I 111th CONGRESS 1st Session H. R. 386 IN THE HOUSE OF REPRESENTATIVES January 9, 2009 Mr. Doggett 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 and improve the current education tax incentives.

1.

Short title

This Act may be cited as the College Learning Access Simplicity and Savings Act of 2009 or the CLASS Act of 2009 .

2.

Creation of College Affordability Credit and simplification of education tax benefits

(a)

College Affordability Credit

(1)Paragraph (1) of section 25A(a) of the Internal Revenue Code of 1986 is amended by striking the Hope Scholarship Credit and inserting the College Affordability Credit. (2)Subsection (b) of section 25A of such Code is amended to read as follows: (b)

College Affordability Credit

(1)

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— (A)100 percent of so much of the qualified tuition and related 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 $1,200, and (B)50 percent of so much of such expenses as exceeds $1,200, but does not exceed $4,800. (2)

Lifetime credit limitation

The amount of the credit allowed under paragraph (1) for any taxable year with respect to any eligible student shall not exceed the excess of— (A)$12,000, over (B)the aggregate credit allowed under subsection (a) with respect to such eligible student for all prior taxable years. (3)

Credit allowed only for first 2 years of graduate education

No credit shall be allowed under subsection (a)(1) 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) 2 years of graduate education at one or more eligible educational institutions. (4)

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

The College Affordability 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. (5)

Eligible student

The term eligible student means, with respect to any academic period, any individual 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. . (b)

Qualified tuition and related expenses To include required course materials

Subparagraph (A) of section 25A(f)(1) of such Code is amended by striking tuition and fees and inserting tuition, fees, and course materials. (c)

Increased income limitation

Subsection (d) of section 25A of such Code is amended to read as follows: (d)

Limitation based on modified adjusted gross income

(1)

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 paragraph (2). (2)

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— (A)the excess of— (i)the taxpayer’s modified adjusted gross income for such taxable year, over (ii)the applicable amount under paragraph (4), bears to (B)$25,000 ($50,000 in the case of a joint return). (3)

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. (4)

Applicable amount

The applicable amount under this subparagraph is— (A)in the case of a joint return, 200 percent of the dollar amount in effect under subparagraph (B) for the taxable year, and (B)in any other case, $50,000. . (d)

Modified inflation adjustment

Paragraph (2) of section 25A(h) of such Code is amended to read as follows: (2)

Income limits

(A)

In general

In the case of a taxable year beginning after 2009, the $50,000 amount in subsection (d)(4)(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 2008 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. . (e)

Portion of credit refundable

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 to a taxpayer under subpart C shall be increased by an amount equal to 50 percent of the portion of the amount of the credit which would have been allowed to the taxpayer under this section by reason of subsection (b) (without regard to this subsection and the limitation under section 26(a)(2)). 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)(2)). (2)

Reduction of credit

In the case of a taxable year to which 26(a)(2) does not apply, the credit determined under paragraph (1) for the taxable year shall be reduced by the amount of tax imposed by section 55 (relating to alternative minimum tax) with respect to such taxpayer for such taxable year. . (f)

Repeal of deduction for qualified tuition and related expenses

(1)

In general

Part VII of subchapter B of chapter 1 of such Code (relating to additional itemized deductions for individuals) is amended by striking section 222. (2)

Clerical amendment

The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 222. (g)

Conforming amendments

(1)The heading for Section 25A of such Code is amended by striking Hope and inserting College Affordability. (2)Section 25A(c)(2)(A) of such Code is amended— (A)by striking Hope Scholarship Credit and inserting College Affordability Credit, and (B)by striking Hope in the heading thereof and inserting College Affordability. (3)Section 62(a) of such Code is amended by striking paragraph (18). (4)Subparagraph (A) of section 86(b)(2) of such Code is amended by striking , 222. (5)Subparagraph (A) of section 135(c)(4) of such Code is amended by striking , 222. (6)Subparagraph (A) of section 137(b)(3) of such Code is amended by striking , 222. (7)Subparagraph (A) of section 199(d)(2) of such Code is amended by striking , 222. (8)Clause (ii) of section 219(g)(3)(A) of such Code is amended by striking , 222. (9)Clause (i) of section 221(b)(2)(C) of such Code is amended by striking , 222. (10)Clause (iii) of section 469(i)(3)(F) of such Code is amended by striking 221, and 222 and inserting and 221. (11)Paragraph (3) of section 221(d) of such Code is amended by striking 25A(b)(3) and inserting 25A(b)(5). (12)Clause (i) of section 529(e)(3)(B) of such Code is amended by striking section 25A(b)(3) and inserting section 221(d)(3). (13)The heading for clause (v) of section 529(c)(3)(B) of such Code is amended by striking Hope and inserting College Affordability. (14)The heading for Subparagraph (C) of section 530(d)(2) of such Code is amended by striking Hope and inserting College Affordability. (15)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 as in effect on the day before the date of the enactment of this sentence.. (16)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting , 25A, after section 35. (h)

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 new item: Sec. 25A. College Affordability and Lifetime Learning credits. . (i)

Effective date

The amendments made by this section shall apply to expenses paid after December 31, 2008, for education furnished in academic periods beginning after such date.