Bill Summary
This bill, titled the "American Opportunity Student Tax Relief Act of 2020," aims to amend the Internal Revenue Code of 1986 to extend and modify the American Opportunity Tax Credit. It also includes provisions for COVID relief, such as expanding the exclusion of Pell Grants from gross income and excluding emergency financial aid grants from taxable income. Additionally, it sets limitations, special rules, and definitions for the tax credit. This section specifically expands the exclusion of Pell Grants to include those received under section 401 of the Higher Education Act of 1965, with an effective date of taxable years beginning after December 31, 2020.
Possible Impacts
1. Students who receive Pell Grants will no longer have to include them as part of their taxable income, providing them with financial relief.
2. Individuals who receive emergency financial aid grants due to the COVID-19 pandemic will not have to pay taxes on the grants, helping them to manage their expenses during this difficult time.
3. This legislation will provide tax credits to students who are pursuing higher education, making it more affordable for them to obtain a degree and potentially improving their career prospects.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6749 Introduced in House (IH)]
<DOC>
116th CONGRESS
2d Session
H. R. 6749
To amend the Internal Revenue Code of 1986 to extend and modify the
American Opportunity Tax Credit, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 8, 2020
Mr. Doggett (for himself, Mr. Fitzpatrick, Mr. Danny K. Davis of
Illinois, Mr. Beyer, Mr. Bishop of Georgia, Mrs. Beatty, Mr. Cohen, Mr.
Clay, Mr. Rush, Mr. Tonko, Ms. Norton, Mr. Thompson of Mississippi, Mr.
Green of Texas, Mr. Veasey, Ms. Roybal-Allard, Mrs. Watson Coleman,
Mrs. Carolyn B. Maloney of New York, Mr. Pascrell, Ms. Kaptur, Ms.
Eshoo, Ms. Lee of California, Ms. DelBene, Mr. Castro of Texas, Mr.
Raskin, Mr. Takano, Mr. Krishnamoorthi, Mr. Lowenthal, Mr. Suozzi, Ms.
Sewell of Alabama, Mr. Ryan, Mr. Panetta, Ms. Jayapal, Mrs. Hayes, Ms.
Schakowsky, Ms. Sanchez, Mr. Cicilline, Mr. Larson of Connecticut, Mr.
Higgins of New York, Mr. Swalwell of California, and Ms. Judy Chu of
California) introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to extend and modify the
American Opportunity Tax Credit, and for other purposes.
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 ``American Opportunity Student Tax
Relief Act of 2020''.
SEC. 2. COVID RELIEF.
(a) American Opportunity and Lifetime Learning Credits.--Section
25A of the Internal Revenue Code of 1986 is amended by adding at the
end the following new subsection:
``(j) COVID Relief.--In the case of any taxable year beginning in
2020:
``(1) Subsection (b)(1)(A) shall be applied by substituting
`$2,500' for `$2,000'.
``(2) Subsection (b)(1)(B) shall be applied--
``(A) by substituting `$2,500' for `$2,000', and
``(B) by substituting `$4,500' for `$4,000'.
``(3) Subsection (i) shall be applied by substituting
`Sixty percent' for `Forty percent'.
``(4) The amount determined under subsection (c)(1) shall
be the sum of--
``(A) 100 percent of so much of the qualified
tuition and related expenses paid the taxpayer during
the taxable year (for education furnished during any
academic period beginning in such taxable year) as does
not exceed $2,000, plus
``(B) 20 percent of such expenses so paid as
exceeds $2,000 but does not exceed $10,000.
``(5) So much of the credit allowable under subsection (a)
as is attributable to the Lifetime Learning Credit (determined
after application of subsection (d) and without regard to this
paragraph and section 26(a)) and does not exceed $1,500 shall
be treated as a credit allowable under subpart C (and not
allowed under subsection (a)).''.
(b) Expansion of Pell Grant Exclusion From Gross Income.--Section
4(b) of this Act is amended by striking ``December 31, 2020'' and
inserting ``December 31, 2019''.
(c) Exclusion of Emergency Financial Aid Grants.--For purposes of
the Internal Revenue Code of 1986, in the case of any taxable year
beginning in 2020, gross income shall not include any emergency
financial aid grant received by a student under section 18004(c) of the
CARES Act.
SEC. 3. EXTENSION AND MODIFICATION OF AMERICAN OPPORTUNITY TAX CREDIT.
(a) In General.--Section 25A of the Internal Revenue Code of 1986,
as amended by section 2, is amended to read as follows:
``SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.
