[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2763 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 2763

    To amend the Internal Revenue Code of 1986 to provide a higher 
    education opportunity credit in place of existing education tax 
                              incentives.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 13, 2008

  Mr. Schumer 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 provide a higher 
    education opportunity credit in place of existing education tax 
                              incentives.

    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 ``Higher Education Opportunity Act of 
2008''.

SEC. 2. HIGHER EDUCATION OPPORTUNITY CREDIT.

    (a) In General.--Section 25A of the Internal Revenue Code of 1986 
(relating to Hope and Lifetime Learning credits) is amended to read as 
follows:

``SEC. 25A. HIGHER EDUCATION OPPORTUNITY CREDIT.

    ``(a) Allowance of Credit.--In the case of any eligible student for 
whom an election is in effect under this section for any taxable year, 
there shall be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to the sum of--
            ``(1) 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 $1,000,
            ``(2) 50 percent of so much of such expenses as exceeds 
        $1,000 but does not exceed $3,000, and
            ``(3) 20 percent of so much of such expenses as exceeds 
        $3,000 but does not exceed $5,500.
    ``(b) Limitations.--
            ``(1) Limitation based on modified adjusted gross income.--
                    ``(A) In general.--The amount which would (but for 
                this paragraph) be taken into account under subsection 
                (a) for the taxable year shall be reduced (but not 
                below zero) by the amount determined under subparagraph 
                (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph is the amount which bears the 
                same ratio to the amount which would be so taken into 
                account as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $70,000 ($140,000 in the 
                                case of a joint return), bears to
                            ``(ii) $10,000 ($20,000 in the case of a 
                        joint return).
                    ``(C) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means the adjusted 
                gross income of the taxpayer for the taxable year 
                increased by any amount excluded from gross income 
                under section 911, 931, or 933.
            ``(2) 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 any taxable year shall 
        not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                subpart (other than this section and sections 23, 24, 
                and 25B) and section 27 for the taxable year.
            ``(3) Credit allowed only for 3 eligible students.--The 
        credit under subsection (a) to any taxpayer shall not be 
        allowed with respect to more than 3 eligible students for any 
        taxable year.
            ``(4) Other limitations.--
                    ``(A) Credit allowed only for 4 taxable years.--An 
                election to have this section apply with respect to any 
                eligible student 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 
                credit under subsection (a) 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) Denial of credit if student convicted of a 
                felony drug offense.--The credit under subsection (a) 
                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.
    ``(c) Definitions.--For purposes of this subsection--
            ``(1) Eligible student.--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 the Taxpayer Relief Act of 1997, and
                    ``(B) is carrying at least \1/2\ the normal full-
                time work load for the course of study the student is 
                pursuing.
            ``(2) Qualified tuition and related expenses.--
                    ``(A) In general.--The term `qualified tuition and 
                related expenses' means tuition and fees required for 
                the enrollment or attendance of an eligible student who 
                is--
                            ``(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,
                at an eligible educational institution for courses of 
                instruction of such individual at such institution.
                    ``(B) Inclusion of certain expenses for books.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), tuition and fees shall 
                        include 50 percent of amounts paid or incurred 
                        for books.
                            ``(ii) Limitation.--The amount of tuition 
                        and fees taken into account under subparagraph 
                        (A) by reason of clause (i) for any taxable 
                        year shall not exceed $250 with respect to any 
                        eligible student.
                    ``(C) Exception for education involving sports, 
                etc.--Such term does not include expenses with respect 
                to any course or other education involving sports, 
                games, or hobbies, unless such course or other 
                education is part of the individual's degree program.
                    ``(D) Exception for nonacademic fees.--Such term 
                does not include student activity fees, athletic fees, 
