[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 2851 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 2851

  To make permanent certain education tax incentives, to modify rules 
       relating to college savings plans, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            December 8, 2009

 Mr. Grassley introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To make permanent certain education tax incentives, to modify rules 
       relating to college savings plans, and for other purposes.

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

SECTION 1. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 2. PERMANENT EXTENSION AND INCREASE OF AMERICAN OPPORTUNITY TAX 
              CREDIT.

    (a) Permanent Extension of Credit; Increase of Credit Amount.--
Section 25A is amended--
            (1) by striking ``$1,000'' each place it appears in 
        subsection (b)(1) and inserting ``$2,000'',
            (2) by striking ``the applicable limit'' in subsection 
        (b)(1)(B) and inserting ``$4,000'',
            (3) by striking paragraph (4) of subsection (b),
            (4) by striking ``2 taxable years'' in the heading of 
        subparagraph (A) of subsection (b)(2) and inserting ``4 taxable 
        years'',
            (5) by striking ``2 prior taxable years'' in subsection 
        (b)(2)(A) and inserting ``4 prior taxable years'',
            (6) by striking ``2 years'' in the heading of subparagraph 
        (C) of subsection (b)(2) and inserting ``4 years'',
            (7) by striking ``first 2 years'' in subsection (b)(2)(C) 
        and inserting ``first 4 years'',
            (8) by striking ``tuition and fees'' in subparagraph (A) of 
        subsection (f)(1) and inserting ``tuition, fees, and course 
        materials'',
            (9) by striking paragraphs (1) and (2) of subsection (d) 
        and inserting the following new paragraphs:
            ``(1) Hope scholarship credit.--The amount which would (but 
        for this paragraph) be taken into account under paragraph (1) 
        of subsection (a) for the taxable year shall be reduced (but 
        not below zero) by 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) $80,000 ($160,000 in the case of a 
                        joint return), bears to
                    ``(B) $10,000 ($20,000 in the case of a joint 
                return).
            ``(2) Lifetime learning credit.--The amount which would 
        (but for this paragraph) be taken into account under paragraph 
        (2) of subsection (a) for the taxable year shall be reduced 
        (but not below zero) by 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) $40,000 ($80,000 in the case of a 
                        joint return), bears to
                    ``(B) $10,000 ($20,000 in the case of a joint 
                return).'',
            (10) by striking ``Dollar limitation on amount of credit'' 
        in the heading of paragraph (1) of subsection (h) and inserting 
        ``Hope scholarship credit'',
            (11) by striking ``2001'' in subsection (h)(1)(A) and 
        inserting ``2011'',
            (12) by striking ``the $1,000 amounts under subsection 
        (b)(1)'' in subsection (h)(1)(A) and inserting ``the dollar 
        amounts under subsections (b)(1) and (d)(1)'',
            (13) by striking ``calendar year 2000'' in subsection 
        (h)(1)(A)(ii) and inserting ``calendar year 2010'',
            (14) by striking ``If any amount'' and all that follows in 
        subparagraph (B) of subsection (h)(1) and inserting ``If any 
        amount under subsection (b)(1) as adjusted under subparagraph 
        (A) is not a multiple of $100, such amount shall be rounded to 
        the next lowest multiple of $100. If any amount under 
        subsection (d)(1) 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.'',
            (15) by inserting ``of lifetime learning credit'' after 
        ``Income limits'' in the heading of paragraph (2) of subsection 
        (h),
            (16) by adding at the end of subsection (b) the following 
        new paragraphs:
            ``(4) Credit allowed against alternative minimum tax.--In 
        the case of a taxable year to which section 26(a)(2) does not 
        apply, so much of the credit allowed under subsection (a) as is 
        attributable to the Hope Scholarship Credit 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 subsection and sections 23, 
                25D, and 30D) and section 27 for the taxable year.
        Any reference in this section or section 24, 25, 25B, 26, 904, 
        or 1400C to a credit allowable under this subsection shall be 
        treated as a reference to so much of the credit allowable under 
        subsection (a) as is attributable to the Hope Scholarship 
        Credit.
            ``(5) Portion of credit made refundable.--40 percent of so 
        much of the credit allowed under subsection (a) as is 
        attributable to the Hope Scholarship Credit (determined after 
        the application of subsection (d)(1) and without regard to this 
        paragraph and section 26(a)(2) or paragraph (4), as the case 
        may be) shall be treated as a credit allowable under subpart C 
        (and not allowed under subsection (a)). The preceding sentence 
        shall not apply to any taxpayer for any taxable year if such 
        taxpayer is a child to whom subsection (g) of section 1 applies 
        for such taxable year.'', and
            (17) by striking subsection (i).
    (b) Conforming Amendments.--
            (1) Section 24(b)(3)(B) is amended by striking ``25A(i)'' 
        and inserting ``25A(b)''.
            (2) Section 25(e)(1)(C)(ii) is amended by striking 
        ``25A(i)'' and inserting ``25A(b)''.
            (3) Section 26(a)(1) is amended by striking ``25A(i)'' and 
        inserting ``25A(b)''.
            (4) Section 25B(g)(2) is amended by striking ``25A(i)'' and 
        inserting ``25A(b)''.
            (5) Section 904(i) is amended by striking ``25A(i)'' and 
        inserting ``25A(b)''.
            (6) Section 1400C(d)(2) is amended by striking ``25A(i)'' 
        and inserting ``25A(b)''.
            (7) Section 6211(b)(4)(A) is amended by striking ``25A by 
        reason of subsection (i)(6) thereof'' and inserting ``25A by 
        reason of subsection (b)(5) thereof''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.
    (d) Application of EGTRRA Sunset.--The amendment made by subsection 
(b)(1) shall be subject to title IX of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 in the same manner as the provision 
of such Act to which such amendment relates.

