article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Children's Education Tax Credit Act''. SEC. 2. CREDIT FOR EDUCATION EXPENSES. (a) In General.--Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 35 as section 36 and by inserting after section 34 the following new section: ``SEC. 35. EDUCATION EXPENSES. ``(a) General Rule.--In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year, the amount of the qualified education expenses paid by the taxpayer during the taxable year for the education of the taxpayer, the taxpayer's spouse, or any individual with respect to whom the taxpayer is allowed a deduction under section 151(c). ``(b) Limitation.-- ``(1) Amount per individual.--The amount allowed as a credit under subsection (a) for any taxable year with respect to the qualified education expenses of any 1 individual shall not exceed $450. ``(2) Proration of credit where more than one taxpayer pays expenses.--If the qualified education expenses of an individual are paid by more than one taxpayer during any calendar year, the dollar limitation under paragraph (1) shall be allocated among such taxpayers in proportion to their respective shares of the qualified education expenses of such individual paid during such calendar year by all such taxpayers. ``(c) Definitions.--For purposes of this section-- ``(1) Qualified education expenses.-- ``(A) In general.--The term `qualified education expenses' means amounts paid for-- ``(i) tuition and fees required for the enrollment or attendance of a student at an eligible educational institution, and ``(ii) fees, books, supplies, and equipment required for courses of instruction at an eligible educational institution. ``(B) Meals and lodging expenses not included.-- Such term does not include any amount paid, directly or indirectly, for meals, lodging, or similar personal, living, or family expenses. In the event an amount paid for tuition or fees includes an amount for meals, lodging, or similar expenses which is not separately stated, the portion of such amount which is attributable to meals, lodging, or similar expenses shall be determined under regulations prescribed by the Secretary. ``(C) Special rule for home schooling.--In the case of education furnished in the home (as a substitute for public education) which meets the requirements of State law relating to compulsory school attendance, the term `qualified education expenses' means amounts paid for books, computer software, and other supplies used in furnishing such education. ``(2) Eligible educational institution.--The term `eligible educational institution' means-- ``(A) an institution of higher education, ``(B) a vocational school, ``(C) a secondary school, or ``(D) an elementary school. ``(3) Institution of higher education.--The term `institution of higher education' means the institutions described in section 1201(a) or 481(a) of the Higher Education Act of 1965. ``(4) Vocational school.--The term `vocational school' means an area vocational education school as defined in section 521(3) of the Carl D. Perkins Vocational Education Act. ``(5) Elementary and secondary schools.--The terms `elementary school' and `secondary school' have the respective meanings given such terms by section 14101 of the Elementary and Secondary Education Act of 1965. ``(d) Special Rules.-- ``(1) Adjustment for certain scholarships and veterans' benefits.--The amounts otherwise taken into account under subsection (a) as qualified education expenses of any individual during any period shall be reduced (before the application of subsection (b)) by the sum of the amounts referred to in section 135(d)(1) which are received with respect to such individual for the taxable year. ``(2) Eligible courses.--Except as provided in subsection (c)(1)(C), amounts paid for qualified education expenses of any individual shall be taken into account under subsection (a) only to the extent such expenses-- ``(A) are attributable to courses of instruction offered by an elementary or secondary school, or ``(B) are attributable to courses of instruction for which credit is allowed toward a baccalaureate or graduate degree by an institution of higher education or toward a certificate of required course work at a vocational school. ``(3) Individual must be at least half-time student.-- Except as provided in subsection (c)(1)(C), no credit shall be allowed under subsection (a) for amounts paid during the taxable year for qualified education expenses with respect to any individual unless that individual, during any 4 calendar months during the calendar year in which the taxable year of the taxpayer begins, is at least a half-time student at an eligible education institution. ``(4) Spouse.--No credit shall be allowed under subsection (a) for amounts paid during the taxable year for qualified education expenses for the spouse of the taxpayer unless-- ``(A) the taxpayer is entitled to an exemption for his spouse under section 151(b) for the taxable year, or ``(B) the taxpayer files a joint return with his spouse for the taxable year. ``(e) Disallowance of Expenses as Deduction.--No deduction shall be allowed under section 162 (relating to trade or business expenses) for any qualified education expense which (after the application of subsection (b)) is taken into account in determining the amount of any credit allowed under subsection (a). The preceding sentence shall not apply to the qualified education expenses of any taxpayer who, under regulations prescribed by the Secretary, elects not to apply the provisions of this section with respect to such expenses for the taxable year. ``(f) Regulations.--The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section.'' (b) Technical Amendments.-- (1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period ``or from section 35 of such Code''. (2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by striking the last item and inserting the following new items: ``Sec. 35. Education expenses. ``Sec. 36. Overpayments of tax.'' (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
summary: Children's Education Tax Credit Act - Amends the Internal Revenue Code to establish an annual tax credit (up to $450 for each qualifying student) for qualified educational expenses (tuition, attendance fees, books, supplies, equipment) paid by a taxpayer for the taxpayer, a spouse, or a dependent. Provides for: (1) credit proration in cases of shared expenses; (2) inclusion of certain home schooling expenses; and (3) adjustments for certain scholarships and veterans' benefits. Defines "eligible educational institution" as an institution of higher education, or a vocational, secondary, or elementary school.