I 111th CONGRESS 2d Session H. R. 6488 IN THE HOUSE OF REPRESENTATIVES December 2, 2010 Mr. Davis of Illinois 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 coordinate the reduction in the American Opportunity Tax Credit with Federal Pell Grants, to the extent such grants are attributable to expenses not eligible for such credit.

1.

American Opportunity Tax Credit coordination with Pell grants

(a)

In general

Subsection (i) of section 25A of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (8)

Coordination with Pell Grants not used for qualified tuition and related expenses

For purposes of this subsection, any amount determined with respect to an individual under subsection (g)(2) which is attributable to a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) shall be reduced (but not below zero) by the amount of expenses (other than qualified tuition and related expenses) which are 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 paragraph) of such individual at an eligible educational institution for the academic period for which the credit under this section is being determined. . (b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

2.

Expansion of Pell Grant exclusion from gross income

(a)

In general

Paragraph (1) of section 117(b) of the Internal Revenue Code of 1986 is amended— (1)by striking the period at the end and inserting , or, (2)by striking received by an individual as a scholarship and inserting the following: received by an individual—(A)as a scholarship , and (3)by adding at the end the following new subparagraph: (B)as a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a). . (b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.