``(a) Allowance of Credit.--In the case of an individual who is an
eligible student for any taxable year, there shall be allowed as a
credit against the tax imposed by this chapter for such taxable year
the amount determined under subsection (b) with respect to such
individual.
``(b) Amount of Credit.--
``(1) Student enrolled at least \1/2\ time.--In the case of
an eligible student who is carrying at least \1/2\ the normal
full-time workload for the course of study the student is
pursuing, the amount determined under this subsection with
respect to such individual is the sum of--
``(A) 100 percent of so much of the qualified
tuition and related expenses paid by the taxpayer
during the taxable year (for education furnished to the
eligible student during any academic period beginning
in such taxable year) as does not exceed $2,000, plus
``(B) 25 percent of such expenses so paid as
exceeds $2,000 but does not exceed $4,000.
``(2) Other students.--In the case of an eligible student
not described in paragraph (1), the amount determined under
this subsection with respect to such individual is 25 percent
of so much of the qualified tuition and related expenses paid
by the taxpayer during the taxable year (for education
furnished to the eligible student during any academic period
beginning in such taxable year) as does not exceed $10,000.
``(c) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--The amount which would (but for this
paragraph) be taken into account under this section for the
taxable year 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) $80,000 ($160,000 in the case of a
joint return), bears to
``(B) $10,000 ($20,000 in the case of a joint
return).
``(3) 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
increased by any amount excluded from gross income under
section 911, 931, or 933.
``(d) Other Limitations and Special Rules.--For purposes of this
section:
``(1) Lifetime dollar limitation.--In the case of qualified
tuition and related expenses with respect to any eligible
student, the aggregate amount of the credits allowed in the
taxable year and any prior taxable year for such eligible
student (whether beginning before or after American Opportunity
Student Tax Relief Act of 2020) shall not exceed $15,000,
determined without regard to whether--
``(A) such credits are claimed on the return of tax
filed by the eligible student or by another taxpayer,
or
``(B) such expenses are treated as paid by the
eligible student or by another taxpayer.
If, in any taxable year, the aggregate amount of such credits
equals or exceeds $15,000, the amount allowed as a credit under
subsection (a) in any subsequent taxable year with respect to
such student shall be zero.
``(2) Identification requirements.--
``(A) Students.--
``(i) In general.--No credit shall be
allowed under this section to a taxpayer with
respect to the qualified tuition and related
expenses of an eligible student unless the
taxpayer includes the name and taxpayer
identification number of such eligible student
on the return of tax for the taxable year.
``(ii) Issuance.--The requirements of
clause (i) shall not be treated as met unless
the individual's taxpayer identification number
was issued on or before the due date for filing
the return of tax for the taxable year.
``(B) Taxpayer.--No credit shall be allowed under
this section if the identifying number of the taxpayer
was issued after the due date for filing the return for
the taxable year.
``(C) Institution.--No credit shall be allowed
under this section unless the taxpayer includes the
employer identification number of any institution to
which qualified tuition and related expenses were paid
with respect to the individual.
``(3) Adjustment for certain scholarships, etc.--
``(A) In general.--The amount of qualified tuition
and related expenses otherwise taken into account under
this section with respect to an individual for an
academic period shall be reduced (before the
application of subsections (b) and (c)) by the sum of
any amounts paid for the benefit of such individual
which are allocable to such period as--
``(i) a qualified scholarship which is
excludable from gross income under section 117,
``(ii) an educational assistance allowance
under chapter 30, 31, 32, 34, or 35 of title
38, United States Code, or under chapter 1606
of title 10, United States Code, and
``(iii) a payment (other than a gift,
bequest, devise, or inheritance within the
meaning of section 102(a)) for such
individual's educational expenses, or
attributable to such individual's enrollment at
an eligible educational institution, which is
excludable from gross income under any law of
the United States.
``(B) Coordination with pell grants not used for
qualified tuition and related expenses.--Any amount
determined with respect to an individual under
subparagraph (A) which is attributable to a Federal
Pell Grant under section 401 of the Higher Education
Act of 1965 shall be reduced (but not below zero) by
the amount of the expenses (other than qualified
tuition and related expenses) which are taken into
account in determining the cost of attendance (as
defined in section 472 of the Higher Education Act of
1965, as in effect on the date of the enactment of the
American Opportunity Student Tax Relief Act of 2020) of
such individual at an eligible educational institution
for the academic period for which the credit under this
section is being determined.
