[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1632 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1632

 To amend the Internal Revenue Code of 1986 to permanently extend the 
  exclusion for employer-provided educational assistance programs, to 
   restore such exclusion for graduate level courses, and to allow a 
               deduction for interest on education loans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 15, 1997

  Mr. Payne 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 permanently extend the 
  exclusion for employer-provided educational assistance programs, to 
   restore such exclusion for graduate level courses, and to allow a 
               deduction for interest on education loans.

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

SECTION 1. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

    (a) Permanent Extension.--Section 127 of the Internal Revenue Code 
of 1986 (relating to exclusion for educational assistance programs) is 
amended by striking subsection (d) and by redesignating subsection (e) 
as subsection (d).
    (b) Restoration of Exclusion for Graduate Education.--The last 
sentence of paragraph (1) of section 127(c) of such Code is amended by 
striking ``, and such term also does not include any payment for, or 
the provision of any benefits with respect to, any graduate level 
course of a kind normally taken by an individual pursuing a program 
leading to a law, business, medical, or other advanced academic or 
professional degree''.
    (c) Effective Dates.--
            (1) Extension.--The amendments made by subsection (a) shall 
        apply to taxable years beginning after December 31, 1996.
            (2) Graduate education.--The amendment made by subsection 
        (b) shall apply with respect to expenses relating to courses 
        beginning after December 31, 1996.

SEC. 2. DEDUCTION FOR INTEREST ON EDUCATION LOANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 221 as 
section 222 and by inserting after section 220 the following new 
section:

``SEC. 221. INTEREST ON EDUCATION LOANS.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction for the taxable year an amount equal to 
the interest paid by the taxpayer during the taxable year on any 
qualified education loan.
    ``(b) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount allowed as a deduction under 
        subsection (a) shall be reduced (but not below zero) by the 
        amount determined under paragraph (2).
            ``(2) Amount of reduction.--The amount determined under 
        this paragraph equals the amount which bears the same ratio to 
        the deduction (determined without regard to this subsection) 
        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.--For purposes of 
        paragraph (2), the term `modified adjusted gross income' means 
        the adjusted gross income of the taxpayer for the taxable year 
        determined--
                    ``(A) without regard to this section and sections 
                911, 931, and 933, and
                    ``(B) after the application of sections 86, 135, 
                137, 219, and 469.
        For purposes of sections 86, 135, 219, and 469, adjusted gross 
        income shall be determined without regard to the deduction 
        allowed under this section.
            ``(4) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 1997, the $50,000 and $80,000 amounts 
                in paragraph (2)(A)(ii) shall each be increased by an 
                amount equal to--
                            ``(i) such dollar amounts, 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 $5,000, such 
amount shall be rounded to the next lowest multiple of $5,000.
    ``(c) Dependents Not Eligible for Deduction.--No deduction shall be 
allowed by this section to an individual for the taxable year if a 
deduction under section 151 with respect to such individual is allowed 
to another taxpayer for the taxable year beginning in the calendar year 
in which such individual's taxable year begins.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified education loan.--The term `qualified 
        education loan' means any indebtedness incurred to pay 
        qualified higher education expenses--
                    ``(A) which are incurred on behalf of the taxpayer 
                or the taxpayer's spouse,
                    ``(B) which are paid or incurred within a 
                reasonable period of time before or after the 
                indebtedness is incurred, and
                    ``(C) which are attributable to education furnished 
                during a period during which the recipient was at least 
                a half-time student.
        Such term includes indebtedness used to refinance indebtedness 
        which qualifies as a qualified education loan. The term 
        `qualified education loan' shall not include any indebtedness 
        owed to a person who is related (within the meaning of section 
        267(b) or 707(b)(1)) to the taxpayer.
            ``(2) Qualified higher education expenses.--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means the excess of--
                            ``(i) 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,
                        as an eligible student at an institution of 
                        higher education, over
                            ``(ii) the sum of--
                                    ``(I) the amount excluded from 
                                gross income under section 135 by 
                                reason of such tuition and fees, and
                                    ``(II) the amount of the reduction 
                                described in section 135(d)(1).
                    ``(B) Exceptions.--Such term does not include--
                            ``(i) expenses with respect to any course 
                        or other education involving sports, games, or 
                        hobbies, unless such course or other education 
                        is part of the student's degree program, and
                            ``(ii) student activity fees, athletic 
                        fees, insurance expenses, or other expenses 
                        unrelated to a student's academic course of 
                        instruction.
                    ``(C) Eligible student.--The term `eligible 
                student' means, with respect to any academic period, a 
                student who--
                            ``(i) 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
                            ``(ii) is carrying at least \1/2\ the 
                        normal full-time work load for the course of 
                        study the student is pursuing, as reasonably 
                        determined by the institution of higher 
                        education.
            ``(3) 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 programs 
                under title IV of such Act.
        Such term includes an institution conducting an internship or 
        residency program leading to a degree or certificate awarded by 
        an institution of higher education, a hospital, or a health 
        care facility which offers postgraduate training.
            ``(4) Full-time student.--The term `full-time student' 
        means any student who is carrying at least the normal full-time 
        work load for the course of study the student is pursuing, as 
        reasonably determined by the institution of higher education.
            ``(5) Half-time student.--The term `half-time student' 
        means any individual who would be a student as defined in 
        section 151(c)(4) if `half-time' were substituted for `full-
        time' each place it appears in such section.
            ``(6) Dependent.--The term `dependent' has the meaning 
        given such term by section 152.
    ``(e) Special Rules.--
            ``(1) Denial of double benefit.--No deduction shall be 
        allowed under this section for any amount for which a deduction 
        is allowable under any other provision of this chapter.
            ``(2) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        deduction shall be allowed under subsection (a) only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(3) Marital status.--Marital status shall be determined 
        in accordance with section 7703.''
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (16) the following new paragraph:
            ``(17) Interest on education loans.--The deduction allowed 
        by section 221.''
    (c) Reporting Requirement.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of such Code (relating to information concerning 
        transactions with other persons) is amended by inserting after 
        section 6050R the following new section:

