1.This Act may be cited as the
Higher Education Affordability Act of
2010
.
2.Consolidation of
education tax incentives into higher education tax credit
(a)Section 25A of the Internal Revenue Code of 1986
(relating to Hope and Lifetime Learning credits) is amended to read as
follows:
25A.Higher
education tax credit
(a)In the case of an individual, there shall be allowed as a
credit against the tax imposed by this chapter for the taxable year an amount
equal so much of the higher education expenses paid by the taxpayer during the
taxable year (for education furnished during any academic period beginning in
such taxable year with respect to each student for whom an election is in
effect under this section for any taxable year) as does not exceed
$3,000.
(b)
(1)Lifetime credit
limitationThe amount of the credit allowed under subsection (a)
for any taxable year with respect to any student shall not exceed the excess
of—
(A)$15,000,
over
(B)the aggregate
credit allowed under subsection (a) with respect to such individual for all
prior taxable years.
(2)Credit
limitation based on modified adjusted gross income
(A)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 $500) by the amount determined under subparagraph (B).
(B)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)the applicable
amount under subparagraph (D), bears to
(ii)$24,000 ($48,000
in the case of a joint return).
(C)Modified
adjusted gross incomeThe 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.
(D)The applicable amount under this subparagraph is—
(i)in
the case of a joint return, 200 percent of the dollar amount in effect under
clause (ii) for the taxable year, and
(ii)in any other
case, $80,000.
(3)Limitation based
on amount of taxIn 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—
(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 section 23)
and section 27 for the taxable year.
(c)For
purposes of this subsection—
(1)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 student who is—
(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 student
at such institution for the academic period for which the credit under this
section is being determined.(2)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 such Act.
(d)
(1)Identification
requirementNo credit shall be allowed under subsection (a) to a
taxpayer with respect to any individual 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)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.
(4)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.
(5)No credit shall be allowed under this section for any
expense for which deduction is allowed under any other provision of this
chapter.
(6)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.
(7)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)Portion of
credit refundableThe aggregate credits allowed to a taxpayer
under subpart C shall be increased by 20 percent of the portion of the amount
of the credit which would have been allowed to the taxpayer under this section
without regard to this subsection and the limitation under section 26(a)(2) or
subsection (b)(4), as the case may be. 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) or subsection (b)(3), as the case may
be.
(f)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.
(g)
(1)In the case of a taxable year beginning after 2011, the
$3,000 and $15,000 amount in subsections (a) and (b)(1), respectively, shall
each be increased by an amount equal to—
(A)such dollar
amount, multiplied by
(B)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
2010
for calendar year 1992
in subparagraph (B)
thereof.
(2)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.
(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)Elimination of
529 plan reduction for education
creditClause (v) of section 529(c)(3)(B) of such Code is amended
by striking shall be reduced
and all that follows through the
period at the end and inserting the following shall be reduced as
provided in section 25A(g)(2).
.
(c)
(1)Subparagraph (B)
of section 24(b)(3) of such Code is amended by striking 25A(i)
and inserting 25A
.
(2)Clause (ii) of
section 25(e)(1)(C) of such Code is amended by striking 2A(i)
inserting 25A
.
(3)Paragraph (2) of
section 25B(g) of such Code is amended by striking 25A(i)
and
inserting 25A
.
(4)Paragraph (2) of
section 1400C(d) of such Code is amended by striking 25A(i)
and
inserting 25A
.
(5)Section 62(a) of
such Code is amended by striking paragraph (18).
(6)Subparagraph (A)
of section 86(b)(2) of such Code is amended by striking ,
222
.
(7)Subparagraph (B)
of section 72(t)(7) of such Code is amended by striking section
25A(g)(2)
and inserting section 25A(d)(2)
.
(8)Subparagraph (A) of section 135(c)(4) of
such Code is amended by striking , 222
.
(9)Subparagraph (A)
of section 137(b)(3) of such Code is amended by striking ,
222
.
(10)Subparagraph (A)
of section 199(d)(2) of such Code is amended by striking ,
222
.
(11)Clause (ii) of
section 219(g)(3)(A) of such Code is amended by striking ,
222
.
(12)Clause (i) of
section 221(b)(2)(C) of such Code is amended by striking ,
222
.
(13)Clause (iii) of
section 469(i)(3)(F) of such Code is amended by striking 221, and
222
and inserting and 221
.
(14)Subsection (d) of
section 221 of such Code is amended—
(A)by striking
section 25A(g)(2)
in paragraph (2)(B) and inserting
section 25A(d)(2)
, and
(B)by striking section
25A(f)(2)
in the second sentence of paragraph (2) and inserting
section 25A(c)(2)
.
(15)Paragraph (3) of section 221(d) of such
Code is amended to read as follows:
(3)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 workload for the course of study
the student is
pursuing.
.
(16)Subclause (I) of
section 529(c)(3)(B)(v) of such Code, as amended by this Act, is amended by
striking section 25A(g)(2)
and inserting
25A(d)(2)
.
(17)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)
.
(18)Subclause (I) of
section 530(d)(2)(C)(i) of such Code is amended by striking section
25A(g)(2)
and inserting section 25A(d)(2)
.
(19)Clause (iii) of section 530(d)(4)(B) of
such Code is amended by striking section 25A(g)(2)
and inserting
25A(d)(2)
.
(20)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.
.
(21)Subsection (e) of
section 6050S of such Code is amended by striking subsection
(g)(2)
and inserting subsection (d)(2)
.
(22)Subparagraph (J)
of section 6213(g)(2) of such Code is amended by striking section
25A(g)(1) (relating to higher education tuition and related expenses)
and inserting section 25A(d)(1) (relating to higher education tax
credit)
.
(23)Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting , 25A,
after
section 35
.
(d)The amendments made by this section shall apply to expenses
paid after December 31, 2010, for education furnished in academic periods
beginning after such date.