[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5383 Introduced in House (IH)]

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114th CONGRESS
  2d Session
                                H. R. 5383

  To amend the Internal Revenue Code of 1986 to extend and modify the 
        American Opportunity Tax Credit, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              June 3, 2016

  Mr. Israel introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to extend and modify 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 ``Middle Class College Tuition Tax 
Credit Expansion Act of 2016''.

SEC. 2. EXTENSION AND MODIFICATION OF AMERICAN OPPORTUNITY TAX CREDIT.

    (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 who is an 
eligible student for any taxable year, there shall be allowed as a 
credit against the tax imposed by this chapter for such taxable year 
the amount determined under subsection (b) with respect to such 
individual.
    ``(b) Amount of Credit.--
            ``(1) Student enrolled at least \1/2\ time.--In the case of 
        an eligible student who is carrying at least \1/2\ the normal 
        full-time workload for the course of study the student is 
        pursuing, the amount determined under this subsection with 
        respect to such individual is 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 $2,500, plus
                    ``(B) 50 percent of such expenses so paid as 
                exceeds $2,500 but does not exceed $7,500.
            ``(2) Other students.--In the case of an eligible student 
        not described in paragraph (1), the amount determined under 
        this subsection with respect to such individual is 50 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 $10,000.
    ``(c) Dollar 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 this 
                section for the taxable year shall be reduced (but not 
                below zero) by the amount determined under paragraph 
                (2).
                    ``(B) 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--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $225,000 (twice such amount 
                                in the case of a joint return), bears 
                                to
                            ``(ii) $20,000 ($40,000 in the case of a 
                        joint return).
                    ``(C) Modified adjusted gross income.--For purposes 
                of this paragraph, 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) Inflation adjustment.--In the case of any 
                taxable year beginning after 2016, the $225,000 amount 
                in subparagraph (B)(i)(II) shall be increased by an 
                amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) 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 2015' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $1,000.
            ``(2) Limitation based on amount of tax.--The credit 
        allowed under this section 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.
    ``(d) Other Limitations and Special Rules.--For purposes of this 
section:
            ``(1) Lifetime dollar limitation.--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 $25,000, determined 
        without regard to whether--
                    ``(A) such credits are claimed on the return of tax 
                filed by the individual or by another taxpayer, or
                    ``(B) such expenses are treated as paid by the 
                individual or by another taxpayer.
            ``(2) Identification numbers.--
                    ``(A) In general.--No credit shall be allowed under 
                this section to a taxpayer with respect to the 
                qualified tuition and related expenses of an eligible 
                student unless the taxpayer includes the name and 
                taxpayer identification number of such eligible student 
                on the return of tax for the taxable year.
                    ``(B) Student.--The requirements of subparagraph 
                (A) shall not be treated as met unless the individual's 
                taxpayer identification number was issued on or before 
                the due date for filing the return of tax for the 
                taxable year.
                    ``(C) Taxpayer.--No credit shall be allowed under 
                this section if the identifying number of the taxpayer 
                was issued after the due date for filing the return for 
                the taxable year.
                    ``(D) Institution.--No credit shall be allowed 
                under this section unless the taxpayer includes the 
                employer identification number of any institution to 
                which qualified tuition and related expenses were paid 
                with respect to the individual.
            ``(3) 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 (b) 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 the 
                Middle Class College Tuition Tax Credit Expansion Act 
                of 2016) of such individual at an eligible educational 
                institution for the academic period for which the 
                credit under this section is being determined.
            ``(4) 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.
            ``(5) 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.
            ``(6) 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.
            ``(7) 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.
            ``(8) 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.
            ``(9) Restrictions on taxpayers who improperly claimed 
        credit in prior year.--
                    ``(A) Taxpayers making prior fraudulent or reckless 
                claims.--
                            ``(i) In general.--No credit shall be 
                        allowed under this section for any taxable year 
                        in the disallowance period.
                            ``(ii) Disallowance period.--For purposes 
                        of clause (i), the disallowance period is--
