[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1766 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 1766

      To amend the Internal Revenue Code of 1986 to simplify the 
 determination and deduction of interest on qualified education loans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 21, 2005

 Mr. English of Pennsylvania 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 simplify the 
 determination and deduction of interest on qualified education loans.

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

SECTION 1. TREATMENT OF ORIGINATION FEES AND CAPITALIZED INTEREST 
              CHARGES FOR QUALIFIED EDUCATION LOANS.

    (a) In General.--Subsection (e) of section 221 of the Internal 
Revenue Code of 1986 (relating to special rules) is amended by adding 
at the end the following:
            ``(4) Loan origination fees.--For purposes of this 
        section--
                    ``(A) Treatment as interest.--Loan origination 
                fees, other than fees for services or property--
                            ``(i) shall be treated as interest, and
                            ``(ii) shall accrue at the time the loan 
                        origination fees are deducted from the loan 
                        proceeds or otherwise are charged to or paid by 
                        the borrower.
                    ``(B) Fees under certain federal programs.--Loan 
                origination fees required under the Federal Family 
                Education Loan Program and Federal Direct Loan Program 
                under title IV of the Higher Education Act of 1965 
                shall be treated as interest for purposes of 
                subparagraph (A).
            ``(5) Accrual of interest.--For purposes of this section, 
        interest on a qualified education loan (other than loan 
        origination fees) shall accrue in accordance with the stated 
        terms of the loan.
            ``(6) Allocation of payments.--For purposes of this 
        section, a payment (other than payments of collection costs, 
        late fees, and penalties, if any) is treated--
                    ``(A) first as a payment of interest to the extent 
                of the interest that has accrued and remains unpaid as 
                of the date the payment is due,
                    ``(B) second as a payment of any loan origination 
                fees or capitalized interest, until such amounts have 
                been reduced to zero, and
                    ``(C) third as a payment of principal.''.
    (b) Conforming Amendment.--Section 6050S(e) of such Code is amended 
by adding at the end the following new sentence: ``The term `interest' 
has the same meaning as when used in section 221.''.
    (c) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply to taxable years ending on or after December 31, 2005.
            (2) Special rule for interest reporting.--The reporting 
        under section 6050S of the Internal Revenue Code of 1986 with 
        respect to capitalized interest and origination fees in 
        accordance with the amendments made by this section shall not 
        be required for loans made prior to September 1, 2004.
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