[House Report 107-650]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-650
======================================================================
 
                 BACK TO SCHOOL TAX RELIEF ACT OF 2002

                                _______
                                

 September 11, 2002.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Thomas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 5193]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5193) to amend the Internal Revenue Code of 1986 to 
allow a deduction to certain taxpayers for elementary and 
secondary education expenses, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     3
          C. Legislative History.................................     3
 II. Explanation of the Bill..........................................3
          A. Extend Tuition Deduction to Qualified Elementary and 
              Secondary Education Expenses.......................     3
III. Votes of the Committee...........................................5
 IV. Budget Effects of the Bill.......................................6
          A. Committee Estimate of Budgetary Effects.............     6
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     8
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     8
  V. Other Matters to be Discussed Under the Rules of the House.......9
          A. Committee Oversight Findings and Recommendations....     9
          B. Statement of General Performance Goals and 
              Objectives.........................................     9
          C. Constitutional Authority Statement..................     9
          D. Information Relating to Unfunded Mandates...........    10
          E. Applicability of House Rule XXI 5(b)................    10
          F. Tax Complexity Analysis.............................    10
 VI. Changes in Existing Law Made by the Bill, as Reported...........10
VII. Dissenting Views................................................13

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Back to School Tax Relief Act of 
2002''.

SEC. 2. DEDUCTION FOR ELEMENTARY AND SECONDARY EDUCATION EXPENSES.

  (a) In General.--Section 222 of the Internal Revenue Code of 1986 
(relating to qualified tuition and related expenses) is amended by 
redesignating subsection (e) as subsection (f) and by inserting after 
subsection (d) the following new subsection:
  ``(e) Elementary and Secondary Education Expenses.--
          ``(1) In general.--In the case of a taxpayer whose adjusted 
        gross income for the taxable year does not exceed $20,000 
        ($40,000 in the case of a joint return), qualified tuition and 
        related expenses shall include the qualified elementary and 
        secondary education expenses paid by the taxpayer during the 
        taxable year.
          ``(2) Dollar limitation.--
                  ``(A) In general.--For purposes of paragraph (1), the 
                amount of qualified elementary and secondary education 
                expenses taken into account for a taxable year under 
                this section by reason of paragraph (1) shall not 
                exceed $3,000.
                  ``(B) Coordination.--For purposes of this section--
                          ``(i) the dollar limitations under subsection 
                        (b) shall not apply to qualified elementary and 
                        secondary education expenses, and
                          ``(ii) qualified elementary and secondary 
                        education expenses shall not be taken into 
                        account for purposes of applying the applicable 
                        dollar limit under subsection (b).
          ``(3) Definitions.--For purposes of this subsection--
                  ``(A) Qualified elementary and secondary education 
                expenses.--The term `qualified elementary and secondary 
                education expenses' has the same meaning given to such 
                term by section 530(b)(4), except that--
                          ``(i) such term shall not include room and 
                        board,
                          ``(ii) subparagraph (A)(i) thereof shall be 
                        applied by including enrollment or attendance 
                        at a home school (as determined under State 
                        law), and
                          ``(iii) such section shall be applied--
                                  ``(I) by substituting `individual' 
                                for `designated beneficiary of the 
                                trust' in subparagraph (A)(i) thereof,
                                  ``(II) by substituting `an individual 
                                with special needs' for `a special 
                                needs beneficiary' in subparagraph 
                                (A)(i) thereof, and
                                  ``(III) by substituting `individual 
                                and the individual's family during any 
                                of the years the individual' for 
                                `beneficiary and the beneficiary's 
                                family during any of the years the 
                                beneficiary' in subparagraph (A)(iii) 
                                thereof.
                  ``(B) Adjusted gross income.--Adjusted gross income 
                shall be determined under subsection (b)(2)(C).''.
  (b) Technical Amendment.--The heading of section 62(a)(18) of such 
Code is amended by striking ``Higher education'' and inserting 
``Qualified tuition and related''.
  (c) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2002.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5193, as amended (the ``Back to School Tax 
Relief Act of 2002'') provides tax relief to assist individuals 
in meeting the elementary and secondary education needs of 
their dependents.
    The bill provides an above-the-line deduction for 
individuals with certain income levels for certain qualified 
elementary and secondary education expenses.