                                    ``(I) the period of 10 taxable 
                                years after the most recent taxable 
                                year for which there was a final 
                                determination that the taxpayer's claim 
                                of credit under this section was due to 
                                fraud, and
                                    ``(II) the period of 2 taxable 
                                years after the most recent taxable 
                                year for which there was a final 
                                determination that the taxpayer's claim 
                                of credit under this section was due to 
                                reckless or intentional disregard of 
                                rules and regulations (but not due to 
                                fraud).
                    ``(B) Taxpayers making improper prior claims.--In 
                the case of a taxpayer who is denied credit under this 
                section for any taxable year as a result of the 
                deficiency procedures under subchapter B of chapter 63, 
                no credit shall be allowed under this section for any 
                subsequent taxable year unless the taxpayer provides 
                such information as the Secretary may require to 
                demonstrate eligibility for such credit.
    ``(e) 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.
    ``(f) Definitions.--For purposes of this section:
            ``(1) Eligible student.--The term `eligible student' means, 
        with respect to any taxable year, an individual who--
                    ``(A) is enrolled for at least one academic period 
                which begins during such taxable year at an eligible 
                educational institution, and
                    ``(B) meets the requirements of section 484(a)(1) 
                of the Higher Education Act of 1965, as in effect on 
                the date of the enactment of the Middle Class College 
                Tuition Tax Credit Expansion Act of 2016.
            ``(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.
                    ``(D) Computer technology and equipment.--Such term 
                includes expenses for the purchase of computer 
                technology or equipment (as defined in section 
                170(e)(6)(F)(i)), or Internet access and related 
                services, only to the extent the purchase of such 
                technology, equipment, or services is specifically 
                required by the individual's academic course of 
                instruction or degree program.
            ``(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 the date 
                of the enactment of the Middle Class College Tuition 
                Tax Credit Expansion Act of 2016, and
                    ``(B) which is eligible to participate in a program 
                under title IV of such Act.
    ``(g) Portion of Credit Refundable.--Fifty percent of the credit 
allowed under this section (determined after application of subsections 
(c)(1) and (d) and without regard to this subsection and subsection 
(c)(2), as the case may be) 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.
    ``(h) 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) 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 the Internal Revenue Code of 1986 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(d)(3)''.
            (2) Paragraph (2) of section 221(d) of such Code is 
        amended--
                    (A) by striking ``25A(g)(2)'' in subparagraph (B) 
                and inserting ``25A(d)(3)'', and
                    (B) by striking ``25A(f)(2)'' and inserting 
                ``25A(f)(3)''.
            (3) Paragraph (3) of section 221(d) of such Code is amended 
        by striking ``25A(b)(3)'' and inserting ``25A(f)(1) (but only 
        with respect to a student who is carrying at least \1/2\ the 
        normal full-time workload for the course of study the student 
        is pursuing)''.
            (4) 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(d)(3)'', and
                    (B) by striking ``Hope and lifetime learning 
                credits'' in the heading and inserting ``American 
                opportunity credit''.
            (5) Clause (i) of section 529(e)(3)(B) of such Code is 
        amended by striking ``25A(b)(3)'' and inserting ``25A(f)(1) 
        (but only with respect to a student who is carrying at least 
        \1/2\ the normal full-time workload for the course of study the 
        student is pursuing)''.
            (6) 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(d)(3)'', and
                    (B) by striking ``Hope and lifetime learning 
                credits'' in the heading and inserting ``American 
                opportunity credit''.
            (7) Clause (iii) of section 530(d)(4)(B) of such Code is 
        amended by striking ``25A(g)(2)'' and inserting ``25A(d)(3)''.
            (8) Section 1400O of such Code is amended--
                    (A) by striking ``25A(f)(2)'' and inserting 
                ``25A(f)(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).
            (9) Subsection (e) of section 6050S of such Code is amended 
        by striking ``subsection (g)(2)'' and inserting ``subsection 
        (d)(3)''.
            (10) Subparagraph (A) of section 6211(b)(4) of such Code is 
        amended by striking ``subsection (i)(6)'' and inserting 
        ``subsection (g)''.
            (11) Subparagraph (J) of section 6213(g)(2) of such Code is 
        amended by striking ``25A(g)(1)'' and inserting ``25A(d)(2)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2015.

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 (as in effect on the 
                date of the enactment of the Middle Class College 
                Tuition Tax Credit Expansion Act of 2016).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2013.
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