109 HR 5407 IH: To amend the Internal Revenue Code of 1986 to expand U.S. House of Representatives 2006-05-17 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 2d Session H. R. 5407 IN THE HOUSE OF REPRESENTATIVES May 17, 2006 Mrs. Lowey 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 expand deductions allowed for education-related expenses and to allow an earned tuition credit against income tax for qualified tuition and related expenses.

1.

Short title

This Act may be cited as the Deductibility and Incentives to Promote Learning Opportunities and Maximize Assistance (DIPLOMA) Act of 2006.

2.

Deduction for higher education expenses

(a)

Elimination of dollar limitation for qualified tuition and related expenses deduction

Subsection (b) of section 222 of the Internal Revenue Code of 1986 (relating to qualified tuition and related expenses) is amended to read as follows: (b)

Limitation based on adjusted gross income

(1)

In general

In the case of a taxpayer whose adjusted gross income for a taxable year exceeds $80,000 ($160,000 in the case of a joint return), the amount of the deduction allowed under subsection (a) for the taxable year shall be zero. (2)

Adjusted gross income

For purposes of this subsection, adjusted gross income shall be determined— (A)without regard to this section and sections 199, 911, 931, and 933, and (B)after application of sections 86, 135, 137, 219, 221, and 469. . (b)

Termination

Subsection (e) of such section of such Code is amended by striking December 31, 2005 and inserting December 31, 2010.

3.

Interest and principal on education loans

(a)

Expansion of deduction for interest on education loans to include principal payments

Section 221 of the Internal Revenue Code of 1986 (relating to interest on education loans) is amended— (1)in subsection (a), by striking interest paid and inserting interest and principal paid, (2)by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g), respectively, (3)by inserting after subsection (c) the following new subsection: (d)

Limit on period deduction allowed

With respect to principal paid on any qualified education loan after the first 60 months (whether or not consecutive) in which principal payments are required, a deduction shall not be allowed under this section. For purposes of this paragraph, any loan and all refinancings of such loan shall be treated as 1 loan. Such 60 months shall be determined in the manner prescribed by the Secretary in the case of multiple loans which are refinanced by, or serviced as, a single loan and in the case of loans incurred before the date of the enactment of this section. , and (4)in the heading, by striking Interest and inserting Interest and principal. (b)

Clerical amendments

The item relating to section 221 in the table of sections for part VII of subchapter B of chapter 1 of such Code is amended to read as follows: Sec. 221. Interest and principal on education loans. .

4.

Earned tuition credit

(a)

In general

Subsection (b) of section 25A of the Internal Revenue Code of 1986 (relating to Hope and Lifetime Learning credits) is amended to read as follows: (b)

Earned tuition credit

(1)

Per student credit

In the case of any eligible student for whom an election is in effect under this section for any taxable year, the earned tuition credit is an amount equal to the sum of— (A)100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $1,500, plus (B)50 percent of such expenses so paid as exceeds $1,500 but does not exceed $4,000. (2)

Limitations applicable to earned tuition credit

(A)

Credit allowed only for 4 taxable years

An election to have this section apply with respect to any eligible student for purposes of the earned tuition credit under subsection (a)(1) may not be made for any taxable year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 4 prior taxable years. (B)

Credit allowed for year only if individual is at least 1/2 time student for portion of year

The earned tuition credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an individual unless such individual is an eligible student for at least one academic period which begins during such year. (C)

Credit allowed only for first 4 years of postsecondary education

The earned tuition credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 4 years of postsecondary education at an eligible educational institution. (D)

Denial of credit if student convicted of a felony drug offense

The earned tuition credit under subsection (a)(1) shall not be allowed for qualified tuition and related expenses for the enrollment or attendance of a student for any academic period if such student has been convicted of a Federal or State felony offense consisting of the possession or distribution of a controlled substance before the end of the taxable year with or within which such period ends. (3)

Eligible student

For purposes of this subsection, 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 ½ the normal full-time work load for the course of study the student is pursuing. . (b)

Earned tuition credit not reduced by Federal Pell Grants and Supplemental Educational Opportunity Grants

Subsection (g) of section 25A of such Code (relating to special rules) is amended by adding at the end the following new paragraph: (8)

Pell and SEOG grants

For purposes of the earned tuition credit, paragraph (2) shall not apply to amounts paid for an individual as a Federal Pell Grant or a Federal supplemental educational opportunity grant under subparts 1 and 3, respectively, of part A of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070a and 1070b et seq., respectively). . (c)

