text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as ``Education Tax Credit Simplification Act 
  of 2004''.
  
  SEC. 2. HOPE AND LIFETIME LEARNING CREDITS COMBINED.
  
      (a) In General.--So much of section 25A of the Internal Revenue 
  Code of 1986 (relating to Hope and Lifetime Learning Credits) as 
  precedes subsection (d) is amended to read as follows:
  
  ``SEC. 25A. EDUCATION CREDIT.
  
      ``(a) Allowance of Credit.--In the case of an individual, there 
  shall be allowed as a credit against the tax imposed by this chapter 
  for the taxable year the amount equal to 50 percent of so much of the 
  qualified expenses paid by the taxpayer during the taxable year (for 
  education furnished to an individual during any academic period 
  beginning in such taxable year) as does not exceed $3,000 for such 
  taxable year with respect to such individual.
      ``(b) Qualified Expenses.--For purposes of subsection (a), the term 
  `qualified expenses' means the sum of--
              ``(1) qualified higher education expenses, and
              ``(2) the expenses described in subsection (d)(1) with 
          respect to any course of instruction at an eligible educational 
          institution to acquire or improve job skills of the 
          individual.''.
      (b) Conforming Amendments to Credit.--
              (1) Section 25A of such Code is amended--
                      (A) by striking subsection (h), and
                      (B) by redesignating subsections (d), (e), (f), 
                  (g), and (i) as subsections (c), (d), (e), (f), and 
                  (g), respectively.
              (2) Subsection (f)(2) of section 25A of such Code, as so 
          redesignated, is amended by striking ``(before the application 
          of subsections (b), (c), and (d))''.
      (c) Other Conforming and Clerical Amendments.--
              (1) The following provisions of such Code are each amended 
          by striking ``section 25A(g)(2)'' and inserting ``section 
          25A(f)(2)'':
                      (A) Section 72(t)(7)(B).
                      (B) Section 221(d)(2)(B).
                      (C) Section 222(d)(1) (as amended by section 132 of 
                  this Act).
                      (D) Section 529(c)(3)(B)(v)(I).
                      (E) Section 530(b)(2)(A).
                      (F) Section 530(d)(2)(C)(i)(I).
                      (G) Section 530(d)(4)(B)(iii).
              (2) Section 221(d) of such Code is amended--
                      (A) in paragraph (2) by striking ``section 
                  25A(f)(2)'' and inserting ``section 25A(e)(2)'', and
                      (B) by amending paragraph (3) to read as follows:
              ``(3) Eligible student.--The term `eligible student' means, 
          with respect to any academic period, a student who--
                      ``(A) 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
                      ``(B) is carrying at least \1/2\ the normal full-
                  time work load for the course of study the student is 
                  pursuing.''.
              (3) Section 529(e)(3)(B)(i) of such Code is amended by 
          striking ``section 25A(b)(3)'' and inserting ``section 
          221(d)(3)''.
              (4) The heading of section 529(c)(3)(B)(v) of such Code is 
          amended to read as follows: ``Coordination with education 
          credit.--''.
              (5) The heading of section 530(d)(2)(C) of such Code is 
          amended to read as follows: ``Coordination with education 
          credit and qualified tuition programs.--''.
              (6) Section 6050S(e) of such Code is amended by striking 
          ``subsection (g)(2)'' and inserting ``subsection (f)(2)''.
              (7) Section 6213(g)(2)(J) of such Code is amended by 
          striking ``section 25A(g)(1)'' and inserting ``section 
          25A(f)(1)''.
              (8) The item relating to section 25A in the table of 
          sections for subpart A of part IV of subchapter A of chapter 1 
          of such Code is amended to read as follows:
  
  ``Sec. 25A. Education Credit.''.
      (d) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2003.
  
  SEC. 3. UNIFORM DEFINITION OF QUALIFYING HIGHER EDUCATION EXPENSES.
  
