            ``(2) Denial of credit if individual fails to make 
        satisfactory academic progress.--If--
                    ``(A) an election was in effect under this section 
                with respect to the qualified higher education expenses 
                of an individual for any taxable year, and
                    ``(B) such individual failed to make satisfactory 
                academic progress described in section 484(c) of the 
                Higher Education Act of 1965 during such year,
        no credit shall be allowed under subsection (a) with respect to 
        qualified higher education expenses of such individual for a 
        succeeding taxable year.
            ``(3) No double benefit.--No credit shall be allowed under 
        subsection (a) for any taxable year for any expense for which a 
        deduction is allowed under any other provision of this chapter.
            ``(4) Identification requirement.--No credit shall be 
        allowed under subsection (a) to a taxpayer with respect to the 
        qualified higher education expenses of an individual unless the 
        taxpayer includes the name and taxpayer identification number 
        of such individual on the return of tax for the taxable year.
            ``(5) Adjustment for certain scholarships.--The amount of 
        qualified higher education 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 (b) and (c)) by the sum of--
                    ``(A) 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,
                            ``(iii) a payment which is excludable from 
                        gross income under section 127, or
                            ``(iv) 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 institution of higher education, which is 
                        excludable from gross income under any law of 
                        the United States, and
                    ``(B) the amount excludable from gross income under 
                section 135 which is allocable to such expenses with 
                respect to such individual for such period.
            ``(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) Coordination with other student financial 
        assistance.--The credit provided under subsection (a), and any 
        payment provided under subsection (j), shall not be taken into 
        account for purposes of determining eligibility for, or the 
        amount of, any student financial assistance provided under the 
        Higher Education Act of 1965.
    ``(i) Inflation Adjustments.--
            ``(1) Dollar limitation on amount of credit.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 1997, the $1,500 and $1,000 amounts in 
                subsection (b)(1)(A) shall be increased by an amount 
                equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) 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 1996' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $50, such amount 
                shall be rounded to the next lowest multiple of $50.
            ``(2) Income limits.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2000, the $50,000 and $80,000 amounts 
                in subsection (c)(2) shall each be increased by an 
                amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) 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 1999' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $5,000, such 
                amount shall be rounded to the next lowest multiple of 
                $5,000.
    ``(j) Credit To Be Refundable.--
            ``(1) In general.--Each qualified student shall be entitled 
        to the refundable Hope Credit.
            ``(2) Payment by educational institution.--Each institution 
        of higher education shall pay, as an agent of the Secretary of 
        the Treasury, the refundable Hope Credit to each qualified 
        student attending such institution.
            ``(3) Qualified student.--For purposes of this subsection, 
        the term `qualified student' means, with respect to any 
        calendar year, any eligible student if--
                    ``(A) the credit provided by subsection (a) would 
                have been allowable to the applicable taxpayer with 
                respect to such student but for the waiver under 
                subparagraph (D) and the limitation based on such 
                taxpayer's income tax liability,
                    ``(B) the applicable taxpayer certifies to the 
                institution that it is reasonable to expect that such 
                taxpayer will not be allowed the maximum credit under 
                this section by reason of having insufficient income 
                tax liability,
                    ``(C) such applicable taxpayer provides to the 
                institution of higher education such information as is 
                necessary to determine the amount of the refundable 
                Hope credit to which the student is entitled, and
                    ``(D) such applicable taxpayer irrevocably waives 
                the right to claim such credit for such year.
        For purposes of this subsection, the applicable taxpayer is the 
        student or, if any other taxpayer is allowed a deduction under 
        section 151 for such student, such other taxpayer.
            ``(4) Refundable hope credit.--For purposes of this 
        subsection, the term `refundable Hope Credit' means, with 
        respect to a student, the amount of the credit provided by 
        subsection (a) which would have been allowable to the 
        applicable taxpayer with respect to such student but for the 
        waiver under paragraph (3)(D) and the limitation based on such 
        taxpayer's income tax liability.
            ``(5) Payments to eligible educational institutions.--The 
        Secretary of the Treasury shall pay, either in advance or by 
        way of reimbursement, to each institution of higher education 
        an amount equal to the aggregate payments made under this 
        subsection by such institution to qualified students. Section 
        1324 of title 31, United States Code, shall apply to the 
        payments required under this paragraph in the same manner as if 
        such payments were refunds of overpayments of tax.
            ``(6) Recapture if payment exceeds correct amount.--If the 
        payments made under this subsection with respect to any 
        qualified student for any calendar year exceed the amount of 
        the refundable Hope credit to which the applicable taxpayer 
        with respect to such student is entitled, such excess shall be 
        assessed and collected in the same manner as an underpayment of 
        tax imposed by this chapter for such year on such taxpayer.
    ``(k) 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 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) Extension of Procedures Applicable to Mathematical or Clerical 
Errors.--Paragraph (2) of section 6213(g) (relating to the definition 
of mathematical or clerical errors) is amended by striking ``and'' at 
the end of subparagraph (G), by striking the period at the end of 
subparagraph (H) and inserting ``, and'', and by inserting after 
subparagraph (H) the following new subparagraph:
                    ``(I) an omission of a correct TIN required under 
                section 24(h)(4) (relating to higher education tuition 
                and fees) to be included on a return.''
    (c) Returns Relating to Higher Education Expenses.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 (relating to information concerning transactions 
        with other persons) is amended by inserting after section 6050R 
        the following new section:

