Background of TRA '97

The Taxpayer Relief Act of 1997 (Public Law 105-34 (111 Stat. 788 (TRA '97)) added section 25A to the Internal Revenue Code to provide the Hope Scholarship Credit and the Lifetime Learning Credit (education credits). In general, the Hope Scholarship Credit and the Lifetime Learning Credit allow taxpayers to claim a nonrefundable credit against their federal income taxes for certain post-secondary educational expenses. On November 17, 1997, the IRS published Notice 97-60 (1997-46 I.R.B 8) to provide general guidance on the higher education tax incentives enacted by TRA '97, including the Hope Scholarship Credit and the Lifetime Learning Credit.

TRA '97 also added section 6050S to the Code, which requires eligible educational institutions to file information returns to assist taxpayer and the IRS in determining the education credit that taxpayers may claim under section 25A.

In 2009, under the American Recovery and Reinvestment Act (ARRA), The American Opportunity Tax Credit modifies the existing Hope Credit for tax years 2009 and 2010. In November 2011, the American Opportunity Tax Credit, which was to expire at the end of 2010, was extended for an additional two years through December 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Please see the Policy Watch section for more details.