[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 553 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 553

To amend the Internal Revenue Code of 1986 to exclude scholarships and 
   fellowships from income, to restore the deduction for interest on 
    educational loans, and to permit penalty-free withdrawals from 
     individual retirement plans to pay higher education expenses.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 6, 1997

Mr. Price  of North Carolina (for himself and Mr. Etheridge) 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 exclude scholarships and 
   fellowships from income, to restore the deduction for interest on 
    educational loans, and to permit penalty-free withdrawals from 
     individual retirement plans to pay higher education expenses.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Education Affordability Act of 
1997''.

SEC. 2. RESTORATION OF PRIOR LAW EXCLUSION FOR SCHOLARSHIPS AND 
              FELLOWSHIPS.

    (a) In General.--Each provision of law amended by section 123 of 
the Tax Reform Act of 1986 is amended to read as if the amendments made 
by such section had not been enacted.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 3. RESTORATION OF DEDUCTION FOR INTEREST ON EDUCATIONAL LOANS.

    (a) In General.--Paragraph (2) of section 163(h) of the Internal 
Revenue Code of 1986 (defining personal interest) is amended by 
striking ``and'' at the end of subparagraph (D), by redesignating 
subparagraph (E) as subparagraph (F), and by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E) any interest on a qualified educational loan, 
                and''.
    (b) Qualified Educational Loan Defined.--Subsection (h) of section 
163 of such Code is amended by adding at the end the following new 
paragraph:
            ``(6) Qualified educational loan.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified educational loan' means any 
                indebtedness incurred to pay qualified educational 
                expenses which are paid or incurred within a reasonable 
                period of time before or after the indebtedness is 
                incurred.
                    ``(B) Qualified educational expenses.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term `qualified 
                        educational expenses' means qualified tuition 
                        and related expenses of the taxpayer, his 
                        spouse, or a dependent for attendance at an 
                        educational institution described in section 
                        170(b)(1)(A)(ii).
                            ``(ii) Qualified tuition and related 
                        expenses.--The term `qualified tuition and 
                        related expenses' means--
                                    ``(I) tuition and fees required for 
                                enrollment or attendance at an 
                                educational institution described in 
                                section 170(b)(1)(A)(ii),
                                    ``(II) fees, books, supplies, and 
                                equipment required for courses of 
                                instruction at such an institution, and
                                    ``(III) reasonable living expenses 
                                while away from home.
                    ``(C) Dependent.--For purposes of this paragraph, 
                the term `dependent' has the meaning given such term by 
                section 152.
                    ``(D) Coordination with paragraph (3)(C)(ii).--Any 
                qualified educational loan shall not be taken into 
                account for purposes of applying the limitation of 
                paragraph (3)(C)(ii).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 4. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS MAY BE USED 
              WITHOUT PENALTY TO PAY HIGHER EDUCATION EXPENSES.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to exceptions to 10-percent additional 
tax on early distributions from qualified retirement plans) is amended 
by adding at the end the following new subparagraph:
                    ``(E) Distributions from individual retirement 
                plans for educational expenses.--Distributions to an 
                individual from an individual retirement plan to the 
                extent such distributions do not exceed the qualified 
                educational expenses (as defined in section 163(h)(6)) 
                of the taxpayer for the taxable year. The amount of 
                such expenses for any taxable year shall be reduced by 
                any amount excludable from gross income under section 
                135.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions received after the date of the enactment of this Act.
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