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Business and Policy Areas
Business and Policy Areas

Associations Argue Against Linking Tax Credit with Service Requirement

May 3, 2010

NACUBO, along with nineteen other higher education associations, endorsed the American Council on Education's comments to Treasury in response to a March 30 notice exploring the addition of a community service requirement as a condition for receiving a tax credit for tuition and related expenses.

The notice originated from provisions in the American Recovery and Reinvestment Act of 2009 (ARRA) creating the American Opportunity Tax Credit (revamped Hope credit). In addition to expansion of the Hope Credit (available for four years instead of only the first two, and additional eligible expenses), ARRA called for two studies related to the education tax credits: one to examine the interplay with Pell Grants and another on the feasibility of implementing a community service requirement.

The notice posed several questions to the higher education community, including the threshold question of whether students should be required to fulfill a community service requirement in order to receive an education tax credit.

The questions included in the notice touch on the potential role colleges and universities may have in:

  • being required to administer the new tax credit-related community service requirement for students
  • any operational and administrative hurdles institutions would face in meeting a requirement to "administer" this new service requirement
  • making "meaningful" community service requirements available to students
  • how campuses would be affected by the additional reporting that may be required in a revised 1098-T or some link with campus-based work study

The community letter underscores higher education's longstanding support for and encouragement of student engagement in community service. However, the associations strongly urge against mandating the performance of community service in order to receive an education tax credit. The letter also explains the many reasons why colleges and universities would be unable to administer, oversee, or report on any such requirement.

NACUBO, working via a variety of eGroups and other discussion lists, urged institutions to respond directly to the notice. NACUBO has received a number of comment letters submitted to Treasury from individual institutions.

ACE April 29 Letter to Treasury


Mary Bachinger
Director, Tax Policy