II 111th CONGRESS 1st Session S. 1120 IN THE SENATE OF THE UNITED STATES May 21, 2009 Mrs. Lincoln 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 conform the definitions of qualifying expenses for purposes of education tax benefits.

1.

Hope and lifetime learning credit

(a)

In general

Section 25A of the Internal Revenue Code of 1986 is amended— (1)by striking qualified tuition and related expenses each place it appears in subsections (b), (c), (e), (g), and (i) and inserting higher education expenses, and (2)by striking paragraph (1) of subsection (f) and inserting the following: (1)

Higher education expenses

The term higher education expenses 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 the Taxpayer Relief Act of 1997) 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 for courses of instruction of such individual at such institution.. (b)

Conforming amendments

(1)Section 6050S of the Internal Revenue Code of 1986 is amended by striking qualified tuition and related expenses each place it appears in subsections (a)(2), (b)(2)(B)(i), and (e) and inserting higher education expenses. (2)Section 6213(g)(2)(J) of such Code is amended by striking tuition and related expenses and inserting expenses. (3)Section 6724 of such Code is amended by striking qualified tuition and related expenses each place it appears in subsections (d)(1)(B)(xii) and (d)(2)(BB) and inserting higher education expenses. (c)

Effective date

The amendments made by this section shall apply to expenses paid after December 31, 2008.

2.

Distributions from individual retirement plans for higher education expenses

(a)

In general

Subparagraph (A) of section 72(t)(7) of the Internal Revenue Code of 1986 is amended by striking means qualified higher education expenses and all that follows and inserting means higher education expenses (as defined in section 25A(f)(1)) for education furnished to— (b)

Effective date

The amendment made by this section shall apply to distributions after December 31, 2008.

3.

Qualified scholarships

(a)

In general

Subsection (b) of section 117 of the Internal Revenue Code of 1986 is amended— (1)by striking qualified tuition and related expenses in paragraph (1) and inserting higher education expenses, and (2)by striking paragraph (2) and inserting the following: (2)

Higher education expenses

For purposes of paragraph (1), the term higher education expenses 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 the Taxpayer Relief Act of 1997) of a student at an eligible educational institution (as defined in section 25A(f)(2)). . (b)

Effective date

The amendments made by this section shall apply to amounts received after December 31, 2008.

4.

Income from US savings bonds

(a)

In general

Section 135(c)(2) of the Internal Revenue Code of 1986 is amended— (1)by striking subparagraphs (A) and (B) and inserting the following: (A)

Qualified higher education expenses

The term qualified higher education expenses means higher education expenses within the meaning of section 25A(f). , and (2)by redesignating subparagraph (C) as subparagraph (B). (b)

Conforming amendments

(1)Subsection (c) of section 135 of the Internal Revenue Code of 1986 is amended by striking paragraph (3) and redesignating paragraph (4) as paragraph (3). (2)Section 135 of the Internal Revenue Code of 1986 is amended by striking tuition and fees in the heading and inserting expenses. (c)

Effective date

The amendments made by this section shall apply to expenses paid after December 31, 2008.

5.

Deduction for qualified tuition and related expenses

(a)

In general

Subsection (a) of section 222 of the Internal Revenue Code of 1986 is amended by striking qualified tuition and related expenses and inserting higher education expenses. (b)

Definition

Paragraph (1) of section 222(d) of the Internal Revenue Code of 1986 is amended to read as follows: (1)

Higher education expenses

The term higher education expenses has the meaning given such term by section 25A(f). Such expenses shall be reduced in the same manner as under section 25A(g)(2). . (c)

Conforming amendments

(1)Subsections (c)(2)(B), (d)(2), (d)(3)(A), and (d)(3)(B) of section 222 of the Internal Revenue Code of 1986 are each amended by striking qualified tuition and related expenses and inserting higher education expenses. (2)Section 222 of such Code is amended by striking Qualified tuition and related expenses in the heading and inserting Higher education expenses. (d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

6.

Qualified tuition programs

(a)

In general

Paragraph (3) of section 529(e) of the Internal Revenue Code of 1986 is amended to read as follows: (3)

Qualified higher education expenses

The term qualified higher education expenses 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 the Taxpayer Relief Act of 1997) of a beneficiary at an eligible educational institution. . (b)

Conforming amendment

Section 1400O of the Internal Revenue Code of 1986 is amended by striking paragraph (1) and redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (c)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2008.