H.R.2543 - Tax-Free Pell Grant Act (119th Congress)
Summary
H.R.2543, the Tax-Free Pell Grant Act, aims to amend the Internal Revenue Code of 1986 to expand the exclusion of Pell Grants from gross income. It also seeks to broaden the scope of the American Opportunity and Lifetime Learning Credits. The bill was introduced in the House of Representatives on April 1, 2025, and referred to the Committee on Ways and Means.
Expected Effects
If enacted, this bill would make Pell Grants tax-free and expand the allowable expenses for the American Opportunity and Lifetime Learning Credits. This includes covering costs like computers, peripheral equipment, internet access, and even child and dependent care expenses for eligible students. These changes would apply to taxable years beginning after December 31, 2024.
Potential Benefits
- Increased Affordability of Education: By making Pell Grants tax-free, students will have more funds available for educational expenses.
- Expanded Access to Education: The inclusion of computer equipment, internet, and childcare expenses in education credits will help more students afford to attend college.
- Support for Working Students: Covering childcare expenses acknowledges the challenges faced by students who are also parents.
- Simplification of Tax Filing: Tax-free Pell Grants reduce the complexity of tax filing for students and their families.
- Incentivizes Higher Education: By reducing the financial burden, the bill encourages more individuals to pursue higher education and skills development.
Potential Disadvantages
- Potential for Increased Deficit: Expanding tax credits and exclusions could lead to a decrease in government revenue, potentially increasing the budget deficit.
- Complexity in Implementation: Defining and verifying eligible expenses like 'child and dependent care expenses' and 'computer or peripheral equipment' may create administrative challenges.
- Risk of Fraud: The expanded scope of eligible expenses could create opportunities for fraudulent claims.
- Limited Impact on Tuition Costs: While the bill addresses some costs, it does not directly address the rising cost of tuition, which remains a significant barrier to higher education.
- Potential for Inflation of Covered Expenses: Suppliers of computers, internet services, and childcare may increase prices, knowing that students have increased access to funds for these items.
Most Disadvantaged Areas:
Constitutional Alignment
The bill appears to align with the general welfare clause of the Constitution (Preamble). By promoting education and reducing financial barriers to higher learning, the bill aims to 'promote the general Welfare'. Congress has the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States (Article I, Section 8, Clause 1). This bill uses the tax code to incentivize education, which falls under the purview of promoting general welfare.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).