[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3437 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 3437

    To amend the Internal Revenue Code of 1986 to consolidate, with 
   modifications, the Hope Scholarship Credit, the Lifetime Learning 
    Credit, and the American Opportunity Tax Credit, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 30, 2013

 Ms. Schwartz introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Education and the Workforce, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to consolidate, with 
   modifications, the Hope Scholarship Credit, the Lifetime Learning 
    Credit, and the American Opportunity Tax Credit, 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. SHORT TITLE.

    This Act may be cited as the ``College Affordability Act of 2013''.

SEC. 2. CONSOLIDATION OF EDUCATION CREDITS WITH MODIFICATIONS.

    (a) In General.--Section 25A of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year the amount equal to 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 
$2,500.
    ``(b) Lifetime Limitation on Aggregate Credit.--In the case of 
qualified tuition and related expenses with respect to any individual, 
the aggregate amount of the credits claimed under this section for all 
taxable years shall not exceed $10,000, determined without regard to 
whether--
            ``(1) such credits are claimed on the return of tax filed 
        by the individual or by another taxpayer, or
            ``(2) such expenses are treated as paid by the individual 
        or by another taxpayer.
    ``(c) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount which would (but for this 
        subsection) be taken into account under this section for the 
        taxable year shall be reduced (but not below zero) by the 
        amount determined under paragraph (2).
            ``(2) Amount of reduction.--The amount determined under 
        this paragraph is 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 (twice such amount in the 
                        case of a joint return), bears to
                    ``(B) $10,000 ($20,000 in the case of a joint 
                return).
            ``(3) Modified adjusted gross income.--For purposes of this 
        subsection, 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.
    ``(d) Other Limitations.--
            ``(1) Credit allowed for year only if individual is at 
        least \1/2\ time student for portion of year.--The credit under 
        this section 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.
            ``(2) 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.
    ``(e) Definitions.--For purposes of this section:
            ``(1) Eligible student.--The term `eligible student' means, 
        with respect to any academic period, a student who--
                    ``(A) 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 August 5, 1997, and
                    ``(B) is carrying at least \1/2\ the normal full-
                time work load for the course of study the student is 
                pursuing.
            ``(2) Qualified tuition and related expenses.--
                    ``(A) In general.--The term `qualified tuition and 
                related expenses' means tuition, fees, and course 
                materials required for the enrollment or attendance 
                of--
                            ``(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) 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.
                    ``(C) 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, as in effect on August 5, 
                1997, and
                    ``(B) which is eligible to participate in a program 
                under title IV of such Act.
    ``(f) Other Limitations and Special Rules.--For purposes of this 
section:
            ``(1) Identification requirement.--No credit shall be 
        allowed under this section 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.--
                    ``(A) In general.--The amount of qualified tuition 
                and related expenses otherwise taken into account under 
                this section with respect to an individual for an 
                academic period shall be reduced (before the 
                application of subsections (a) and (c)) by the sum of 
                any amounts paid for the benefit of such individual 
                which are allocable to such period as--
                            ``(i) a qualified scholarship which is 
                        excludable from gross income under section 117,
                            ``(ii) 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
                            ``(iii) 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.
                    ``(B) Coordination with pell grants not used for 
                qualified tuition and related expenses.--Any amount 
                determined with respect to an individual under 
                subparagraph (A) which is attributable to a Federal 
                Pell Grant under section 401 of the Higher Education 
                Act of 1965 shall be reduced (but not below zero) by 
                the amount of the 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 
                subparagraph) of such individual at an eligible 
                educational institution for the academic period for 
                which the credit under this section is being 
                determined.
            ``(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 this section 
                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.
    ``(g) Portion of Credit Refundable.--
            ``(1) In general.--80 percent of the amount which would 
        (but for this subsection and section 26) be allowed as a credit 
        allowed under this section for the taxable year shall be 
        treated as a credit allowable under subpart C (and not allowed 
        under this section). 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.
            ``(2) Maximum amount refundable.--The amount treated by 
        paragraph (1) as a credit allowable under subpart C for any 
        taxable year shall not exceed $1,500.
    ``(h) Inflation Adjustments.--
            ``(1) In general.--In the case of taxable years beginning 
        after 2014, the $2,500 and $3,000 amounts in subsection (a), 
        the $10,000 amount in subsection (b), the $80,000 amount in 
        subsection (c)(2)(A)(ii), and the $1,500 in subsection (g)(2) 
        shall each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2013' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--
                    ``(A) In general.--If the $1,500, $2,500, $3,000, 
                or $10,000 amount as adjusted under paragraph (1) is 
                not a multiple of $100, such amount shall be rounded to 
                the next lowest multiple of $100.
                    ``(B) $80,000 amount.--If the $80,000 amount as 
                adjusted under paragraph (1) is not a multiple of 
                $1,000, such amount shall be rounded to the next lowest 
                multiple of $1,000.
    ``(i) 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.
    ``(j) 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.
    ``(k) Pilot Program To Make Periodic Payments as College Expenses 
Incurred.--
            ``(1) In general.--The Secretary of the Treasury and the 
        Secretary of Education shall jointly establish a program 
        designed to make payments periodically to or on behalf of an 
        eligible student as the student incurs qualified expenses 
        during the taxable year. The total amount that may be so paid 
        to or on behalf of an eligible student through this program 
        shall not exceed the credit which would (but for paragraph (2)) 
        be allowable under this section if subsection (c) were applied 
        by using the taxpayer's modified adjusted gross income for the 
        preceding taxable year.
            ``(2) Credit reduced by pilot program payments.--The credit 
        allowable under this section (without regard to this paragraph) 
        for any taxable year shall be reduced (but not below zero) by 
        the payments made with respect to a student under paragraph (1) 
        for expenses which would otherwise be taken into account in 
        determining the credit under this section for such year.
            ``(3) Program participation.--Participation in the program 
        established under this subsection shall be voluntary with 
        respect to both students and educational institutions; except 
        that, institutions which are taxable under this chapter (other 
        than by reason of section 511) may not participate in such 
        program.
            ``(4) Program period.--The program established under this 
        subsection shall apply to expenses for academic periods 
        beginning during the 5-year period which begins on the date 
        which is 1 year after the date of the enactment of this 
        subsection.
            ``(5) Payments not treated as resources for financial 
        aid.--Payments made under this subsection shall not be treated 
        as resources for purposes of determining the amount of any 
        financial aid which is funded in whole or part with Federal 
        funds. Payments under the program shall not be made in a manner 
        that would reduce the State, private, or institutional aid 
        available to an eligible student.
            ``(6) Notice of program.--Educational institutions 
        participating in the program established under this subsection 
        shall provide appropriate notices to parents and students of 
        the option of payments under such program. Such notices shall 
        not be considered tax advice for purposes of any Federal law or 
        regulation.
            ``(7) Reporting.--The Secretary of the Treasury and the 
        Secretary of Education shall jointly submit annual reports to 
        Congress on the program established under this subsection, 
        together with any recommendations with respect to such 
        program.''.
    (b) Clerical Amendment.--The item relating to section 25A in the 
table of sections for subpart A of part IV of subchapter A of chapter 1 
of such Code is amended to read as follows:

