Copyright© 2007 by School Services of California, Inc.

                                      Volume 20                   For Publication Date: June 22, 2007             No. 14

Bipartisan Bill Proposes Tax Reform for Higher Education 

U.S. Representatives Rahm Emanuel (D-IL) and Dave Camp (R-MI) and U.S. Senator Evan Bayh (D-IN) recently introduced the Universal Higher Education and Lifetime Learning Act, a measure that proposes to strengthen and simplify tax breaks currently used to help families afford higher education. At present, the Hope Scholarship, the Lifetime Learning Credit, and the deduction for tuition and fees assist students and their families with tuition costs at community colleges and four-year public and private colleges. The Universal Higher Education and Lifetime Learning Act would:

·                     Simplify and Consolidate Three Higher Education Tax Incentives. This bill consolidates the Hope Credit, Lifetime Learning Credit, and the tuition tax deduction into one simple, streamlined, easy-to-understand credit, which combines the best features of the existing tax benefits. According to a Government Accountability Office (GAO) study, 27% of all eligible tax filers did not claim either the tuition deduction or a tax credit.

·                     Make College More Affordable for the Middle Class. The bill provides a maximum $3,000 credit that is available on a per-student basis. The bill expands eligibility for the credit to higher income levels and increases the benefit for middle-class families struggling to keep up with rising tuition costs.

·                     Makes College More Accessible for the Middle Class. One-third of all American households, which are homes to about half of all American children, do not have a federal income tax liability. The Emanuel bill provides a 50% refundable credit that will allow these households, for the first time, to receive a tax benefit for higher education. Currently, among the 67 million taxpayers that earn less than $30,000, the higher education tax benefits are only providing $1.5 billion in assistance.

·                     Creates Universal Credit for All Post-Secondary Education. The credit is available for all four years of college (public or private), two years of community college, two years of graduate school, and individuals who are updating their skills in a training or certificate program.

·                     Covers Nontuition Costs. The bill expands the type of eligible education expenses that qualify for the tax credit to include room and board, books and supplies, and transportation. By modifying the definition, the bill conforms how eligible education expenses are defined in the tax code with how they are defined for the purpose of qualifying for federal financial aid.  

George R. Boggs, President of the American Association of Community Colleges, which represents the nation’s 1,200 community colleges, said that, “Community colleges strongly support this legislation, which will greatly enhance access to community college. The bill also increases equity in the tax code’s college financing vehicles and dramatically reduces their unnecessary complexity.” 

If passed and signed by the President, the Universal Higher Education and Lifetime Learning Act will benefit nine million students attending four-year public and private colleges and universities and an estimated 1.1 million students attending community colleges. 

—Angelo Williams