[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Pages S104-S105]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 97. A bill to amend the Internal Revenue Code of 1986 to replace 
the Hope and Lifetime Learning credits with a partially refundable 
college opportunity credit; to the Committee on Finance.
  Mr. KERRY. Mr. President, today I am introducing the College 
Opportunity Tax Credit Act of 2007. This legislation creates a new tax 
credit that will put the cost of higher education in reach for American 
families.
  An October 2006 College Board report found that this year tuition and 
other costs at public and private universities rose faster than 
inflation. And, according to the report, tuition and fees at public 
universities rose more in the past five years than at any other time in 
the past 30 years, increasing by 35 percent to $5,836 this academic 
year. Over the same time period, tuition and fees at private 
universities increased 22 percent to $22,218.
  Unfortunately, neither student aid funds nor family incomes are 
keeping pace with increasing tuition and fees. In my travels around the 
country, I frequently hear from parents concerned they will not be able 
to pay for their children's college. These parents know that earning a 
college education will result in greater earnings for their children 
and they desperately want to ensure their kids have the greatest 
opportunities possible.
  In 1997, we implemented two new tax credits to make college 
affordable--the HOPE Credit and the Lifetime Learning Credit. These tax 
credits were important and have put college in reach for families, but 
I believe we can do more. In December, the Senate Finance Committee 
held a hearing on tax incentives for higher education in which we 
learned that the existing tax credits are not reaching enough students, 
particularly lower-income students who are most severely impacted by 
rising tuitions.
  The HOPE and Lifetime Learning credits are not refundable, and 
therefore a family of four must have an income over $30,000 in order to 
receive the maximum credit. Almost half of families with college 
students fail to receive the full credit because their income is too 
low. In order to receive the full benefit of the Lifetime Learning 
credit, a student has to spend $10,000 a year on tuition and fees. This 
is nearly double the average annual public four-year college tuition 
and four times the average annual tuition of a community college. Over 
80 percent of college students attend schools with tuition and fees 
under $10,000.
  In 2004, I proposed a refundable tax credit to help pay for the cost 
of four years of college. Currently the HOPE Credit applies only to the 
first two years of college. The College Opportunity Tax Credit Act of 
2007 (COTC) helps students and parents afford all four years of 
college. It also builds on the proposal I made in 2004 by incorporating 
some of the suggestions made by experts, including those at this

[[Page S105]]

week's Finance Committee hearing. My legislation creates a new credit 
that replaces the existing HOPE credit and Lifetime Learning credit and 
ultimately makes these benefits more generous.
  The COTC has two components. The first provides a refundable tax 
credit for a student enrolled in a degree program at least on a half-
time basis. It would provide a 100 percent tax credit for the first 
$1,000 of eligible expenses and a 50 percent tax credit to the next 
$3,000 of expenses. The maximum credit would be $2,500 each year per 
student. The second provides a nonrefundable tax credit for part-time 
students, graduate students, and other students that do not qualify for 
the refundable tax credit. It provides a 40 percent credit for the 
first $1,000 of eligible expenses and a 20 percent credit for the next 
$3,000 of expenses.
  Both of these credits can be used for expenses associated with 
tuition and fees. The same income limits that apply to the HOPE credit 
and the Lifetime Learning credit apply to the COTC; the COTC will be 
phased out ratably for taxpayers with income between $45,000 and 
$55,000 ($90,000 and $110,000 for married taxpayers). These amounts are 
indexed for inflation, as are the eligible amounts of expenses.
  The College Opportunity Tax Credit Act of 2007 simplifies the 
existing credits that make higher education more affordable and will 
enable more students to be eligible for tax relief. I understand that 
many of my colleagues are interested in making college more affordable. 
I look forward to working with my colleagues to make a refundable tax 
credit for college education a reality this Congress. I ask unanimous 
consent that the text of the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 97

       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 Opportunity Tax 
     Credit Act of 2007''.

     SEC. 2. COLLEGE OPPORTUNITY TAXT CREDIT.

       (a) In General.--
       (1) Allowance of credit.--Section 25A(a) of the Internal 
     Revenue Code of 1986 (relating to allowance of credit) is 
     amended--
       (A) in paragraph (1), by striking ``the Hope Scholarship 
     Credit'' and inserting ``the eligible student credit amount 
     determined under subsection (b)'', and
       (B) in paragraph (2), by striking ``the Lifetime Learning 
     Credit'' and inserting ``the part-time, graduate, and other 
     student credit amount determined under subsection (c)''.
       (2) Name of credit.--The heading for section 25A of such 
     Code is amended to read as follows:

     ``SEC. 25A. COLLEGE OPPORTUNITY CREDIT.''.