``Sec. 25A. American Opportunity Tax Credit.''.
    (c) Conforming Amendments.--
            (1) Subparagraph (B) of section 72(t)(7) of such Code is 
        amended by striking ``25A(g)(2)'' and inserting ``25A(f)(2)''.
            (2) Paragraph (2) of section 221(d) of such Code is 
        amended--
                    (A) by striking ``25A(g)(2)'' in subparagraph (B) 
                and inserting ``25A(f)(2)'', and
                    (B) by striking ``25A(f)(2)'' and inserting 
                ``25A(e)(3)''.
            (3) Paragraph (3) of section 221(d) of such Code is amended 
        by striking ``25A(b)(3)'' and inserting ``25A(e)(1)''.
            (4) Paragraph (1) of section 222(d) of such Code is 
        amended--
                    (A) by striking ``25A(f)'' and inserting 
                ``25A(e)(2)'', and
                    (B) by striking ``25A(g)(2)'' and inserting 
                ``25A(f)(2)''.
            (5) Clause (v) of section 529(c)(3)(B) of such Code is 
        amended--
                    (A) by striking ``25A(g)(2)'' in subclause (I) and 
                inserting ``25A(f)(2)'', and
                    (B) by striking ``Hope and lifetime learning 
                credits'' in the heading and inserting ``American 
                opportunity tax credit''.
            (6) Clause (i) of section 529(e)(3)(B) of such Code is 
        amended by striking ``25A(b)(3)'' and inserting ``25A(e)(1)''.
            (7) Subparagraph (C) of section 530(d)(2) of such Code is 
        amended--
                    (A) by striking ``25A(g)(2)'' in clause (i)(I) and 
                inserting ``25A(f)(2)'', and
                    (B) by striking ``Hope and lifetime learning 
                credits'' in the heading and inserting ``American 
                opportunity tax credit''.
            (8) Clause (iii) of section 530(d)(4)(B) of such Code is 
        amended by striking ``25A(g)(2)'' and inserting ``25A(f)(2)''.
            (9) Section 1400O of such Code is amended--
                    (A) by striking ``25A(f)(2)'' and inserting 
                ``25A(e)(3)'',
                    (B) by inserting ``(as in effect on the date of the 
                enactment of this section)'' after ``25A(b)(1)'' in 
                paragraph (2), and
                    (C) by inserting ``(as in effect on the date of the 
                enactment of this section)'' after ``25A(c)(1)'' in 
                paragraph (3).
            (10) Subsection (e) of section 6050S of such Code is 
        amended by striking ``subsection (g)(2)'' and inserting 
        ``subsection (f)(2)''.
            (11) Subparagraph (A) of section 6211(b)(4) of such Code is 
        amended by striking ``subsection (i)(6)'' and inserting 
        ``subsection (g)''.
            (12) Subparagraph (J) of section 6213(g)(2) of such Code is 
        amended by striking ``25A(g)(1)'' and inserting ``25A(f)(1)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

SEC. 3. 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 by striking ``received by an 
individual'' and all that follows and inserting ``received by an 
individual--
            ``(A) as a scholarship or fellowship grant to the extent 
        the individual establishes that, in accordance with the 
        conditions of the grant, such amount was used for qualified 
        tuition and related expenses, or
            ``(B) as a Federal Pell Grant under section 401 of the 
        Higher Education Act of 1965 (20 U.S.C. 1070a) (as in effect on 
        the date of the enactment of this subparagraph).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2013.

SEC. 4. INCREASED PUBLIC AWARENESS OF AMERICAN OPPORTUNITY TAX CREDIT.

    The Secretary of the Treasury, or the Secretary's delegate, in 
consultation with the Secretary of Education, shall establish a 
taxpayer awareness program to inform the taxpaying public of the 
availability of the American Opportunity Tax Credit allowed under 
section 25A of the Internal Revenue Code of 1986. Such public awareness 
program shall be designed to assure that individuals who may be 
eligible are informed of the availability of such credit and filing 
procedures. The Secretary shall use appropriate means of communication 
to carry out the provisions of this section. The taxpayer awareness 
program shall include, but not be limited to, prominent display of 
information about the availability of the American Opportunity Tax 
Credit on information return forms specified by such Secretary for use 
by educational institutions to report qualified tuition and related 
expenses incurred.
                                 <all>