II 111th CONGRESS 1st Session S. 2851 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.
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.
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.
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.
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.
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.
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.
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.