1.This Act may be cited as the American Opportunity Tax Credit Act of 2009
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2.Refundable credit for higher education expenses
(a)Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by inserting after section 36 the following new section:
36A.Higher education expenses
(a)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 subtitle for the taxable year an amount equal to 100 percent of so much of the higher education expenses paid by the taxpayer during the taxable year (with respect to attendance of the eligible student at an eligible educational institution during any academic period beginning in such taxable year) as does not exceed $4,000.
(b)
(1)Higher education expense limitationThe amount of higher education expenses taken into account under subsection (a) with respect to an individual for an academic period shall not exceed the individual’s cost of attendance (as defined in section 472 of the Higher Education Act of 1965, as in effect on the date of the enactment of this section) for such period at the eligible educational institution with respect to which such higher education expenses were paid.
(2)Lifetime credit limitationThe amount of the credit allowed under subsection (a) for any taxable year with respect to any eligible student shall not exceed the excess of—
(A)$28,000, over
(B)the aggregate credit allowed under subsection (a) with respect to such eligible student for all prior taxable years.
(c)For purposes of this subsection—
(1)The term eligible student means, with respect to any academic period, any individual who 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.
(2)The term higher education expense means any expense of a type which is taken into account in determining the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, as in effect on the date of the enactment of this section) of—
(A)the taxpayer,
(B)the taxpayer’s spouse, or
(C)any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151, at an eligible educational institution with respect to the attendance of such individual at such institution for the academic period for which the credit under this section is being determined.
(3)Eligible educational institutionThe term eligible educational institution means an institution—
(A)which is described in section 481 of the Higher Education Act of 1965, 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.
(d)
(1)Identification requirementNo credit shall be allowed under subsection (a) to a taxpayer with respect to an eligible student unless the taxpayer includes the name and taxpayer identification number of such student on the return of tax for the taxable year.
(2)Adjustment for certain scholarshipsThe amount of higher education 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) and (b)) 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 student’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)Coordination with section 25AThe amount of higher education 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) and (b)) by the amount of such expenses which are taken into account in determining the credit under section 25A.
(4)Treatment of expenses paid by dependentIf 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)higher education 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.
(5)Treatment of certain prepaymentsIf higher education expense is 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.
(6)No credit shall be allowed under this section for any expense for which deduction is allowed under any other provision of this chapter.
(7)No credit for married individuals filing separate returnsIf 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.
(8)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.
(e)Community service requirement
(1)No credit shall be allowed under this section for any taxable year with respect to the higher education expenses of a student unless the student satisfies the community service requirement of paragraph (2) for such year. The community service requirement of paragraph (2) shall be treated as satisfied only if such service is verified under regulations prescribed by the Secretary of Education.
(2)The community service requirement of this paragraph is satisfied for any taxable year only if the student completes at least 100 hours of volunteer service during such year for—
(A)a governmental unit,
(B)a hospital, or
(C)an organization described in section 501(c)(3) and exempt from tax under section 501(a). For purposes of the preceding sentence, service shall not fail to be treated as volunteer service by reason of receiving a stipend for living expenses, but only if the aggregate stipends for the year does not exceed $600.
(3)Exception for death or disabilityParagraph (1) shall not apply if the failure to meet the community service requirement of paragraph (2) is by reason of the death or disability of the student.
(f)Credit paid directly to educational institutionThe Secretary of Education shall prescribe regulations under which—
(1)a taxpayer may certify, before making payment of a higher education expense to an eligible educational institution, that the taxpayer reasonably believes that credit would be allowed under this section for such payment were it made,
(2)the amount of credit, were such payment made, shall be paid to such institution and treated as payment of such expense, and
(3)amounts paid under this subsection in excess of the proper amount of credit are recaptured from the taxpayer.
(g)Election not To have section applyA taxpayer may elect not to have this section apply with respect to the higher education expenses of an individual for any taxable year.
(h)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 expense which was taken into account in determining the amount of such credit. .
(b)
(1)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36A,
after 36,
.
(2)The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 36 the following new item:
Sec. 36A. Higher education expenses. .
(c)The amendments made by this section shall apply to expenses paid after December 31, 2009, for education furnished in academic periods beginning after such date.