                 B. Background and Need for Legislation

    The provisions approved by the Committee reflect the need 
to improve the affordability of elementary and secondary 
education for low-income families and to improve educational 
opportunities for these families.

                         C. Legislative History


                            COMMITTEE ACTION

    The Committee on Ways and Means marked up the provisions of 
the bill on September 5, 2002, and approved the provisions, as 
amended, on September 5, 2002, by a rollcall vote of 22 yeas to 
14 nays (with a quorum being present).

                      II. EXPLANATION OF THE BILL


   A. Extend Tuition Deduction to Qualified Elementary and Secondary 
                           Education Expenses


                              PRESENT LAW

    An individual is allowed an above-the-line deduction for 
qualified tuition and related expenses for higher education 
paid by the individual during a taxable year.\1\ Qualified 
tuition and related expenses are tuition and fees required for 
the enrollment or attendance of the taxpayer, the taxpayer's 
spouse, or any dependent of the taxpayer with respect to whom 
the taxpayer may claim a personal exemption, at an eligible 
institution of higher education for courses of instruction of 
such individual at such institution. The deduction generally is 
not available for expenses with respect to a course or 
education involving sports, games, or hobbies, and is not 
available for student activity fees, athletic fees, insurance 
expenses, or other expenses unrelated to an individual's 
academic course of instruction. The expenses must be in 
connection with enrollment at an institution of higher 
education during the taxable year, or with an academic term 
beginning during the taxable year or during the first three 
months of the next taxable year. The deduction is not available 
for tuition and related expenses paid for elementary or 
secondary education.
---------------------------------------------------------------------------
    \1\ Sec. 222. (All section references are to the Internal Revenue 
Code of 1986.)
---------------------------------------------------------------------------
    For taxable years beginning in 2002 or 2003, the maximum 
deduction is $3,000 for an individual whose adjusted gross 
income for the taxable year does not exceed $65,000 ($130,000 
in the case of a joint return). For taxable years beginning in 
2004 or 2005, the maximum deduction is $4,000 for an individual 
whose adjusted gross income for the taxable year does not 
exceed $65,000 ($130,000 in the case of a joint return), or 
$2,000 for other individuals whose adjusted gross income does 
not exceed $80,000 ($160,000 in the case of a joint return). No 
deduction is allowed an individual whose adjusted gross income 
exceeds the relevant adjusted gross income limitations, a 
married individual who does not file a joint return, or an 
individual with respect to whom a personal exemption deduction 
may be claimed by another taxpayer for the taxable year.
    The amount of qualified tuition and related expenses must 
be reduced by certain scholarships, educational assistance 
allowances, and other amounts paid for the benefit of such 
individual,\2\ and by the amount of such expenses taken into 
account for purposes of determining any exclusion from gross 
income of: (1) income from certain United States Savings Bonds 
used to pay higher education tuition and fees; and (2) income 
from a Coverdell education savings account.\3\ Additionally, 
such expenses must be reduced by the earnings portion (but not 
the return of principal) of distributions from a section 529 
qualified tuition program if exclusion under section 529 is 
claimed with respect to expenses eligible for an exclusion 
under section 222. No deduction is allowed for any expense for 
which a deduction is otherwise allowed or with respect to an 
individual for whom a Hope Scholarship Credit or Lifetime 
Learning Credit is elected for such taxable year.
---------------------------------------------------------------------------
    \2\ Sec. 222(d)(1) and sec. 25A(g)(2).
    \3\ Sec. 222(c).
---------------------------------------------------------------------------
    The deduction is not available for taxable years beginning 
after December 31, 2005.

                           REASONS FOR CHANGE

    Present law limits the above-the-line deduction to certain 
higher education expenses. The Committee believes that 
taxpayers with incomes below certain levels and who incur 
certain education expenses should be eligible for an above-the-
line deduction with respect to such expenses, whether they are 
incurred for elementary and secondary education or for higher 
education.

