The American Institute of CPAs has written to lawmakers on the tax-writing House Ways and Means Committee supporting their efforts to simplify the array of education tax credits available to students while suggesting several reforms of its own.
In a letter last Thursday, AICPA Tax Executive Committee chairman Jeffrey A. Porter wrote that the AICPA generally supports the education proposals of H.R. 3393, the Student and Family Tax Simplification Act, which was introduced last October by Reps. Diane Black, R-Tenn., and Danny Davis, D-Ill. Their proposals were basically incorporated into the tax reform discussion draft released in February by Ways and Means Committee chairman Dave Camp, R-Mich., Porter noted (see House Ways and Means Chairman Camp Releases Tax Reform Proposal).
“We generally support the specific provisions in H.R. 3393 and the education proposals of the Tax Reform Act,” Porter wrote. “However, in order to further simplify and encourage the use of the new combined American Opportunity Tax Credit (AOTC), we recommend that you clarify that the credit is available on a per-student basis (rather than per-family basis), provide that the credit is 100% refundable, and increase the availability of the credit to any six years of post-secondary education (including graduate-level and professional degree courses). We also note that continuous review and monitoring of credit limitations will ensure they remain consistent with the rate of rising tuition costs. Finally, we submit recommendations to support the additional education proposals included in the Tax Reform Act.”
The letter was addressed to Camp, Black, Davis and Ways and Means ranking member Sander Levin, D-Mich.
The AICPA asked Congress to provide further clarification on whether the new AOTC will have a limitation of one credit per family or if the credit is available on a per-student basis.
“We recommend you offer the credit on a per student’ rather than a per taxpayer’ basis, providing a potentially larger tax benefit per family,” the Institute wrote.
The AICPA also recommended that Congress make the new AOTC 100 percent refundable to minimize the complexity of compliance for taxpayers. Lawmakers should make the new AOTC available for any six years of post-secondary education, including graduate-level and professional degree courses, the AICPA suggested.
“We believe a credit for four years (that includes graduate-level and professional degree programs) is beneficial to many taxpayers, but urge you to consider increasing the limit to six years,” Porter wrote. He cited recent statistics on graduation rates from the Department of Education that found approximately 59 percent of full-time, first-time undergraduate students completed a bachelor’s degree within six years rather than four. “These statistics do not account for the additional two or more years required to complete graduate-level and professional degree programs,” Porter wrote.
The AICPA also encouraged Congress to review and monitor credit limits continuously to ensure they remain consistent with the rate of rising tuition costs. “Although the new AOTC is indexed for inflation, the rate of increase for tuition costs is often higher than the inflation index,” Porter wrote.