      (a) In General.--Paragraph (3) of section 529(e) of such Code 
  (relating to other definitions and special rules) is amended to read as 
  follows:
              ``(3) Qualified higher education expenses.--
                      ``(A) In general.--The term `qualified higher 
                  education expenses' means--
                              ``(i) tuition, fees, books, supplies, and 
                          equipment required for the enrollment or 
                          attendance of a designated beneficiary at an 
                          eligible educational institution; and
                              ``(ii) expenses for special needs services 
                          in the case of a special needs beneficiary 
                          which are incurred in connection with such 
                          enrollment or attendance.
                      ``(B) Room and board included for students who are 
                  at least half-time.--
                              ``(i) In general.--In the case of an 
                          individual who is an eligible student for any 
                          academic period, such term shall also include 
                          reasonable costs for such period (as determined 
                          under the qualified tuition program) incurred 
                          by the designated beneficiary for room and 
                          board while attending such institution. For 
                          purposes of subsection (b)(7), a designated 
                          beneficiary shall be treated as meeting the 
                          requirements of this clause.
                              ``(ii) Limitation.--The amount treated as 
                          qualified higher education expenses by reason 
                          of clause (i) shall not exceed--
                                      ``(I) the allowance (applicable to 
                                  the student) for room and board 
                                  included in the cost of attendance (as 
                                  defined in section 472 of the Higher 
                                  Education Act of 1965 (20 U.S.C. 
                                  1087ll), as in effect on the date of 
                                  the enactment of the Economic Growth 
                                  and Tax Relief Reconciliation Act of 
                                  2001) as determined by the eligible 
                                  educational institution for such 
                                  period, or
                                      ``(II) if greater, the actual 
                                  invoice amount the student residing in 
                                  housing owned or operated by the 
                                  eligible educational institution is 
                                  charged by such institution for room 
                                  and board costs for such period.
                              ``(iii) Eligible student.--For purposes of 
                          this subparagraph, the term `eligible student' 
                          means, with respect to any academic period, 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 \1/2\ 
                                  the normal full-time work load for the 
                                  course of study the student is 
                                  pursuing.
                      ``(C) Exceptions.--
                              ``(i) 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.
                              ``(ii) 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.''.
      (b) Conforming Amendments.--
              (1) Section 25A and 6050S of such Code are each amended by 
          striking ``qualified tuition and related expenses'' each place 
          it appears and inserting ``qualified higher education 
          expenses''.
              (2) Section 25A(e)(1) of such Code (as amended by this Act) 
          is amended to read as follows:
              ``(1) Qualified higher education expenses.--The term 
          `qualified higher education expenses' means the qualified 
          higher education expenses (as defined by section 529(e)(3) 
          without regard to subparagraph (B) thereof) required for the 
          enrollment or attendance of--
                      ``(A) the taxpayer,
                      ``(B) the taxpayer's spouse, or
                      ``(C) 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.''.
              (3) Section 135(c)(2) of such Code is amended--
                      (A) by striking ``tuition and fees'' and inserting 
                  ``the qualified higher education expenses (as defined 
                  by section 529(e)(3) without regard to subparagraph (B) 
                  thereof)'', and
                      (B) by striking subparagraph (B) and redesignating 
                  subparagraph (C) as subparagraph (B).
              (4) Section 221(d)(2) of such Code is amended by striking 
          ``the cost of attendance (as defined in section 472 of the 
          Higher Education Act of 1965, 20 U.S.C. 1087ll, as in effect on 
          the day before the date of the enactment of this Act)'' and 
          inserting ``the qualified higher education expenses (as defined 
          by section 529(e)(3) without regard to subparagraph (B) 
          thereof) incurred for attendance''.
              (5)(A) Section 222 of such Code is amended by striking 
          ``qualified tuition and related expenses'' each place it 
          appears and inserting ``qualified higher education expenses''.
              (B) Section 222(d)(1) of such Code is amended to read as 
          follows:
              ``(1) Qualified higher education expenses.--The term 
          `qualified higher education expenses' has the meaning given 
          such term by section 529(e)(3) (without regard to subparagraph 
          (B) thereof). Such expenses shall be reduced in the same manner 
          as under section 25A(f)(2).''.
              (C) Section 222(d) of such Code is amended by redesignating 
          paragraph (6) as paragraph (7) and by inserting after paragraph 
          (5) the following new paragraph:
              ``(6) Room and board included for students who are full-
          time.--No amount shall be taken into account under this section 
          for an expense described in section 529(e)(3)(B) (relating to 
          room and board included for students who are at least half-
          time) unless such individual is an eligible student (as defined 
          in section 25A(b)(3), determined by substituting `the normal 
          full-time work load' in lieu of `\1/2\ the normal full-time 
          work load' in subparagraph (B) thereof.''.
              (D) The heading for section 222 of such Code is amended by 
          striking ``TUITION AND RELATED'' and inserting ``HIGHER 
          EDUCATION''.
              (E) The table of sections for part VII of subchapter B of 
          chapter 1 of such Code is amended by amending the item relating 
          to section 222 to read as follows:
  
  ``Sec. 222. Qualified higher education expenses.''.
              (6)(A) Section 6724(d) of such Code is amended--
                      (i) in paragraph (1)(B)(x) by striking ``qualified 
                  tuition and related expenses'' and inserting 
                  ``qualified higher education expenses'', and
                      (ii) in paragraph (2)(Z) by striking ``qualified 
                  tuition and related expenses'' and inserting 
                  ``qualified higher education expenses''.
      (c) Effective Date.--The amendments made by this section shall 
  apply to amounts paid in taxable years beginning after December 31, 
  2003, for education furnished in periods beginning after such date.
target: Education Tax Credit Simplification Act of 2004 - Amends the Internal Revenue Code to revise the Hope and Lifetime Learning Tax Credits. Combines both credits into an Education Credit that allows certain students a tax credit of 50 percent of their qualified higher education expenses and educational expenses to acquire or improve job skills, up to $3,000 per year. Eliminates the annual cost of living adjustments to the allowable credit amount.
feat_title: To amend the Internal Revenue Code of 1986 to combine the Hope and Lifetime Learning credits and to provide a uniform definition of qualifying higher education expenses.