                insurance expenses, or other expenses unrelated to an 
                individual's academic course of instruction.
            ``(3) Eligible educational institution.--The term `eligible 
        educational institution' means an institution--
                    ``(A) which is described in section 481 of the 
                Higher Education Act of 1965 (20 U.S.C. 1088), as in 
                effect on the date of the enactment of the Taxpayer 
                Relief Act of 1997, and
                    ``(B) which is eligible to participate in a program 
                under title IV of the Higher Education Act of 1965 (as 
                so in effect).
    ``(d) Election Not To Have Section Apply.--A taxpayer may elect not 
to have this section apply with respect to the qualified tuition and 
related expenses of an individual for any taxable year.
    ``(e) Special Rules.--
            ``(1) Identification requirement.--No credit shall be 
        allowed under subsection (a) to a taxpayer with respect to the 
        qualified tuition and related expenses of an individual unless 
        the taxpayer includes the name and taxpayer identification 
        number of such individual on the return of tax for the taxable 
        year.
            ``(2) Adjustment for certain scholarships, etc.--The amount 
        of qualified tuition and related expenses otherwise taken into 
        account under subsection (a) with respect to an individual for 
        an academic period shall be reduced (before the application of 
        subsections (a), (b), and (c)) by the sum of any amounts paid 
        for the benefit of such individual which are allocable to such 
        period as--
                    ``(A) a qualified scholarship which is excludable 
                from gross income under section 117,
                    ``(B) an educational assistance allowance under 
                chapter 30, 31, 32, 34, or 35 of title 38, United 
                States Code, or under chapter 1606 of title 10, United 
                States Code, and
                    ``(C) a payment (other than a gift, bequest, 
                devise, or inheritance within the meaning of section 
                102(a)) for such individual's educational expenses, or 
                attributable to such individual's enrollment at an 
                eligible educational institution, which is excludable 
                from gross income under any law of the United States.
            ``(3) Treatment of expenses paid by dependent.--If a 
        deduction under section 151 with respect to an individual is 
        allowed to another taxpayer for a taxable year beginning in the 
        calendar year in which such individual's taxable year begins--
                    ``(A) no credit shall be allowed under subsection 
                (a) to such individual for such individual's taxable 
                year, and
                    ``(B) qualified tuition and related expenses paid 
                by such individual during such individual's taxable 
                year shall be treated for purposes of this section as 
                paid by such other taxpayer.
            ``(4) Treatment of certain prepayments.--If qualified 
        tuition and related expenses are paid by the taxpayer during a 
        taxable year for an academic period which begins during the 
        first 3 months following such taxable year, such academic 
        period shall be treated for purposes of this section as 
        beginning during such taxable year.
            ``(5) Denial of double benefit.--No credit shall be allowed 
        under this section for any expense for which a deduction is 
        allowed under any other provision of this chapter.
            ``(6) No credit for married individuals filing separate 
        returns.--If the taxpayer is a married individual (within the 
        meaning of section 7703), this section shall apply only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(7) Nonresident aliens.--If the taxpayer is a nonresident 
        alien individual for any portion of the taxable year, this 
        section shall apply only if such individual is treated as a 
        resident alien of the United States for purposes of this 
        chapter by reason of an election under subsection (g) or (h) of 
        section 6013.
    ``(f) Inflation Adjustments.--
            ``(1) Dollar limitation on amount of credit.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2008, each of the dollar amounts under 
                subsection (a) 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 2007' 
                        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.
            ``(2) Income limits.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2008, the $70,000 and $140,000 amounts 
                in subsection (b)(1)(B) shall each 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 2007' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $1,000, such 
                amount shall be rounded to the next lowest multiple of 
                $1,000.
    ``(g) Portion of Credit Refundable.--
            ``(1) In general.--In the case of an eligible active duty 
        student, the aggregate credits allowed under subpart C shall be 
        increased by an amount equal to the applicable percentage of 
        the eligible active duty student amount.
            ``(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 (b)(2), as the case may be.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Eligible active duty student.--The term 
