[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\
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\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.
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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.