To amend the Internal Revenue Code of 1986 to expand incentives for education.

October 30, 2003

Mr. ENGLISH 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

To amend the Internal Revenue Code of 1986 to expand incentives for education.

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 `Higher Education Affordability and Equity Act of 2003'.

SEC. 2. EXPANSION OF DEDUCTION FOR INTEREST ON EDUCATION LOANS.

(a) REPEAL OF DOLLAR LIMITATION; INCREASE IN PHASEOUT BEGINNING POINT- Subsection (b) of section 221 of the Internal Revenue Code of 1986 (relating to maximum deduction) is amended to read as follows:

`(b) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME-

`(1) IN GENERAL- The amount which would (but for this subsection) be allowable as a deduction under this section 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) $100,000 ($200,000 in the case of a joint return), bears to

`(B) $15,000 ($30,000 in the case of a joint return).

`(3) MODIFIED ADJUSTED GROSS INCOME- The term `modified adjusted gross income' means adjusted gross income determined--

`(A) without regard to this section and sections 222, 911, 931, and 933, and

`(B) after application of sections 86, 135, 137, 219, and 469.'.

(b) CONFORMING AMENDMENT- Section 221(f)(1) of such Code is amended to read as follows:

`(1) IN GENERAL- In the case of a taxable year beginning after 2004, the $100,000 and $200,000 amounts in subsection (b) 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 2003' for `calendar year 1992' in subparagraph (B) thereof.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 3. DEDUCTION FOR QUALIFIED TUITION AND RELATED EXPENSES MADE PERMANENT.

(a) REPEAL OF TERMINATION- Section 222 of the Internal Revenue Code of 1986 is amended by striking subsection (e).

(b) CONFORMING AMENDMENTS- Subparagraph (B) of section 222(b)(2) of such Code is amended--

(1) by striking `2004 or 2005' and inserting `2004 or thereafter', and

(2) in the heading by striking `AND 2005' and inserting `AND THEREAFTER'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 4. EDUCATION SAVINGS ACCOUNTS.

(a) INCREASE IN ALLOWABLE CONTRIBUTIONS-

(1) IN GENERAL- Clause (iii) of section 530(b)(1)(A) of the Internal Revenue Code of 1986 is amended by striking `$2,000' and inserting `$5,000'.

(2) CONFORMING AMENDMENT- Section 4973(e)(1)(A) of such Code is amended by striking `$2,000' and inserting `$5,000'.

(b) REPORTS- Subsection (h) of section 530 of such Code is amended by striking the period at the end of the last sentence and inserting `, except that reports shall be so filed and furnished for any calendar year not later than June 30 of the following year.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 5. ALLOWANCE OF ROOM, BOARD, AND SPECIAL NEEDS SERVICES IN THE CASE OF SCHOLARSHIPS AND TUITION REDUCTION PROGRAMS WITH RESPECT TO HIGHER EDUCATION.

(a) IN GENERAL- Paragraph (1) of section 117(b) of the Internal Revenue Code of 1986 (defining qualified scholarship) is amended by inserting before the period at the end the following: `or, in the case of enrollment or attendance at an eligible educational institution, for qualified higher education expenses.'.

(b) DEFINITIONS- Subsection (b) of section 117 of such Code is amended by adding at the end the following new paragraph:

`(3) QUALIFIED HIGHER EDUCATION EXPENSES; ELIGIBLE EDUCATIONAL INSTITUTION- The terms `qualified higher education expenses' and `eligible educational institution' have the meanings given such terms in section 529(e).'.

(c) TUITION REDUCTION PROGRAMS- Paragraph (5) of section 117(d) of such Code (relating to special rules for teaching and research assistants) is amended by striking `shall be applied as if it did not contain the phrase `(below the graduate level)'.' and inserting `shall be applied--

`(A) as if it did not contain the phrase `(below the graduate level)', and

`(B) by substituting `qualified higher education expenses' for `tuition' the second place it appears.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to expenses paid after December 31, 2003 (in taxable years ending after such date), for education furnished in academic periods beginning after such date.

SEC. 6. TREATMENT OF PREPAYMENT AND SAVINGS PLANS UNDER STUDENT FINANCIAL AID NEEDS ANALYSIS.

(a) DEFINITION OF ASSETS- Subsection (f) of section 480 of the Higher Education Act of 1965 (20 U.S.C. 1087vv(j)) is amended--

(1) in paragraph (1) by inserting `qualified education benefit (except as provided in paragraph (3)),' after `tax shelters,'; and

(2) by adding at the end the following new paragraphs:

`(3) A qualified education benefit shall not be considered an asset of the student under section 475 of this part.

`(4) For purposes of this subsection, the term `qualified education benefit' means--

`(A) a program which is described in clause (i) of section 529(b)(1)(A) of the Internal Revenue Code of 1986 and which meets the requirements of section 529(b)(1)(B) of such Code;

`(B) a State tuition program described in clause (ii) of section 529(b)(1)(A) of the Internal Revenue Code of 1986 which meets the requirements of section 529(b)(1)(B) of such Code; and

`(C) a Coverdell education savings account (as defined in section 530(b)(1) of the Internal Revenue Code of 1986).'.

(b) DEFINITION OF OTHER FINANCIAL ASSISTANCE- Subsection (j) of section 480 of the Higher Education Act of 1965 (20 U.S.C. 1087vv(j)) is amended--

(1) by striking `; TUITION PREPAYMENT PLANS' in the heading of such subsection;

(2) by striking `(1) For purposes' and inserting `For purposes'; and

(3) by striking paragraph (2).

(c) EFFECTIVE DATE- The amendments made by this section shall apply with respect to determinations of need under part F of title IV of the Higher Education Act of 1965 for academic years beginning on or after July 1, 2005.

SEC. 7. REPEAL OF EGTRRA SUNSET APPLICABILITY TO CERTAIN EDUCATION PROVISIONS.

Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 (relating to sunset of provisions of such Act) shall not apply to subtitles A, B, and D of title IV of such Act.

END