107th CONGRESS
1st Session

Make College Affordable Act
H. R. 342

To amend the Internal Revenue Code of 1986 to make higher education more affordable by
providing a full tax deduction for higher education expenses and interest on student loans.

IN THE HOUSE OF REPRESENTATIVES
January 31, 2001

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

To amend the Internal Revenue Code of 1986 to make higher education more affordable by providing a full tax deduction for higher education expenses and interest on student loans.

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 `Make College Affordable Act of 2001'.

SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

(a) DEDUCTION ALLOWED- Section 221 of the Internal Revenue Code of 1986 is amended to read as follows:

`SEC. 221. HIGHER EDUCATION EXPENSES.

`(a) ALLOWANCE OF DEDUCTION- In the case of an individual, there shall be allowed as a deduction an amount equal to--

`(1) the qualified higher education expenses, and

`(2) interest on qualified higher education loans,

paid by the taxpayer during the taxable year.

`(b) LIMITATIONS-

`(1) PER STUDENT- The aggregate payments during the taxable year for the qualified higher education expenses of each individual which may be taken into account under subsection (a) shall not exceed $10,000.

`(2) PER TAXPAYER- The amount allowed as a deduction under subsection (a) for the taxable year shall not exceed $20,000.

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

`(A) IN GENERAL- The amount which would (but for this paragraph) be taken into account under subsection (a) shall be reduced (but not below zero) by the amount determined under subparagraph (B).

`(B) AMOUNT OF REDUCTION- The amount determined under this subparagraph equals 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) $55,000 ($85,000 in the case of a joint return), bears to

`(ii) $15,000.

`(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 determined--

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

`(ii) after the application of sections 86, 135, 219, 220, and 469.

For purposes of the sections referred to in clause (ii), adjusted gross income shall be determined without regard to the deduction allowed under this section.

`(D) INFLATION ADJUSTMENTS-

`(i) IN GENERAL- In the case of a taxable year beginning after 2002, the $55,000 and $85,000 amounts described in subparagraph (B) shall each 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 2001' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any amount as adjusted under clause (i) is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.

`(c) QUALIFIED HIGHER EDUCATION EXPENSES- For purposes of this section--

`(1) QUALIFIED HIGHER EDUCATION EXPENSES-

`(A) IN GENERAL- The term `qualified higher education expenses' means--

`(i) tuition and fees charged by an educational institution and required for the enrollment or attendance of--

`(I) the taxpayer,

`(II) the taxpayer's spouse,

`(III) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151, or

`(IV) any grandchild of the taxpayer,

as an eligible student at an institution of higher education, and

`(ii) room and board for such an individual while away from home and attending such institution.

`(B) ELIGIBLE COURSES- Amounts paid for qualified higher education expenses of any individual shall be taken into account under subsection (a) only to the extent such expenses are attributable to courses of instruction for which credit is allowed toward a baccalaureate or graduate degree by an institution of higher education or toward a certificate of required course work at a vocational school.

`(C) EXCEPTION FOR NONACADEMIC FEES- Such term does not include any student activity fees, athletic fees, insurance expenses, or other expenses unrelated to a student's academic course of instruction.

`(D) ELIGIBLE STUDENT- For purposes of subparagraph (A), the term `eligible student' means a student who--

`(i) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on the date of the enactment of this section, and

`(ii) is carrying at least one-half the normal full-time work load for the course of study the student is pursuing, as determined by the institution of higher education.

`(E) IDENTIFICATION REQUIREMENT- No deduction shall be allowed under subsection (a) to a taxpayer with respect to an eligible student unless the taxpayer includes the name, age, and taxpayer identification number of such eligible student on the return of tax for the taxable year.

`(2) INSTITUTION OF HIGHER EDUCATION- The term `institution of higher education' means an institution which--

`(A) is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date of the enactment of this section, and

`(B) is eligible to participate in programs under title IV of such Act.

`(d) QUALIFIED HIGHER EDUCATION LOAN- For purposes of this section--

`(1) IN GENERAL- The term `qualified higher education loan' means a loan which is--

`(A) made, insured, or guaranteed by the Federal Government,

`(B) made by a State or a political subdivision of a State,

`(C) made from the proceeds of a qualified student loan bond under section 144(b), or

`(D) made by an institution of higher education (as defined in section 1201(a) of the Higher Education Act of 1965 (20 U.S.C. 1141(a))).

`(2) LIMITATION- The amount of interest on a qualified higher education loan which is taken into account under subsection (a)(2) shall not exceed the amount which bears the same ratio to such amount of interest as--

`(A) the proceeds from such loan used for qualified higher education expenses, bears to

`(B) the total proceeds from such loan.

For purposes of the preceding sentence, the term `qualified higher education expenses' shall be determined without regard to subsection (c)(1)(A)(i)(IV).

`(e) SPECIAL RULES-

`(1) NO DOUBLE BENEFIT-

`(A) IN GENERAL- No deduction shall be allowed under subsection (a) for any expense for which a deduction is allowable to the taxpayer under any other provision of this chapter unless the taxpayer irrevocably waives his right to the deduction of such expense under such other provision.

`(B) DENIAL OF DEDUCTION IF CREDIT ELECTED- No deduction shall be allowed under subsection (a) for a taxable year with respect to the qualified higher education expenses of an individual if the taxpayer elects to have section 25A apply with respect to such individual for such year.

`(C) DEPENDENTS- No deduction shall be allowed under subsection (a) to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.

`(D) COORDINATION WITH EXCLUSIONS- A deduction shall be allowed under subsection (a) for qualified higher education expenses only to the extent the amount of such expenses exceeds the amount excludable under section 135 or 530(d)(2) for the taxable year.

`(2) LIMITATION ON TAXABLE YEAR OF DEDUCTION-

`(A) IN GENERAL- A deduction shall be allowed under subsection (a) for qualified higher education expenses for any taxable year only to the extent such expenses are in connection with enrollment at an institution of higher education during the taxable year.

`(B) CERTAIN PREPAYMENTS ALLOWED- Subparagraph (A) shall not apply to qualified higher education expenses paid during a taxable year if such expenses are in connection with an academic term beginning during such taxable year or during the first 3 months of the next taxable year.

`(3) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS AND VETERANS BENEFITS- The amount of qualified higher education expenses otherwise taken into account under subsection (a) or (d)(2) with respect to the education of an individual shall be reduced (before the application of subsection (b)) by the sum of the amounts received with respect to such individual for the taxable year as--

`(A) a qualified scholarship which under section 117 is not includable in gross income,

`(B) an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or

`(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for educational expenses, or attributable to enrollment at an eligible educational institution, which is exempt from income taxation by any law of the United States.

`(4) NO DEDUCTION 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.

`(5) 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.

`(6) REGULATIONS- The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including regulations requiring recordkeeping and information reporting.'

(b) DEDUCTION ALLOWED IN COMPUTING ADJUSTED GROSS INCOME- Paragraph (17) of section 62(a) of such Code is amended to read as follows:

`(17) HIGHER EDUCATION EXPENSES- The deduction allowed by section 221.'

(c) CONFORMING AMENDMENTS-

(1) The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 221 and inserting the following new item:

`Sec. 221. Higher education expenses.'

(2) Section 6050S(e) of such Code is amended by striking `such term by section 221(e)(1)' and inserting `the term `qualified higher education loan' by section 221(d)(1)'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to payments made after December 31, 2000.

END