``(4) Treatment of expenses paid by dependent.--If a
deduction under section 151 with respect to an individual is
allowed to another taxpayer for a taxable year beginning in the
calendar year in which such individual's taxable year begins--
``(A) no credit shall be allowed under this section
to such individual for such individual's taxable year,
and
``(B) qualified tuition and related expenses paid
by such individual during such individual's taxable
year shall be treated for purposes of this section as
paid by such other taxpayer.
``(5) Treatment of certain prepayments.--If qualified
tuition and related expenses are paid by the taxpayer during a
taxable year for an academic period which begins during the
first 3 months following such taxable year, such academic
period shall be treated for purposes of this section as
beginning during such taxable year.
``(6) Denial of double benefit.--No credit shall be allowed
under this section for any expense for which a deduction is
allowed under any other provision of this chapter.
``(7) No credit 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.
``(8) 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.
``(e) Election Not To Have Section Apply.--A taxpayer may elect not
to have this section apply with respect to the qualified tuition and
related expenses of an individual for any taxable year.
``(f) Definitions.--For purposes of this section:
``(1) Eligible student.--The term `eligible student' means,
with respect to any taxable year, an individual who--
``(A) is enrolled for at least one academic period
which begins during such taxable year at an eligible
educational institution, and
``(B) meets the requirements of section 484(a)(1)
of the Higher Education Act of 1965, as in effect on
the date of the enactment of the American Opportunity
Student Tax Relief Act of 2020.
``(2) Qualified tuition and related expenses.--
``(A) In general.--The term `qualified tuition and
related expenses' means tuition, fees, and course
materials required for the enrollment or attendance
of--
``(i) the taxpayer,
``(ii) the taxpayer's spouse, or
``(iii) any dependent of the taxpayer with
respect to whom the taxpayer is allowed a
deduction under section 151,
at an eligible educational institution for courses of
instruction of such individual at such institution.
``(B) Exception for education involving sports,
etc.--Such term does not include expenses with respect
to any course or other education involving sports,
games, or hobbies, unless such course or other
education is part of the individual's degree program.
``(C) Exception for nonacademic fees.--Such term
does not include student activity fees, athletic fees,
insurance expenses, or other expenses unrelated to an
individual's academic course of instruction.
``(3) Eligible educational institution.--The term `eligible
educational institution' means an institution--
``(A) which is described in section 481 of the
Higher Education Act of 1965, as in effect on the date
of the enactment of the American Opportunity Student
Tax Relief Act of 2020, and
``(B) which is eligible to participate in a program
under title IV of such Act.
``(g) Portion of Credit Refundable.--The lesser of--
``(1) the credit allowed under this section for a taxable
year (determined after application of subsections (c)(1) and
(d) and without regard to this subsection and section 26(a)(2),
as the case may be), or
``(2) $1,500,
shall be treated as a credit allowable under subpart C (and not allowed
under this section). The preceding sentence shall not apply to any
taxpayer for any taxable year if such taxpayer is a child to whom
subsection (g) of section 1 applies for such taxable year.
``(h) Restrictions on Taxpayers Who Improperly Claimed Credit in
Prior Year.--
``(1) Taxpayers making prior fraudulent or reckless
claims.--
``(A) In general.--No credit shall be allowed under
this section for any taxable year in the disallowance
period.
``(B) Disallowance period.--For purposes of clause
(i), the disallowance period is--
``(i) the period of 10 taxable years after
the most recent taxable year for which there
was a final determination that the taxpayer's
claim of credit under this section was due to
fraud, and
``(ii) the period of 2 taxable years after
the most recent taxable year for which there
was a final determination that the taxpayer's
claim of credit under this section was due to
reckless or intentional disregard of rules and
regulations (but not due to fraud).
``(2) Taxpayers making improper prior claims.--In the case
of a taxpayer who is denied credit under this section for any
taxable year as a result of the deficiency procedures under
subchapter B of chapter 63, no credit shall be allowed under
this section for any subsequent taxable year unless the
taxpayer provides such information as the Secretary may require
to demonstrate eligibility for such credit.
``(i) Inflation Adjustment.--In the case of any taxable year
beginning in a calendar year after 2020, each dollar amount in
subsections (b) and (c)(2), and (d)(1) shall be increased by an amount
equal to--
``(1) such dollar amount, multiplied by
``(2) 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 2017' for
`calendar year 1992' in subparagraph (B) thereof.
In the case of subsections (b) and (d)(1), any increase determined
under the preceding sentence shall be rounded to the nearest multiple
of $50. In the case of subsection (c)(2), any increase determined under
the preceding sentence shall be rounded to the nearest multiple of
$500.
