To amend the Internal Revenue Code of 1986 to allow a refundable credit against income tax for tuition expenses incurred for each qualifying child of the taxpayer in attending public or private elementary or secondary school.

February 1, 2005

Mr. SMITH of New Jersey introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow a refundable credit against income tax for tuition expenses incurred for each qualifying child of the taxpayer in attending public or private elementary or secondary school.

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 `Education, Achievement, and Opportunity Act'.

SEC. 2. FINDINGS.

Congress finds the following:

(1) Private schools supplement the public school system and are a vital component of our Nation's school network.

(2) The public school system was created to serve students, not the other way around. Children should have the opportunity to attend the school system that is most conducive to developing their abilities, and parents have the right to choose the public or private school that best meets their child's individual needs.

SEC. 3. CREDIT FOR ELEMENTARY AND SECONDARY EDUCATION EXPENSES.

(a) In General- Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 36 as section 37 and by inserting after section 35 the following new section:

`SEC. 36. ELEMENTARY AND SECONDARY EDUCATION EXPENSES.

`(a) Allowance of Credit-

`(1) IN GENERAL- In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year the amount of the qualified education expenses paid by the taxpayer during the taxable year for each qualifying child of the taxpayer.

`(2) AMOUNT PER CHILD- The amount of credit allowable under paragraph (1) for any taxable year with respect to the qualified education expenses of each qualifying child of the taxpayer shall not exceed--

`(A) $2,500 for a child enrolled in an elementary school for any portion of the taxable year, and

`(B) $3,500 for a child enrolled in a secondary school for any portion of the taxable year.

In any taxable year in which a child meets the requirements of both subparagraphs (A) and (B), the amount of credit allowable shall not exceed the sum of the amounts in such subparagraphs.

`(b) Limitation Based on Adjusted Gross Income-

`(1) IN GENERAL- The amount of the credit allowable under subsection (a) (after the application of subsection (a)(2)) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds the threshold amount.

`(2) DEFINITIONS AND SPECIAL RULES- For purposes of this paragraph (1)--

`(A) THRESHOLD AMOUNT- The term `threshold amount' means--

`(i) $150,000 in the case of a joint return, and

`(ii) $75,000 in any other case.

`(B) MODIFIED ADJUSTED GROSS INCOME- The term `modified adjusted gross income' means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.

`(C) MARITAL STATUS- Marital status shall be determined under section 7703.

`(c) Definitions- For purposes of this section--

`(1) QUALIFYING CHILD- The term `qualifying child' has the meaning provided by section 24(c).

`(2) QUALIFIED EDUCATION EXPENSES-

`(A) IN GENERAL- The term `qualified education expenses' means amounts paid for--

`(i) tuition and fees required for the enrollment or attendance of a student at a qualified educational institution,

`(ii) computers, educational software, computer support services, and books required for courses of instruction at a qualified educational institution,

`(iii) academic tutoring (by a person other than the taxpayer),

`(iv) special needs services for qualifying children with disabilities (within the meaning of the Americans With Disabilities Act of 1990),

`(v) fees for transportation services to and from a private school, if the transportation is provided by the school and the school charges a fee for the transportation, and

`(vi) academic testing services.

`(B) AMOUNTS EXCLUDED- The term does not include special school fees for nonacademic purposes, including fees for student activities, athletics, insurance, school uniforms, and nonacademic after-school activities.

`(3) QUALIFIED EDUCATIONAL INSTITUTION- The term `qualified educational institution' means--

`(A) an elementary or secondary school (as defined in section 14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 8801)), or

`(B) any private, parochial, or religious school organized for the purpose of providing elementary or secondary education, or both.

`(d) Adjustment for Coverdell Savings Account Distributions- The amount of qualified education expenses taken into account under subsection (a) with respect to an individual for a taxable year shall be reduced (before the application of subsection (b)) by the sum of any amounts not includible in gross income under section 530(d)(2)(B) for such taxable year by reason of the qualified elementary and secondary education expenses (as defined in section 530(b)(4)) of such individual for such taxable year.'.

(b) Technical Amendments-

(1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by striking `or' after `1978,' and by inserting before the period `, or enacted by the Education, Achievement, and Opportunity Act'.

(2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last item and inserting the following new items:

`Sec. 36. Elementary and secondary education expenses.

`Sec. 37. Overpayments of tax.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

END