                `eligible active duty student' means an eligible 
                student who has, at any time after September 11, 2001, 
                served an aggregate of at least 90 days on active duty 
                in the Armed Forces under one or more calls or orders 
                to active duty for a period of more than 30 days.
                    ``(B) Applicable percentage.--The term `applicable 
                percentage' means--
                            ``(i) in the case of an eligible active 
                        duty student who has served an aggregate of 
                        less than 1 year on active duty, 50 percent, 
                        and
                            ``(ii) in the case of any other eligible 
                        active duty student, 100 percent.
                    ``(C) Eligible active duty student amount.--The 
                term `eligible active duty student amount' means the 
                amount of the credit which would be allowed to the 
                taxpayer under subsection (a) with respect to an 
                eligible active duty student determined--
                            ``(i) without regard to this subsection and 
                        the limitation under section 26(a)(2) or 
                        subsection (b)(2), as the case may be,
                            ``(ii) without regard to subsection (b)(1), 
                        and
                            ``(iii) by reducing (but not below zero) 
                        such amount (determined without regard to this 
                        clause) by an amount equal to--
                                    ``(I) the amount of the reduction 
                                determined under subsection (b)(1)(B), 
                                divided by
                                    ``(II) the number of eligible 
                                students with respect to which the 
                                taxpayer claimed a credit under this 
                                section.
                    ``(D) Other terms.--The terms `active duty' and 
                `active duty for a period of more than 30 days' have 
                the meanings given such terms under section 101(d) of 
                title 10, United States Code.
    ``(h) Regulations.--The Secretary may prescribe such regulations as 
may be necessary or appropriate to carry out this section, including 
regulations providing for a recapture of the credit allowed under this 
section in cases where there is a refund in a subsequent taxable year 
of any amount which was taken into account in determining the amount of 
such credit.''.
    (b) Repeal of Deduction for Qualified Tuition and Related 
Expenses.--
            (1) In general.--Part VII of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by striking 
        section 222 (relating to qualified tuition and related 
        expenses).
            (2) Clerical amendment.--The table of section for part VII 
        of subchapter B of chapter 1 of such Code is amended by 
        striking the item relating to section 222.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 26(a) of the Internal Revenue 
        Code of 1986 is amended by inserting ``25A,'' after ``24,''.
            (2) Section 62(a) of such Code is amended by striking 
        paragraph (18).
            (3) Subparagraph (B) of section 72(t)(7) of such Code is 
        amended by striking ``section 25A(g)(2)'' and inserting 
        ``section 25A(e)(2)''.
            (4) Section 221(d) of such Code is amended--
                    (A) by striking ``section 25A(g)(2)'' in paragraph 
                (2)(B) and inserting ``section 25A(e)(2)'',
                    (B) by striking ``section 25A(f)(2)'' in paragraph 
                (2)(B) and inserting ``section 25A(c)(3)'', and
                    (C) by striking ``section 25A(b)(3)'' in paragraph 
                (3) and inserting ``section 25A(c)(1)''.
            (5) 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 
                25(e)(2)'', and
                    (B) by striking ``section 25A(b)(3)'' in clause (i) 
                of subsection (e)(3)(B) and inserting ``section 
                25A(c)(1)''.
            (6) 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 
                25A(e)(2)'', and
                    (B) by striking ``section 25A(g)(2)'' in clause 
                (iii) of subsection (d)(4)(B) and inserting ``section 
                25A(e)(2)''.
            (7) Section 1400O of such Code is amended by adding at the 
        end the following flush sentence:
``For purposes of this section, any reference to section 25A shall be 
treated as a reference to such section before the date of the enactment 
of this sentence.''.
            (8) Subsection (e) of section 6050S of such Code is amended 
        by striking ``(without regard to subsection (g)(2) thereof)'' 
        and inserting ``(without regard to subsection (e)(2) 
        thereof)''.
            (9) Subparagraph (J) of section 6213(g)(2) of such Code is 
        amended by striking ``section 25A(g)(1)'' and inserting 
        ``section 25A(e)(1)''.
            (10) 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. Higher education opportunity credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2007 (in taxable years ending 
after such date), for education furnished in academic periods beginning 
after such date.
                                 <all>