Rep. Lloyd Doggett Introduces Bipartisan Tax Free Pell Grants Act to Strengthen Access to Higher Education
Washington, D.C. – Today, U.S. Representatives Lloyd Doggett (D-TX), ranking member of the House Ways and Means Subcommittee on Health, Mike Kelly (R-PA), Chairman of the House Ways and Means Subcommittee on Tax, Danny K. Davis (D-IL), ranking member of the House Ways and Means Subcommittee on Worker and Family Support, and Adrian Smith (R-NE), Chairman of the House Ways and Means Subcommittee on Trade, introduced bipartisan legislation to remove a financial and logistical barrier impairing students from securing higher education opportunities. The Tax Free Pell Grants Act expands the usage of Pell Grants on a tax-free basis, improves coordination with the American Opportunity Tax Credit (AOTC), and ensures students do not lose out on any AOTC benefits.
More than a decade ago, Rep. Doggett authored provisions that ensure the AOTC allows a tax cut of up to $10,000 on education expenses, such as tuition, textbooks and fees.
“Simplifying our tax code means more in-pocket financial assistance for students seeking higher education,” said Rep. Doggett. “And this legislation would also expand eligible expenses under the existing tax credit to include computers and childcare, which have become essential in helping many students get the education they need to achieve their dreams.”
“Pell Grants are an important way for more lower-income Americans to get an education and work toward a successful career,” said Rep. Mike Kelly (R-PA), Chairman of the Ways & Means Subcommittee on Tax. “More than 216,000 Pennsylvania students benefitted from Pell Grants last year. I’m again proud to join Congressman Doggett on this bipartisan legislation that will expand what these grants can be used for – including child care and computers -- so many more Americans, particularly single mothers, have the ability to access higher education to achieve long-term financial stability for themselves and their families.”
“Education is fundamental to our democracy,” said Rep. Davis. “I am proud to join Representatives Doggett, Kelly, and Smith in leading this bill that helps low-income students get the most from the American Opportunity Tax Credit. In my District, relatively few taxpayers use the AOTC because many attend community colleges and can’t claim their childcare and computer costs. Ensuring that students can fully benefit from the AOTC credit without worry about being taxed on the Pell grant helps educate our citizenry and strengthen them economically.”
“The American Opportunity Tax Credit and the Pell Grant are important tools for ensuring every student can access the training and education necessary to seize their American dream,” said Rep. Smith. “I am especially pleased this bill will support students pursuing education at community colleges. With 9.9 million job openings in our economy – including nearly 700,000 in manufacturing, 400,000 in construction, 488,000 in transportation, and 1.7 million in health and social care – improving access to cost-effective technical education is critical to empowering students to access economic opportunity while also ensuring employers can hire the workers they desperately need.”
Since enacted in 2009, the AOTC has helped millions pay for college. The AOTC covers up to $2,500 in annual college tuition, fees, and other education-related expenses — 40% of the credit, up to $1,000, is refundable. While Pell Grant awards used to pay for tuition and fees are already treated as tax-free income, any portion of a Pell Grant used for other education-related items, like living expenses, is taxed. And using Pell Grants to cover tuition reduces potential AOTC eligibility and creates complications for students in maximizing their educational benefits. As a result, many simply forgo trying to claim the AOTC, leaving an estimated hundreds of millions of dollars unclaimed each year according to a report from the IRS. The Tax Free Pell Grants Act increases compatibility with the AOTC by ensuring that Pell Grants are not treated as taxable income even if they are used for non-tuition education expenses.
Additionally, more than one in five undergraduate college students are parents – with over 40% of student parents being single mothers – and childcare is often essential to completing higher education. This bill also adds childcare and computer costs as qualifying expenses for the AOTC.
Original co-sponsors for the Tax Free Pell Grants Act include Reps. Earl Blumenauer (D-OR), Joaquin Castro (D-TX), Brain Fitzpatrick (R-PA) and Tony Gonzales (R-TX).
Endorsing organizations: Advance CTE, American Association of Collegiate Registrars and Admissions Officers (AACRAO), American Association of Community Colleges (AACC), American Association of State Colleges and Universities (AASCU), American Council on Education (ACE), Association of American Universities (AAU), Association of Career and Technical Education (ACTE), Association of Community College Trustees (ACCT), Association of Jesuit Colleges and Universities (ACJU), Association of Public and Land Grant Universities (APLU), EDUCAUSE, National Association of College and University Business Officers (NACUBO), National Association of Independent Colleges and Universities (NAICU), National Association of State Directors of Community Colleges, National Association of Student Financial Aid Administrators (NASFAA), State Higher Education Executive Officers Association (SHEEO), The Hope Center at Temple University and The Institute for College Access and Success (TICAS).
The full bill text is available here.
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