Definition of qualified tuition and related expenses

Paragraph (1) of section 25A(f) of such Code (relating to definitions) is amended to read as follows: (1)

Qualified tuition and related expenses

(A)

In general

The term qualified tuition and related expenses means the qualified higher education expenses 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. (B)

Qualified higher education expenses

The term qualified higher education expenses has the meaning given to such term by section 529(e)(3). . (d)

Conforming amendments

Section 25A of such Code is amended— (1)in the heading, by striking Hope and inserting Earned tuition, (2)in subsection (a)(1), by striking Hope Scholarship Credit and inserting earned tuition credit, (3)in subsection (c)(2)(A)— (A)in the heading, by striking Hope Scholarship and inserting earned tuition credit, (B)in the text, by striking Hope Scholarship Credit and inserting earned tuition credit, and (4)in subsection (h)(1)(A)— (A)by striking 2001 and inserting 2006, (B)by striking the $1,000 amounts and inserting the dollar amounts, and (C)in clause (ii), by striking substituting calendar year 2000 and inserting substituting calendar year 2005.

5.

Earned tuition and Lifetime Learning credits To be refundable

(a)

Credit to be refundable

Section 25A of the Internal Revenue Code of 1986, as amended by this Act, is hereby moved to subpart C of part IV of subchapter A of chapter 1 of such Code (relating to refundable credits) and inserted after section 35. (b)

Technical amendments

(1)Section 36 of such Code is redesignated as section 37. (2)Section 25A of such Code (as moved by subsection (a)) is redesignated as section 36. (3)Paragraph (1) of section 36(a) of such Code (as redesignated by paragraph (2)) is amended by striking this chapter and inserting this subtitle. (4)Subparagraph (B) of section 72(t)(7) of such Code is amended by striking section 25A(g)(2) and inserting section 36(g)(2). (5)Subparagraph (A) of section 135(d)(2) of such Code is amended by striking section 25A and inserting section 36. (6)Section 221(d) of such Code is amended— (A)by striking section 25A(g)(2) in paragraph (2)(B) and inserting section 36(g)(2), (B)by striking section 25A(f)(2) in the matter following paragraph (2)(B) and inserting section 36(f)(2), and (C)by striking section 25A(b)(3) in paragraph (3) and inserting section 36(b)(3). (7)Section 222 of such Code is amended— (A)by striking section 25A in subparagraph (A) of subsection (c)(2) and inserting section 36, (B)by striking section 25A(f) in subsection (d)(1) and inserting section 36(f), and (C)by striking section 25A(g)(2) in subsection (d)(1) and inserting section 36(g)(2). (8)Section 529 of such Code is amended— (A)by striking section 25A(g)(2) in subclause (I) of subsection (c)(3)(B)(v) and inserting section 36(g)(2), (B)by striking section 25A in subclause (II) of subsection (c)(3)(B)(v) and inserting section 36, and (C)by striking section 25A(b)(3) in clause (i) of subsection (e)(3)(B) and inserting section 36(b)(3). (9)Section 530 of such Code is amended— (A)by striking section 25A(g)(2) in subclause (I) of subsection (d)(2)(C)(i) and inserting section 36(g)(2), (B)by striking section 25A in subclause (II) of subsection (d)(2)(C)(i) and inserting section 36, and (C)by striking section 25A(g)(2) in clause (iii) of subsection (d)(4)(B) and inserting section 36(g)(2). (10)Subsection (e) of section 6050S of such Code is amended by striking section 25A and inserting section 36. (11)Subparagraph (J) of section 6213(g)(2) of such Code is amended by striking section 25A(g)(1) and inserting section 36(g)(1). (12)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period or from section 36 of such Code. (13)Section 1400O of such Code is amended— (A)by striking paragraph (1) and redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively, (B)by striking section 25A(f)(2) and inserting section 36(f)(2), (C)by striking section 25A(b)(1) in paragraph (1) (as redesignated by subparagraph (A)) and inserting section 36(b)(1), and (D)by striking section 25A(c)(1) in paragraph (2) (as redesignated by subparagraph (A)) and inserting section 36(c)(1). (14)The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 36 and inserting the following: Sec. 36. Earned tuition and Lifetime Learning credits. . (15)The table of sections for subpart A of such part IV is amended by striking the item relating to section 25A.

6.

Effective date

The amendments made by this Act shall apply to taxable years beginning after December 31, 2006.