                        EXPLANATION OF PROVISION

    The proposal would extend the above-the-line deduction to 
``qualified elementary and secondary education expenses'' paid 
in connection with an ``eligible K-12 student.'' Qualified 
elementary and secondary education expenses generally would be 
defined under the present-law rules applicable to Coverdell 
education savings accounts \4\ and would include (1) expenses 
for tuition, fees, academic tutoring, special needs 
services,\5\ books, supplies, and other equipment that are 
incurred in connection with enrollment or attendance at a 
public, private, religious, or home school as determined under 
State law that provides elementary or secondary education as 
determined under State law; (2) expenses for uniforms, 
transportation, and supplementary items and services (including 
extended day programs) that are required or provided by such a 
school (other than a home school) in connection with such 
enrollment or attendance; and (3) expenses for the purchase of 
any computer technology or equipment or Internet access and 
related services, if such items are to be used by the student 
or the student's family during any of the years the student is 
in school.\6\ Qualified elementary and secondary education 
expenses would not include room and board.\7\
---------------------------------------------------------------------------
    \4\ Sec. 530(b)(4).
    \5\ For this purpose, special needs services generally would 
include services required because a physical, mental, or emotional 
condition (including learning disability) of the student requires 
additional time of the student in order to complete his or her 
education.
    \6\ Qualified elementary and secondary expenses would not include 
expenses for computer software designed for sports, games, or hobbies 
unless the software is predominantly educational in nature.
    \7\ The present-law rules regarding coordination of the deduction 
for qualified tuition and related expenses with other education 
incentives also would apply to qualified elementary and secondary 
expenses.
---------------------------------------------------------------------------
    An eligible K-12 student would be an individual with 
respect to whom the taxpayer is allowed to claim a personal 
exemption for the taxable year and who is enrolled in a school 
that provides elementary education or secondary education 
(kindergarten through grade 12) as determined under State law 
(including a home school). The expenses would be required to be 
in connection with enrollment at a school during the taxable 
year, or with an academic term beginning during the taxable 
year or during the first three months of the next taxable year.
    The proposal would retain the present-law maximum deduction 
and adjusted gross income limitations applicable to qualified 
tuition and related expenses for higher education, and provide 
a separate maximum deduction and adjusted gross income 
limitation applicable to the taxpayer's qualified elementary 
and secondary education expenses. A taxpayer's maximum 
deduction for qualified elementary and secondary education 
expenses for a taxable year would be $3,000 for an individual 
whose adjusted gross income for the taxable year does not 
exceed $20,000 ($40,000 in the case of a joint return).\8\
---------------------------------------------------------------------------
    \8\ No deduction would be allowed an individual whose adjusted 
gross income exceeds the relevant adjusted gross income limitation, a 
married individual who does not file a joint return, or an individual 
with respect to whom a personal exemption deduction may be claimed by 
another taxpayer for the taxable year.
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision would be effective for taxable years 
beginning after December 31, 2002, and before January 1, 2006.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the bill, H.R. 5193.

                       MOTION TO REPORT THE BILL

    The bill, H.R. 5193, as amended, was ordered favorably 
reported by a rollcall vote of 22 yeas to 14 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas.....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Rangel..........
                                                                 ......
Mr. Crane......................        X   ........  .........  Mr.                ........        X   .........
                                                                 Stark...........
                                                                 ........
Mr. Shaw.......................        X   ........  .........  Mr.                ........        X   .........
                                                                 Matsui..........
                                                                 ......
Mrs. Johnson...................  ........        X   .........  Mr.                ........        X   .........
                                                                 Coyne...........
                                                                 ......
Mr. Houghton...................        X   ........  .........  Mr.                ........        X   .........
                                                                 Levin...........
                                                                 .......
Mr. Herger.....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Cardin..........
                                                                 ......
Mr. McCrery....................        X   ........  .........  Mr.                ........        X   .........
                                                                 McDermott........
Mr. Camp.......................        X   ........  .........  Mr.                ........        X   .........
                                                                 Kleczka.........
                                                                 .....
Mr. Ramstad....................        X   ........  .........  Mr. Lewis          ........        X   .........
                                                                 (GA)........
Mr. Nussle.....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Neal............
                                                                 ........
Mr. Johnson....................        X   ........  .........  Mr.                ........  ........  .........
                                                                 McNulty.........
                                                                 ....
Ms. Dunn.......................        X   ........  .........  Mr.                ........  ........  .........
                                                                 Jefferson.......
                                                                 .....
Mr. Collins....................  ........        X   .........  Mr.                ........        X   .........
                                                                 Tanner..........
                                                                 ......
Mr. Portman....................        X   ........  .........  Mr.                ........  ........  .........
                                                                 Becerra.........
                                                                 ......
Mr. English....................        X   ........  .........  Mrs.               ........  ........  .........
                                                                 Thurman.........
                                                                 ..
Mr. Watkins....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Doggett.........
                                                                 .....
Mr. Hayworth...................        X   ........  .........  Mr.                      X   ........  .........
                                                                 Pomeroy.........
                                                                 ....
Mr. Weller.....................  ........  ........  .........
Mr. Hulshof....................        X   ........  .........
Mr. McInnis....................        X   ........  .........
Mr. Lewis (KY).................        X   ........  .........
Mr. Foley......................        X   ........  .........
Mr. Brady......................        X   ........  .........
Mr. Ryan.......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                       VOTE ON PROCEDURAL MOTION