``SEC. 6050S. RETURNS RELATING TO EDUCATION LOAN INTEREST RECEIVED IN 
              TRADE OR BUSINESS FROM INDIVIDUALS.

    ``(a) Education Loan Interest of $600 or More.--Any person--
            ``(1) who is engaged in a trade or business, and
            ``(2) who, in the course of such trade or business, 
        receives from any individual interest aggregating $600 or more 
        for any calendar year on 1 or more qualified education loans,
shall make the return described in subsection (b) with respect to each 
individual from whom such interest was received 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 
                from whom the interest described in subsection (a)(2) 
                was received,
                    ``(B) the amount of such interest received for the 
                calendar year, and
                    ``(C) such other information as the Secretary may 
                prescribe.
    ``(c) Application to Governmental Units.--For purposes of 
subsection (a)--
            ``(1) Treated as persons.--The term `person' includes any 
        governmental unit (and any agency or instrumentality thereof).
            ``(2) Special rules.--In the case of a governmental unit or 
        any agency or instrumentality thereof--
                    ``(A) subsection (a) shall be applied without 
                regard to the trade or business requirement contained 
                therein, and
                    ``(B) any return required under subsection (a) 
                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 a written statement showing--
            ``(1) the name and address of the person required to make 
        such return, and
            ``(2) the aggregate amount of interest described in 
        subsection (a)(2) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished.
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) Qualified Education Loan Defined.--For purposes of this 
section, except as provided in regulations prescribed by the Secretary, 
the term `qualified education loan' has the meaning given such term by 
section 221(d)(1).
    ``(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 interest received by any person on behalf 
of another person, only the person first receiving such interest shall 
be required to make the return under subsection (a).''
            (2) Assessable penalties.--Section 6724(d) of such Code 
        (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 education loan interest received in 
                        trade or business from individuals),'', 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 6050R (relating to returns relating 
                to education loan interest received in trade or 
                business from individuals).''
    (d) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following new items:

                              ``Sec. 221. Interest on education loans.
                              ``Sec. 222. Cross reference.''
            (2) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 of such Code is amended by inserting 
        after the item relating to section 6050R the following new 
        item:

                              ``Sec. 6050S. Returns relating to 
                                        education loan interest 
                                        received in trade or business 
                                        from individuals.''
    (e) Effective Date.--The amendments made by this section shall 
apply to any qualified education loan (as defined in section 221(d)(1) 
of the Internal Revenue Code of 1986, as added by this section) 
incurred on, before, or after the date of the enactment of this Act, 
but only with respect to any loan interest payment due after December 
31, 1996.
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