       (3) Clerical amendment.--The table of sections for subpart 
     A of parti 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. College opportunity credit.''.
       (b) Eligible Students.--
       (1) In general.--Paragraph (1) of section 25A(b) of the 
     Internal Revenue Code of 1986 is amended--
       (A) by striking ``the Hope Scholarship Credit'' and 
     inserting ``the eligible student credit amount determined 
     under this subsection'', and
       (B) by striking ``Per student credit'' in the heading and 
     inserting ``In general''.
       (2) Amount of credit.--Paragraph (4) of section 25A(b) of 
     such Code (relating to applicable limit) is amended by 
     striking ``2'' and inserting ``3''.
       (3) Credit refundable.--
       (A) In general.--Section 25A of such Code is amended by 
     redesignating subsection (i) as subsection (j) and by 
     inserting after subsection (h) the following new subsection:
       ``(i) Portion of Credit Refundable.--
       ``(1) In general.--The aggregate credits allowed under 
     subpart C shall be increased by the amount of the credit 
     which would be allowed under this section--
       ``(A) by reason of subsection (b), and
       ``(B) without regard to this subsection and the limitation 
     under section 26(a) or subsection (j), as the case may be.
       ``(2) Treatment of credit.--The amount of the credit 
     allowed under this subsection shall not be treated as a 
     credit allowed under this subpart and shall reduce the amount 
     of credit otherwise allowable under subsection (a) without 
     regard to section 26(a) or subsection (j), as the case may 
     be.''.
       (B) Technical amendment.--Section 1324(b) of title 31, 
     United States Code, is amended by inserting ``, or enacted by 
     the College Opportunity Tax Credit Act of 2007'' before the 
     period at the end.
       (4) Limitations.--
       (A) Credit allowed for 4 years.--Subparagraph (A) of 
     section 25A(b)(2) of such Code is amended--
       (i) by striking ``2'' in the text and in the heading and 
     inserting ``4'', and
       (ii) by striking ``the Hope Scholarship Credit'' and 
     inserting ``the credit allowable''.
       (B) Elimination of limitation on first 2 years of 
     postsecondary education.--Section 25A(b)(2) of such Code is 
     amended by striking subparagraph (C) and by redesignating 
     subparagraph (D) as subparagraph (C).
       (5) Conforming amendments.--
       (A) The heading of subsection (b) of section 25A of such 
     Code is amended to read as follows:
       ``(b) Eligible Students.--''.
       (B) Section 25A(b)(2) of such Code is amended--
       (i) in subparagraph (B), by striking ``the Hope Scholarship 
     Credit'' and inserting ``the credit allowable'', and
       (ii) in subparagraph (C), as redesignated by paragraph 
     (4)(B), by striking ``the Hope Scholarship Credit'' and 
     inserting ``the credit allowable''.
       (c) Part-Time, Graduate, and Other Students.--
       (1) In general.--Subsection (c) of section 25A of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(c) Part-Time, Graduate, and Other Students.--
       ``(1) In general.--In the case of any student for whom an 
     election is in effect under this section for any taxable 
     year, the part-time, graduate, and other student credit 
     amount determined under this subsection for any taxable year 
     is an amount equal to the sum of--
       ``(A) 40 percent of so much of the qualified tuition and 
     related expenses paid by the taxpayer during the taxable year 
     (for education furnished to the student during any academic 
     period beginning in such taxable year) as does not exceed 
     $1,000, plus
       ``(B) 20 percent of such expenses so paid as exceeds $1,000 
     but does not exceed the applicable limit.
       ``(2) Applicable limit.--For purposes of paragraph (1)(B), 
     the applicable limit for any taxable year is an amount equal 
     to 3 times the dollar amount in effect under paragraph (1)(A) 
     for such taxable year.
       ``(3) Special rules for determining expenses.--
       ``(A) Coordination with credit for eligible students.--The 
     qualified tuition and related expenses with respect to a 
     student who is an eligible student for whom a credit is 
     allowed under subsection (a)(1) for the taxable year shall 
     not be taken into account under this subsection.
       ``(B) Expenses for job skills courses allowed.--For 
     purposes of paragraph (1), qualified tuition and related 
     expenses shall include expenses described in subsection 
     (f)(1) with respect to any course of instruction at an 
     eligible educational institution to acquire or improve job 
     skills of the student.''.
       (2) Inflation adjustment.--
       (A) In general.--Subsection (h) of section 25A of such Code 
     (relating to inflation adjustments) is amended by adding at 
     the end the following new paragraph:
       ``(3) Dollar limitation on amount of credit under 
     subsection (a)(2).--
       ``(A) In general.--In the case of a taxable year beginning 
     after 2007, each of the $1,000 amounts under subsection 
     (c)(1) 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 2006' 
     for `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding.--If any amount as adjusted under 
     subparagraph (A) is not a multiple of $100, such amount shall 
     be rounded to the next lowest multiple of $100.''.
       (B) Conforming amendment.--The heading for paragraph (1) of 
     section 25A(h) of such code is amended by inserting ``under 
     subsection (a)(1)'' after ``credit''.
       (d) Credit Allowed Against Alternative Minimum Tax.--
       (1) In general.--Section 25A of the Internal Revenue Code 
     of 1986, as amended by subsection (b)(3), is amended by 
     redesignating subsection (j) as subsection (k) and by 
     inserting after subsection (h) the following new subsection:
       ``(j) 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 the taxable year 
     shall not exceed the excess of--
       ``(1) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(2) the sum of the credits allowed under this subpart 
     (other than this section and sections 23, 24, and 25B) and 
     section 27 for the taxable year.''.
       (2) Conforming amendment.--Section 25(a)(1) of such Code is 
     amended by inserting ``25A,'' after ``24,''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                 ______