[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 573 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 573

   To amend the Internal Revenue Code of 1986 to allow an income tax 
             deduction for student loan interest payments.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 1997

Mr. Grassley (for himself, Ms. Moseley-Braun, and Mr. Burns) introduced 
the following bill; which was read twice and referred to the Committee 
                               on Finance

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to allow an income tax 
             deduction for student loan interest payments.

    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 ``Loan Interest Forgiveness for 
Education Act''.

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:

``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.--If the modified adjusted gross income of 
        the taxpayer for the taxable year exceeds $65,000 ($85,000 in 
        the case of a joint return), the amount which would (but for 
        this paragraph) be allowable as a deduction under this section 
        shall be reduced (but not below zero) by the amount which bears 
        the same ratio to the amount which would be so allowable as 
        such excess bears to $20,000.
            ``(2) Modified adjusted gross income.--For purposes of 
        paragraph (1), the term `modified adjusted gross income' means 
        adjusted gross income determined--
                    ``(A) without regard to this section and sections 
                135, 911, 931, and 933, and
                    ``(B) after application of sections 86, 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.
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning after 1997, the $65,000 and $85,000 amounts 
        referred to in paragraph (1) shall 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, by substituting `1996' for 
                `1992'.
            ``(4) Rounding.--If any amount as adjusted under paragraph 
        (3) is not a multiple of $50, such amount shall be rounded to 
        the nearest multiple of $50.
    ``(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, 
                the taxpayer's spouse, or any dependent of the taxpayer 
                as of the time the indebtedness was incurred,
                    ``(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.--The term 
        `qualified higher education expenses' means the cost of 
        attendance (as defined in section 472 of the Higher Education 
        Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before 
        the date of the enactment of this Act) of the taxpayer or the 
        taxpayer's spouse at an eligible educational institution, 
        reduced by the sum of--
                    ``(A) the amount excluded from gross income under 
                section 135 by reason of such expenses, and
                    ``(B) the amount of the reduction described in 
                section 135(d)(1).
        For purposes of the preceding sentence, the term `eligible 
        educational institution' has the same meaning given such term 
        by section 135(c)(3), except that such term shall also include 
        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.
            ``(3) 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.
            ``(4) 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.--Section 62(a) of the Internal Revenue Code of 1986 
(defining adjusted gross income) is amended by inserting after 
paragraph (16) the following:
            ``(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 the Internal Revenue Code of 1986 (relating to 
        information concerning transactions with other persons) is 
        amended by inserting after section 6050R the following:

``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) in paragraph (1)(B), by redesignating clauses 
                (x) through (xv) as clauses (xi) through (xvi), 
                respectively, and by inserting after clause (ix) the 
                following new clause:
                            ``(x) section 6050S (relating to returns 
                        relating to education loan interest received in 
                        trade or business from individuals),'', and
                    (B) in paragraph (2), 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 education loan interest received in trade 
                or business from individuals).''.
    (d) Conforming Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by striking the last item and inserting the following:

                              ``Sec. 221. Interest on education loans.
                              ``Sec. 222. Cross reference.''.

    (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.
                                 <all>