``SEC. 6050S. RETURNS RELATING TO HIGHER EDUCATION EXPENSES.

    ``(a) In General.--Any person--
            ``(1) which is an institution of higher education which 
        receives payments for qualified higher education expenses with 
        respect to any individual for any calendar year or which pays 
        any amount under section 24(j) with respect to any individual 
        for any calendar year, or
            ``(2) which is engaged in a trade or business which, in the 
        course of such trade or business makes payments during any 
        calendar year to any individual which constitute reimbursements 
        or refunds (or similar amounts) of qualified higher education 
        expenses of such individual,
shall make the return described in subsection (b) with respect to the 
individual at such time as the Secretary may by regulations prescribe.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe,
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                with respect to whom payments described in subsection 
                (a) were received from (or were paid to),
                    ``(B) the name, address, and TIN of any individual 
                certified by the individual described in subparagraph 
                (A) as the taxpayer who will claim the individual as a 
                dependent for purposes of the deduction allowable under 
                section 151 for any taxable year ending with or within 
                the calendar year,
                    ``(C) the--
                            ``(i) aggregate amount of payments for 
                        qualified higher education expenses received 
                        with respect to the individual described in 
                        subparagraph (A) during the calendar year, and
                            ``(ii) aggregate amount of reimbursements 
                        or refunds (or similar amounts) paid to such 
                        individual during the calendar year, and
                    ``(D) such other information as the Secretary may 
                prescribe.
    ``(c) Application to Governmental Units.--For purposes of this 
section--
            ``(1) a governmental unit or any agency or instrumentality 
        thereof shall be treated as a person, and
            ``(2) any return required under subsection (a) by such 
        governmental entity shall be made by the officer or employee 
        appropriately designated for the purpose of making such return.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required to be set forth in such return under subparagraph (A) or (B) 
of subsection (b)(2) a written statement showing--
            ``(1) the name, address, and phone number of the 
        information contact of the person required to make such return, 
        and
            ``(2) the aggregate amounts described in subparagraph (C) 
        of subsection (b)(2).
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) was required to be made.
    ``(e) Definitions.--For purposes of this section, the terms 
`institution of higher education' and `qualified higher education 
expenses' have the respective meanings given such terms by section 24.
    ``(f) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the provisions of this section. No 
penalties shall be imposed under section 6724 with respect to any 
return or statement required under this section until such time as such 
regulations are issued.''
            (2) Assessable penalties.--Section 6724(d) (relating to 
        definitions) is amended--
                    (A) by redesignating clauses (x) through (xv) as 
                clauses (xi) through (xvi), respectively, in paragraph 
                (1)(B) and by inserting after clause (ix) of such 
                paragraph the following new clause:
                            ``(x) section 6050S (relating to returns 
                        relating to payments for qualified higher 
                        education expenses),'', and
                    (B) by striking ``or'' at the end of the next to 
                last subparagraph, by striking the period at the end of 
                the last subparagraph and inserting ``, or'', and by 
                adding at the end the following new subparagraph:
                    ``(Z) section 6050S(d) (relating to returns 
                relating to qualified higher education expenses).''
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 is amended by 
        inserting after the item relating to section 6050R the 
        following new item:

                              ``Sec. 6050S. Returns relating to higher 
                                        education expenses.''
    (d) Conforming Amendments.--
            (1) Subsection (a) of section 26 is amended by inserting 
        ``(other than section 24)'' after ``amount of credits''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 23 the following new item:

                              ``Sec. 24. Hope scholarship credit.''
    (e) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 1996 (in taxable years ending 
after such date), for education furnished in academic periods beginning 
after June 30, 1997.
                                 <all>