    A motion by Mr. McCrery to table the appeal of the ruling 
of the chair to sustain the point of order that the Rangel 
amendment was not germane was agreed to by a rollcall vote of 
23 yeas to 12 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas.....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Rangel..........
                                                                 ......
Mr. Crane......................        X   ........  .........  Mr.                ........        X   .........
                                                                 Stark...........
                                                                 ........
Mr. Shaw.......................        X   ........  .........  Mr.                ........        X   .........
                                                                 Matsui..........
                                                                 ......
Mrs. Johnson...................        X   ........  .........  Mr.                ........        X   .........
                                                                 Coyne...........
                                                                 ......
Mr. Houghton...................        X   ........  .........  Mr.                ........        X   .........
                                                                 Levin...........
                                                                 .......
Mr. Herger.....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Cardin..........
                                                                 ......
Mr. McCrery....................        X   ........  .........  Mr.                ........        X   .........
                                                                 McDermott........
Mr. Camp.......................        X   ........  .........  Mr.                ........        X   .........
                                                                 Kleczka.........
                                                                 .....
Mr. Ramstad....................        X   ........  .........  Mr. Lewis          ........        X   .........
                                                                 (GA)........
Mr. Nussle.....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Neal............
                                                                 ........
Mr. Johnson....................        X   ........  .........  Mr.                ........  ........  .........
                                                                 McNulty.........
                                                                 ....
Ms. Dunn.......................        X   ........  .........  Mr.                ........  ........  .........
                                                                 Jefferson.......
                                                                 .....
Mr. Collins....................        X   ........  .........  Mr.                ........  ........  .........
                                                                 Tanner..........
                                                                 ......
Mr. Portman....................        X   ........  .........  Mr.                ........  ........  .........
                                                                 Becerra.........
                                                                 ......
Mr. English....................        X   ........  .........  Mrs.               ........  ........  .........
                                                                 Thurman.........
                                                                 ..
Mr. Watkins....................        X   ........  .........  Mr.                ........        X   .........
                                                                 Doggett.........
                                                                 .....
Mr. Hayworth...................        X   ........  .........  Mr.                ........        X   .........
                                                                 Pomeroy.........
                                                                 ....
Mr. Weller.....................  ........  ........  .........
Mr. Hulshof....................        X   ........  .........
Mr. McInnis....................        X   ........  .........
Mr. Lewis (KY).................        X   ........  .........
Mr. Foley......................        X   ........  .........
Mr. Brady......................        X   ........  .........
Mr. Ryan.......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of the rule XIII of the 
Rules of the House of Representatives, the following statement 
is made concerning the effects on the budget of the revenue 
provisions of the bill, H.R. 5193 as reported.
    The bill is estimated to have the following effects on 
budget receipts for fiscal years 2003-2007:

  ESTIMATED REVENUE EFFECTS OF THE CHAIRMAN'S AMENDMENT IN THE NATURE OF A SUBSTITUTE TO H.R. 5193, THE ``BACK TO SCHOOL TAX RELIEF ACT OF 2002'' SCHEDULED FOR MARKUP BY THE COMMITTEE ON WAYS
                                                                                   AND MEANS ON JULY 25, 2002
                                                                        [Fiscal years 2003-2012, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          Provision                                 Effective          2003       2004       2005      2006    2007   2008   2009   2010   2011     2012     2003-07    2003-12
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1. Extend Section 222 Tuition Deduction to Allow up to a          tyba 12/31/02 &      -1,189     -1,622     -1,672     -421  .....  .....  .....  .....  .....  .........     -4,903     -4,903
 $3,000 Above-the-Line Deduction for Qualified Elementary and         tybb 1/1/06
 Secondary Education Expenses Incurred by Eligible Taxpayers
 With AGI No Greater Than $20,000 ($40,000 for Joint Returns)
2. Clarify that the Extension of the Section 222 Tuition          tyba 12/31/02 &
 Deduction Applies to Special Needs Studenst.................         tybb 1/1/06                                                 No revenue effect
      Net total..............................................  ...................     -1,189     -1,622     -1,672     -421  .....  .....  .....  .....  .....  .........     -4,903     -4,903
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Legend for ``Effective'' column: tyba = taxable years beginning after; tybb = taxable years beginning before.

Note.--Details may not add to totals due to rounding.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority (as detailed 
in the statement by the Congressional Budget Office (``CBO''); 
see Part IV.C., below). The Committee further states that the 
revenue reducing income tax provisions involve increased tax 
expenditures. (See amounts in table in Part IV.A., above.)

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 9, 2002.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5193, the Back to 
School Tax Relief Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Annie 
Bartsch.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 5193--Back to School Tax Relief Act of 2002

    Summary: H.R. 5193 would provide individual taxpayers with 
a deduction for certain education expenses through tax year 
2005. The deduction would be ``above the line.'' Such 
deductions are statutorily allowed subtractions from gross 
income that are used to compute adjusted gross income (AGI) and 
may be taken by both taxpayers who itemize their deductions and 
those who do not. Eligible single taxpayers whose AGI is no 
greater than $20,000 (no greater than $40,000 for joint filers) 
would be allowed to deduct up to $3,000 of qualified elementary 
and secondary education expenditures.
    The Joint Committee on Taxation (JCT) estimates that 
enacting H.R. 5193 would reduce revenues by $1.2 billion in 
2003 and by $4.9 billion over the 2003-2007 period. Because the 
bill would affect receipts, pay-as-you-go procedures would 
apply. JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would not affect the 
budgets of state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
bugetary impact of H.R. 5193 is shown in the following table. 
All revenue estimates of H.R. 5193 were provided by JCT.

----------------------------------------------------------------------------------------------------------------
                                                                     By fical year, in millions of dollars--
                                                                ------------------------------------------------
                                                                   2003      2004       2005      2006     2007
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated revenues.............................................    1,189     -1,622     -1,672     -421        0
----------------------------------------------------------------------------------------------------------------

    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in governmental receipts that are subject to pay-as-
you-go procedures are shown in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        By fiscal year, in millions of dollars--
                                                              ------------------------------------------------------------------------------------------
                                                                2002     2003       2004       2005      2006    2007   2008   2009   2010   2011   2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays...........................................      0     -1,189     -1,622     -1,672     -421      0      0      0      0      0      0
Changes in receipts..........................................                                        Not applicable
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: JCT has 
determined that the bill contains no intergovernmental or 
private-sector mandates as defined in UMRA and would not affect 
the budgets of state, local, or tribal governments.
    Estimate prepared by: Annie Bartsch.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE 


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was a result of the Committee's 
oversight review concerning the tax burden on individual 
taxpayers and tax-related education issues that the Committee 
concluded that it is appropriate and timely to enact the 
revenue provisions included in the bill as reported.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of the rule XIII of the 
Rules of the House of Representatives (relating to 
Constitutional Authority), the Committee states that the 
Committee's action in reporting this bill is derived from 
Article I of the Constitution, Section 8 (``The Congress shall 
have Power to lay and collect Taxes, Duties, Imposts and 
Excises * * *''), and from the 16th Amendment to the 
Constitution.

