College opportunity tax credit

(a)

In general

(1)

Allowance of credit

Section 25A(a) of the Internal Revenue Code of 1986 (relating to allowance of credit) is amended— (A)in paragraph (1), by striking the Hope Scholarship Credit and inserting the eligible student credit amount determined under subsection (b), and (B)in paragraph (2), by striking the Lifetime Learning Credit and inserting the part-time, graduate, and other student credit amount determined under subsection (c). (2)

Name of credit

The heading for section 25A of such Code is amended to read as follows:

25A.

College opportunity credit

(3)

Clerical amendment

The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 25A and inserting the following:

Sec. 25A. College opportunity credit.

(b)

Eligible students

(1)

In general

Paragraph (1) of section 25A(b) of the Internal Revenue Code of 1986 is amended— (A)by striking the Hope Scholarship Credit and inserting the eligible student credit amount determined under this subsection, and (B)by striking

Per student credit

in the heading and inserting

In general

. (2)

Amount of credit

Paragraph (4) of section 25A(b) of such Code (relating to applicable limit) is amended by striking 2 and inserting 3. (3)

Credit refundable

(A)

In general

Section 25A of such Code is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

(i)

Portion of Credit Refundable

(1)

In general

The aggregate credits allowed under subpart C shall be increased by the amount of the credit which would be allowed under this section— (A)by reason of subsection (b), and (B)without regard to this subsection and the limitation under section 26(a) or subsection (j), as the case may be. (2)

Treatment of credit

The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a) or subsection (j), as the case may be.

(B)

Technical amendment

Section 1324(b) of title 31, United States Code, is amended by inserting , or enacted by the College Opportunity Tax Credit Act of 2006 before the period at the end. (4)

Limitations

(A)

Credit allowed for 4 years

Subparagraph (A) of section 25A(b)(2) of such Code is amended— (i)by striking 2 in the text and in the heading and inserting 4, and (ii)by striking the Hope Scholarship Credit and inserting the credit allowable. (B)

Elimination of limitation on first 2 years of postsecondary education

Section 25A(b)(2) of such Code is amended by striking subparagraph (C) and by redesignating subparagraph (D) as subparagraph (C). (5)

Conforming amendments

(A)The heading of subsection (b) of section 25A of such Code is amended to read as follows:

(b)

Eligible students

(B)Section 25A(b)(2) of such Code is amended— (i)in subparagraph (B), by striking the Hope Scholarship Credit and inserting the credit allowable, and (ii)in subparagraph (C), as redesignated by paragraph (4)(B), by striking the Hope Scholarship Credit and inserting the credit allowable. (c)

Part-time, graduate, and other students

(1)

In general

Subsection (c) of section 25A of the Internal Revenue Code of 1986 is amended to read as follows:

(c)

Part-time, graduate, and other students

(1)

In general

In the case of any student for whom an election is in effect under this section for any taxable year, the part-time, graduate, and other student credit amount determined under this subsection for any taxable year is an amount equal to the sum of— (A)40 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the student during any academic period beginning in such taxable year) as does not exceed $1,000, plus (B)20 percent of such expenses so paid as exceeds $1,000 but does not exceed the applicable limit. (2)

Applicable limit

For purposes of paragraph (1)(B), the applicable limit for any taxable year is an amount equal to 3 times the dollar amount in effect under paragraph (1)(A) for such taxable year. (3)

Special rules for determining expenses

(A)

Coordination with credit for eligible students

The qualified tuition and related expenses with respect to a student who is an eligible student for whom a credit is allowed under subsection (a)(1) for the taxable year shall not be taken into account under this subsection. (B)

Expenses for job skills courses allowed

For purposes of paragraph (1), qualified tuition and related expenses shall include expenses described in subsection (f)(1) with respect to any course of instruction at an eligible educational institution to acquire or improve job skills of the student.

(2)

Inflation adjustment

(A)

In general

Subsection (h) of section 25A of such Code (relating to inflation adjustments) is amended by adding at the end the following new paragraph:

(3)

Dollar limitation on amount of credit under subsection (a)(2)

(A)

In general

In the case of a taxable year beginning after 2007, each of the $1,000 amounts under subsection (c)(1) shall be increased by an amount equal to— (i)such dollar amount, 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 2006 for calendar year 1992 in subparagraph (B) thereof. (B)

Rounding

If any amount as adjusted under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100.

(B)

Conforming amendment

The heading for paragraph (1) of section 25A(h) of such code is amended by inserting

under subsection (a)(1)

after

credit

. (d)

Credit allowed against alternative minimum tax

(1)

In general

Section 25A of the Internal Revenue Code of 1986, as amended by subsection (b)(3), is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (h) the following new subsection:

(j)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for the taxable year shall not exceed the excess of— (1)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (2)the sum of the credits allowed under this subpart (other than this section and sections 23, 24, and 25B) and section 27 for the taxable year.

(2)

Conforming amendment

Section 25(a)(1) of such Code is amended by inserting 25A, after 24,. (e)

Effective date

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