SEC. 3. PERMANENT EXTENSION OF CERTAIN EGTRRA PROVISIONS RELATING TO 
              EDUCATION.

    (a) In General.--Title IX of the Economic Growth and Tax Relief 
Reconciliation Act of 2001 shall not apply to the amendments made by 
sections 401, 402, 411, 412, 413, and 431 of such Act.
    (b) Conforming Amendment.--Section 222 is amended by striking 
subsection (e).
    (c) Effective Date.--The amendment made by subsection (b) shall 
apply to taxable years beginning after December 31, 2009.

SEC. 4. PERMANENT EXTENSION OF DEDUCTION FOR CERTAIN EXPENSES OF 
              ELEMENTARY AND SECONDARY SCHOOL TEACHERS.

    (a) In General.--Subparagraph (D) of section 62(a)(2) is amended by 
striking ``during 2002, 2003, 2004, 2005, 2006, 2007, 2008, or 2009'' 
and inserting ``after 2001''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2009.

SEC. 5. PERMANENT EXTENSION OF QUALIFIED ZONE ACADEMY BONDS.

    (a) In General.--Paragraph (1) of section 54E(c) is amended by 
striking ``and, except as provided in paragraph (4), zero thereafter'' 
and inserting ``and, except as provided in paragraph (5), $700,000,000 
for each calendar year thereafter''.
    (b) Inflation Adjustment.--Subsection (c) of section 54E is amended 
by adding at the end the following new paragraph:
            ``(5) Inflation adjustment.--In the case of any calendar 
        year after 2011, the $700,000,000 amount in paragraph (1) shall 
        be increased by an amount equal to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2010' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any increase determined under this paragraph is not a 
        multiple of $1,000,000, such increase shall be rounded to the 
        next lowest multiple of $1,000,000.''.
    (c) Credits Not To Be Stripped.--Section 54E is amended by adding 
at the end the following new subsection:
    ``(e) Credits Not To Be Stripped.--Subsection (i) of section 54A 
shall not apply with respect to any qualified zone academy bond.''.
    (d) Davis-Bacon Rules Not To Apply to QZABs or School Construction 
Bonds.--Section 1601 of the American Recovery and Reinvestment Act of 
2009 is amended by striking paragraphs (3) and (4), by inserting 
``and'' at the end of paragraph (2), and by redesignating paragraph (5) 
as paragraph (3).
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to obligations 
        issued after December 31, 2010.
            (2) Davis-bacon rules.--The amendments made by subsection 
        (d) shall apply to obligations issued after the date of the 
        enactment of this Act.

SEC. 6. PERMANENT EXTENSION OF SCHOOL CONSTRUCTION BONDS.

    (a) In General.--Subsection (c) of section 54F is amended--
            (1) by striking paragraph (3),
            (2) by inserting ``and'' at the end of paragraph (1), and
            (3) by striking ``for 2010, and'' in paragraph (2) and 
        inserting ``thereafter.''.
    (b) Allocations for Indian Schools.--Paragraph (4) of section 
54F(d) is amended by striking ``for calendar year 2010'' and inserting 
``for each calendar year after 2009''.
    (c) Extension of Small Issuer Exception.--
            (1) In general.--Clause (vii) of section 148(f)(4)(D) is 
        amended by striking ``$10,000,000'' and inserting 
        ``$15,000,000''.
            (2) Elimination of egtrra sunset.--Title IX of the Economic 
        Growth and Tax Relief Reconciliation Act of 2001 shall not 
        apply to the amendments made by section 421 of such Act.
    (d) Credits Not To Be Stripped.--Section 54F is amended by adding 
at the end the following new subsection:
    ``(f) Credits Not To Be Stripped.--Subsection (i) of section 54A 
shall not apply with respect to any qualified school construction 
bond.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2010.

SEC. 7. PERMANENT EXTENSION AND MODIFICATION OF SECTION 529 RULES.

    (a) In General.--Clause (iii) of section 529(e)(3)(A) is amended by 
striking ``in 2009 or 2010''.
    (b) Ability To Change Investment Options.--Subsection (e) of 
section 529 is amended by adding at the end the following new 
paragraph:
            ``(6) Allowable change of investment options.--A program 
        shall not fail to be treated as meeting the requirements of 
        subsection (b)(4) merely because such program allows a 
        designated beneficiary to change investment options under the 
        plan not more than 4 times per year.''.
    (c) Effective Dates.--
            (1) Extension.--The amendment made by subsection (a) shall 
        apply to taxable years beginning after December 31, 2010.
            (2) Investment options.--The amendment made by subsection 
        (b) shall apply to taxable years beginning after December 31, 
        2009.
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