Coalition Works to Preserve Tax-Free Employer-Provided Tuition Benefits
June 15, 2010
Section 127 of the Internal Revenue Code enables employers to provide up to $5,250 per year in tax-free educational assistance to employees. Section 127 is set to expire at the end of this year. The Coalition to Preserve Employer Provided Education Assistance is working to get the provision extended or made permanent.
The coalition is a group of higher education institutions, associations, companies, and labor groups dedicated to ensuring the tax protection of employer tuition assistance programs. NACUBO belongs to the coalition and participates on its steering committee.
Tax Treatment of Tuition Benefits. Section 127 allows an employee to exclude from income up to $5,250 per year in employer-provided educational assistance at the undergraduate and graduate level regardless of whether the education is job-related. The student does not have to include these amounts in gross income for tax purposes, and employers do not have to pay taxes on the tuition benefits provided. The provision benefits both students and employers and enjoys broad bipartisan support in Congress and throughout the education, labor, and corporate sectors.
Unlike other employers, as educational institutions, colleges and universities are able to provide employees with undergraduate tuition benefits under Section 117. However, they rely on Section 127 to provide graduate-0level benefits to employees.
Current Status of Section 127. The provision is currently set to expire at the end of 2010. Originally enacted in 1978, Section 127 has expired and been extended many times, and has sometimes been limited to only undergraduate benefits. House Ways and Means Committee member Earl Pomeroy (D-ND) has agreed to introduce legislation to make Section 127 permanent. Representative Sam Johnson (R-TX) recently agreed to be the lead Republican cosponsor of the bill. The coalition is working to garner additional cosponsors. A bill is expected to be introduced in the House shortly.
In December 2009, Senator Charles Grassley (R-IA) introduced S. 2851, a bill to make permanent several higher education-related expiring tax provisions, including Section 127.
Congress is currently working to enact a package of expiring tax provisions from 2009. With many senators and representatives likely to spend a good part of the summer campaigning at home, it's unlikely that 2010-expiring provisions will be addressed soon.Learn more about the coalition and follow their efforts at www.cpepea.com.
Director, Tax Policy
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