[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 250 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                 S. 250

    To amend the Internal Revenue Code of 1986 to provide a higher 
    education opportunity credit in place of existing education tax 
                              incentives.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 14, 2009

Mr. Schumer (for himself, Mr. Bayh, Mrs. Boxer, Mrs. Murray, Mr. Brown, 
 Mr. Casey, Mr. Lieberman, Mr. Merkley, and Mrs. McCaskill) 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 provide a higher 
    education opportunity credit in place of existing education tax 
                              incentives.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Higher Education Opportunity Act of 
2009''.

SEC. 2. HIGHER EDUCATION OPPORTUNITY CREDIT.

    (a) In General.--Section 25A of the Internal Revenue Code of 1986 
(relating to Hope and Lifetime Learning credits) is amended to read as 
follows:

``SEC. 25A. HIGHER EDUCATION OPPORTUNITY CREDIT.

    ``(a) 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 in an amount equal to the lesser of--
            ``(1) the sum of--
                    ``(A) 100 percent of so much of the qualified 
                tuition and related expenses paid by the taxpayer 
                during the taxable year (for education furnished to the 
                eligible student during any academic period beginning 
                in such taxable year) as does not exceed $2,000,
                    ``(B) 50 percent of so much of such expenses as 
                exceeds $2,000 but does not exceed $4,000, and
                    ``(C) 25 percent of so much of such expenses as 
                exceeds $4,000 but does not exceed $8,000, or
            ``(2) the excess (if any) of $16,000 over the aggregate 
        credits allowed under this section with respect to such 
        eligible student for all prior taxable years.
    ``(b) Limitations.--
            ``(1) Limitation based on modified adjusted gross income.--
                    ``(A) 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 subparagraph 
                (B).
                    ``(B) 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--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $70,000 ($140,000 in the 
                                case of a joint return), bears to
                            ``(ii) $10,000 ($20,000 in the case of a 
                        joint return).
                    ``(C) 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.
            ``(2) Limitation based on amount of tax.--In the case of a 
        taxable year to which section 26(a)(2) does not apply, the 
        credit allowed under subsection (a) for any 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 sections 23, 24, 
                and 25B) and section 27 for the taxable year.
            ``(3) Credit allowed only for 3 eligible students.--The 
        credit under subsection (a) to any taxpayer shall not be 
        allowed with respect to more than 3 eligible students for any 
        taxable year.
            ``(4) Other limitations.--
                    ``(A) Credit allowed only for first 2 years of 
                graduate education.--An election to have this section 
                apply with respect to any eligible student may not be 
                made for any taxable year if the student has completed 
                (before the beginning of such taxable year) 2 years of 
                graduate education at one or more eligible educational 
                institutions.
                    ``(B) Credit allowed for year only if individual is 
                at least 1/2 time student for portion of year.--The 
                credit under subsection (a) 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.
                    ``(C) Denial of credit if student convicted of a 
                felony drug offense.--The credit under subsection (a) 
                shall not be allowed for qualified tuition and related 
                expenses for the enrollment or attendance of a student 
                for any academic period if such student has been 
                convicted of a Federal or State felony offense 
                consisting of the possession or distribution of a 
                controlled substance before the end of the taxable year 
                with or within which such period ends.
    ``(c) Definitions.--For purposes of this subsection--
            ``(1) Eligible student.--
                    ``(A) In general.--The term `eligible student' 
                means, with respect to any academic period, a student 
                who--
                            ``(i) 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
                            ``(ii) is carrying at least \1/2\ the 
                        normal full-time work load for the course of 
                        study the student is pursuing.
                    ``(B) Waiver of enrollment requirement for certain 
                workers.--Subparagraph (A) shall be applied without 
                regard to clause (ii) if the student is employed for at 
                least 25 hours per week during the academic period.
            ``(2) Qualified tuition and related expenses.--
                    ``(A) In general.--The term `qualified tuition and 
                related expenses' means tuition and fees required for 
                the enrollment or attendance of an eligible student who 
                is--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) 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) Inclusion of certain expenses for books.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), tuition and fees shall 
                        include 50 percent of amounts paid or incurred 
                        for books.