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, and tribal 
governments.

                E. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the provisions of the bill, and states that 
the provisions of the bill do not involve any Federal income 
tax rate increases within the meaning of the rule.

                       F. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of Treasury) to provide a 
tax complexity analysis. The complexity analysis is required 
for all legislation reported by the House Committee on Ways and 
Means, the Senate Committee on Finance, or any committee of 
conference if the legislation includes a provision that 
directly or indirectly amends the Internal Revenue Code and has 
widespread applicability to individuals or small businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Internal Revenue Code and that have 
``widespread applicability'' to individuals or small 
businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *



Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


              Subchapter B--Computation of Taxable Income

  PART I--DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE 
INCOME, ETC.

           *       *       *       *       *       *       *



SEC. 62. ADJUSTED GROSS INCOME DEFINED.

  (a) General Rule.--For purposes of this subtitle, the term 
``adjusted gross income'' means, in the case of an individual, 
gross income minus the following deductions:
          (1) * * *

           *       *       *       *       *       *       *

          (18) [Higher education] Qualified tuition and related 
        expenses.--The deduction allowed by section 222.

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *



SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Elementary and Secondary Education Expenses.--
          (1) In general.--In the case of a taxpayer whose 
        adjusted gross income for the taxable year does not 
        exceed $20,000 ($40,000 in the case of a joint return), 
        qualified tuition and related expenses shall include 
        the qualified elementary and secondary education 
        expenses paid by the taxpayer during the taxable year.
          (2) Dollar limitation.--
                  (A) In general.--For purposes of paragraph 
                (1), the amount of qualified elementary and 
                secondary education expenses taken into account 
                for a taxable year under this section by reason 
                of paragraph (1) shall not exceed $3,000.
                  (B) Coordination.--For purposes of this 
                section--
                          (i) the dollar limitations under 
                        subsection (b) shall not apply to 
                        qualified elementary and secondary 
                        education expenses, and
                          (ii) qualified elementary and 
                        secondary education expenses shall not 
                        be taken into account for purposes of 
                        applying the applicable dollar limit 
                        under subsection (b).
          (3) Definitions.--For purposes of this subsection--
                  (A) Qualified elementary and secondary 
                education expenses.--The term ``qualified 
                elementary and secondary education expenses'' 
                has the same meaning given to such term by 
                section 530(b)(4), except that--
                          (i) such term shall not include room 
                        and board,
                          (ii) subparagraph (A)(i) thereof 
                        shall be applied by including 
                        enrollment or attendance at a home 
                        school (as determined under State law), 
                        and
                          (iii) such section shall be applied--
                                  (I) by substituting 
                                ``individual'' for ``designated 
                                beneficiary of the trust'' in 
                                subparagraph (A)(i) thereof,
                                  (II) by substituting ``an 
                                individual with special needs'' 
                                for ``a special needs 
                                beneficiary'' in subparagraph 
                                (A)(i) thereof, and
                                  (III) by substituting 
                                ``individual and the 
                                individual's family during any 
                                of the years the individual'' 
                                for ``beneficiary and the 
                                beneficiary's family during any 
                                of the years the beneficiary'' 
                                in subparagraph (A)(iii) 
                                thereof.
                  (B) Adjusted gross income.--Adjusted gross 
                income shall be determined under subsection 
                (b)(2)(C).
  [(e)] (f) Termination.--This section shall not apply to 
taxable years beginning after December 31, 2005.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    It had been our hope that expanding educational 
opportunities for our children would be an issue where this 
Committee could set aside its partisan differences and work 
together. There are more than enough other issues that we can 
use to define our differences for the Fall campaign. Education 
could and should be different. The fact that Congressman Rangel 
and Congresswoman Nancy Johnson reached across the partisan 
divide in an attempt to aid our ailing public schools gave 
credence to our hopes.
    Unfortunately, the Committee, presumably following the 
