Section 1 Short title
This Act may be cited as the “American Opportunity Tax Credit Reform Act”.
American Opportunity Tax Credit Reform Act
A BILL
To amend the Internal Revenue Code of 1986 to coordinate the reduction in the American Opportunity Tax Credit with Federal Pell Grants, to the extent such grants are attributable to expenses not eligible for such credit, and for other purposes.
Sec. 2 American Opportunity Tax Credit coordination with Pell grants
In general— Section 25A(i) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(8) Coordination with Pell Grants not used for qualified tuition and related expenses—For purposes of this subsection, any amount determined with respect to an individual under subsection (g)(2) which is attributable to a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) shall be reduced (but not below zero) by the amount of 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 this paragraph) of such individual at an eligible educational institution for the academic period for which the credit under this section is being determined.”
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 3 Expansion of Pell Grant exclusion from gross income
by striking the period at the end and inserting “, or”,
by striking “received by an individual as a scholarship” and inserting the following:
“(A) as a scholarship”
by adding at the end the following new subparagraph:
“(B) as a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a).”
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2016.