                            ``(ii) Limitation.--The amount of tuition 
                        and fees taken into account under subparagraph 
                        (A) by reason of clause (i) for any taxable 
                        year shall not exceed $400 with respect to any 
                        eligible student.
                    ``(C) Exception for education involving sports, 
                etc.--Such term does not include expenses with respect 
                to any course or other education involving sports, 
                games, or hobbies, unless such course or other 
                education is part of the individual's degree program.
                    ``(D) Exception for nonacademic fees.--Such term 
                does not include student activity fees, athletic fees, 
                insurance expenses, or other expenses unrelated to an 
                individual's academic course of instruction.
            ``(3) Eligible educational institution.--The term `eligible 
        educational institution' means an institution--
                    ``(A) which is described in section 481 of the 
                Higher Education Act of 1965 (20 U.S.C. 1088), 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) Election Not To Have Section Apply.--A taxpayer may elect not 
to have this section apply with respect to the qualified tuition and 
related expenses of an individual for any taxable year.
    ``(e) Special Rules.--
            ``(1) Identification requirement.--No credit shall be 
        allowed under subsection (a) to a taxpayer with respect to the 
        qualified tuition and related expenses of an individual unless 
        the taxpayer includes the name and taxpayer identification 
        number of such individual on the return of tax for the taxable 
        year.
            ``(2) Adjustment for certain scholarships, etc.--The amount 
        of qualified tuition and related 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), (b), and (c)) 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 individual'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 dependent.--If 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) qualified tuition and related 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 prepayments.--If qualified 
        tuition and related expenses are 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) Denial of double benefit.--No credit shall be allowed 
        under this section for any expense for which a deduction is 
        allowed under any other provision of this chapter.
            ``(6) No credit for married individuals filing separate 
        returns.--If 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) Nonresident aliens.--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.
    ``(f) Regulations.--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 amount which was taken into account in determining the amount of 
such credit.''.
    (b) Repeal of Deduction for Qualified Tuition and Related 
Expenses.--
            (1) In general.--Part VII of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by striking 
        section 222 (relating to qualified tuition and related 
        expenses).
            (2) Clerical amendment.--The table of section for part VII 
        of subchapter B of chapter 1 of such Code is amended by 
        striking the item relating to section 222.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 26(a) of the Internal Revenue 
        Code of 1986 is amended by inserting ``25A,'' after ``24,''.
            (2) Section 62(a) of such Code is amended by striking 
        paragraph (18).
            (3) Subparagraph (B) of section 72(t)(7) of such Code is 
        amended by striking ``section 25A(g)(2)'' and inserting 
        ``section 25A(e)(2)''.
            (4) Section 221(d) of such Code is amended--
                    (A) by striking ``section 25A(g)(2)'' in paragraph 
                (2)(B) and inserting ``section 25A(e)(2)'',
                    (B) by striking ``section 25A(f)(2)'' in paragraph 
                (2)(B) and inserting ``section 25A(c)(3)'', and
                    (C) by striking ``section 25A(b)(3)'' in paragraph 
                (3) and inserting ``section 25A(c)(1)''.
            (5) Section 529 of such Code is amended--
                    (A) by striking ``section 25A(g)(2)'' in subclause 
                (I) of subsection (c)(3)(B)(v) and inserting ``section 
                25(e)(2)'', and
                    (B) by striking ``section 25A(b)(3)'' in clause (i) 
                of subsection (e)(3)(B) and inserting ``section 
                25A(c)(1)''.
            (6) Section 530 of such Code is amended--
                    (A) by striking ``section 25A(g)(2)'' in subclause 
                (I) of subsection (d)(2)(C)(i) and inserting ``section 
                25A(e)(2)'', and
                    (B) by striking ``section 25A(g)(2)'' in clause 
                (iii) of subsection (d)(4)(B) and inserting ``section 
                25A(e)(2)''.
            (7) 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 before the date of the enactment 
of this sentence.''.
            (8) Subsection (e) of section 6050S of such Code is amended 
        by striking ``(without regard to subsection (g)(2) thereof)'' 
        and inserting ``(without regard to subsection (e)(2) 
        thereof)''.
            (9) Subparagraph (J) of section 6213(g)(2) of such Code is 
        amended by striking ``section 25A(g)(1)'' and inserting 
        ``section 25A(e)(1)''.
            (10) 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:

``Sec. 25A. Higher education opportunity credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2008 (in taxable years ending 
after such date), for education furnished in academic periods beginning 
after such date.
                                 <all>