``(j) Regulations.--The Secretary may prescribe such regulations as
may be necessary or appropriate to carry out this section, including
regulations providing for a recapture of the credit allowed under this
section in cases where there is a refund in a subsequent taxable year
of any amount which was taken into account in determining the amount of
such credit.''.
(b) Retention of Limitation.--
(1) In general.--Subparagraph (D) of section 25A(b)(2) of
the Internal Revenue Code of 1986, as in effect before the
enactment of the American Opportunity Student Tax Relief Act of
2020, is hereby transferred to section 25A of such Code, as
amended by subsection (a), and is inserted as a new subsection
(d)(9) of section 25A, as so amended.
(2) Conforming amendment.--Paragraph (9) of section 25A(d)
of such Code, as transferred and inserted by paragraph (1), is
amended by striking ``The Hope Scholarship Credit under
subsection (a)(1)'' and inserting ``The credit under subsection
(a)''.
(c) Conforming Amendments.--
(1) Subparagraph (B) of section 72(t)(7) of such Code is
amended by striking ``25A(g)(2)'' and inserting ``25A(d)(3)''.
(2) Paragraph (2) of section 221(d) of such Code is
amended--
(A) by striking ``25A(g)(2)'' in subparagraph (B)
and inserting ``25A(d)(3)''; and
(B) by striking ``25A(f)(2)'' and inserting
``25A(f)(3)''.
(3) Paragraph (3) of section 221(d) of such Code is amended
by striking ``25A(b)(3)'' and inserting ``25A(f)(1) (but only
with respect to a student who is carrying at least \1/2\ the
normal full-time workload for the course of study the student
is pursuing)''.
(4) Clause (v) of section 529(c)(3)(B) of such Code is
amended--
(A) by striking ``25A(g)(2)'' in subclause (I) and
inserting ``25A(d)(3)''; and
(B) by striking ``Hope and lifetime learning
credits'' in the heading and inserting ``American
opportunity credit''.
(5) Clause (i) of section 529(e)(3)(B) of such Code is
amended by striking ``25A(b)(3)'' and inserting ``25A(f)(1)
(but only with respect to a student who is carrying at least
\1/2\ the normal full-time workload for the course of study the
student is pursuing)''.
(6) Subparagraph (C) of section 530(d)(2) of such Code is
amended--
(A) by striking ``25A(g)(2)'' in clause (i)(I) and
inserting ``25A(d)(3)''; and
(B) by striking ``Hope and lifetime learning
credits'' in the heading and inserting ``American
opportunity credit''.
(7) Clause (iii) of section 530(d)(4)(B)(iii) of such Code
is amended by striking ``25A(g)(2)'' and inserting
``25A(d)(3)''.
(8) Section 1400O of such Code is amended--
(A) by striking ``25A(f)(2)'' and inserting
``25A(f)(3)'';
(B) by inserting ``(as in effect on the date of the
enactment of this section)'' after ``25A(b)(1)'' in
paragraph (2); and
(C) by inserting ``(as in effect on the date of the
enactment of this section)'' after ``25A(c)(1)'' in
paragraph (3).
(9) Subsection (e) of section 6050S of such Code is amended
by striking ``subsection (g)(2)'' and inserting ``subsection
(d)(3)''.
(10) Subparagraph (A) of section 6211(b)(4) of such Code is
amended by striking ``subsection (i)(6)'' and inserting
``subsection (g)''.
(11) Section 6213(g)(2) of such Code is amended--
(A) in subparagraph (J), by striking ``25A(g)(1)''
and inserting ``25A(d)(2)''; and
(B) in subparagraph (Q), by striking
``25A(i)(8)(B)'' and inserting ``25A(h)(2)'' and by
striking ``25A(i)'' and inserting ``25A''.
(12) Subsection (g) of section 6695 of such Code is amended
by striking ``25A(a)(1)'' and inserting ``25A(a)''.
(d) Clerical Amendment.--The item relating to section 25A in the
table of sections for subpart A of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended to read as follows:
``Sec. 25A. American Opportunity Tax Credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2020.
SEC. 4. EXPANSION OF PELL GRANT EXCLUSION FROM GROSS INCOME.
(a) In General.--Paragraph (1) of section 117(b) of the Internal
Revenue Code of 1986 is amended by striking ``received by an
individual'' and all that follows and inserting ``received by an
individual--
``(A) as a scholarship or fellowship grant to the
extent the individual establishes that, in accordance
with the conditions of the grant, such amount was used
for qualified tuition and related expenses; or
``(B) as a Federal Pell Grant under section 401 of
the Higher Education Act of 1965 (as in effect on the
date of the enactment of the American Opportunity
Student Tax Relief Act of 2020).''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2020.
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