dictates of the House Republican leadership, chose a different 
path. It reported out a bill on almost a pure party line vote. 
The reported bill is so flawed that it is an embarrassment to 
the Committee. It is worth noting that not one single 
Republican Member of the Committee defended the substance of 
the bill when Congressman Rangel and others raised concerns 
over its uncertain and likely overly broad definition of 
eligible expenses.
    The Committee bill will not improve the education of a 
single American child because it is designed to make a 
political point, not to become law. Congressman Nussle's 
response during the Committee markup to questions over its 
impact on the budget made this clear. He stated that its 
revenue cost would be a concern only if it were presented to 
the President for his signature, an occurrence that he implied 
would be highly unlikely.
    The political motivation for the bill is simple. Several 
months ago, the Congress passed the No Child Left Behind Act 
that reauthorized the elementary and secondary education 
programs. Congressional Republicans and the President pointed, 
with pride, to the enhanced levels of education spending that 
were authorized in that legislation. Now, the President and the 
House Republicans have allocated funds for that program for the 
next fiscal year that are approximately $7 billion less than 
the level that they just promised several months ago. This bill 
is an attempt to divert attention from their failure to live up 
to the prior rhetoric.
Administrability
    From a technical standpoint the Committee bill is so flawed 
that it is an embarrassment. It provides a long list of 
potentially deductible items, including computers, internet 
access, software, books, videos, backpacks, art supplies, 
athletic equipment, and many other items. A parent could 
receive tax deductions by paying one child to tutor another 
child as long as the parent contends that the tutoring is 
academic. Even after years of working on similar legislation, 
the Committee staff still could not explain whether taxi cab 
fares would be covered by the legislation. The staff during the 
markup admitted that purchases of TV sets could qualify in 
certain circumstances. The bill directs the Internal Revenue 
Service to distinguish between games and educational software. 
Families with income of $40,000 would receive the full benefit 
of the deduction, but if they have an additional dollar of 
income, they would lose it all. That is a result which is hard 
to justify; it would provide large incentives to not report 
income in order to avoid this harsh result.
    Above are only a few examples of the many problems that 
would result if this bill becomes law. Again, it is worth 
noting that no Republican Member of the Committee bothered to 
explain or justify the legislation. They were merely voting 
according to their leadership dictates.
Bipartisan school construction alternative
    We believe that we cannot expect our children to learn or 
our teachers to teach effectively unless they are provided with 
a safe and modern school building. Forcing students to go to 
school intrailers or dilapidated school buildings is a clear 
message to them that they and their education do not matter.
    Currently, our public school system has extraordinary unmet 
needs for funds to construct and modernize schools. New 
estimates, based on data collected by the State Departments of 
Education, indicate that more than $300 billion will be needed 
to repair or replace existing public school facilities and to 
construct new schools for the so-called ``baby boom echo'' 
effect. That $300 billion need cannot be met without a 
significant commitment of funds from all levels of government, 
including the Federal Government.
    Congressman Rangel and Congresswoman Nancy Johnson, working 
together, have developed bipartisan legislation that would 
provide a meaningful downpayment for school construction and 
modernization. Their proposal would provide $24.8 billion in 
interest-free funds over the next two years for school 
construction and renovation projects.
    The bipartisan school construction proposal would in no way 
impede on local control of the public school system. All 
decisions regarding what schools to build or renovate would be 
left to local school districts. The Federal contribution under 
the proposal would be provided under procedures similar to 
those utilized in providing the current law tax-exempt bond 
subsidy. The Federal role in the proposal would be limited to 
making an initial allocation of the volume limitations among 
the States.
    The bipartisan compromise is a cost-effective approach that 
would leverage nearly $25 billion in school repairs and new 
construction, while avoiding the creation of any new level of 
bureaucracy.

Conclusion

    It is our hope that the bipartisan compromise will be made 
in order when the Committee bill is considered on the Floor. 
Adopting the bipartisan compromise would be a first step in 
enacting bipartisan legislation to expand educational 
opportunities.

                                   Pete Stark.
                                   C.B. Rangel.
                                   Robert T. Matsui.
                                   Richard E. Neal.
                                   Jerry Kleczka.
                                   John Lewis.
                                   Karen L. Thurman.
                                   William J. Coyne.
                                   Sander M. Levin.
                                   Ben Cardin.
                                   Jim McDermott.
                                   John Tanner.
                                   Xavier Becerra.
                                   Wm. J. Jefferson.

                                
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