Treasury Solicits Comments on Linking Education Tax Credit with Community Service Requirement

April 21, 2010

Following up on the expansion of the education tax credit enacted last year, the Treasury Department is seeking comments on the feasibility of the federal government instituting a community service requirement as a condition for receiving a tax credit for tuition and related expenses.

Background. The March 24 notice originates 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 less than one-page notice poses 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 remaining questions 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 Form 1098-T or by linking the service requirement to campus-based work study.

Responding to Treasury. Working with the NACUBO Tax Council, NACUBO has received a good deal of input from member institutions and is aware of the numerous administrative, policy, and financial challenges institutions would be faced with in the event of such burdensome requirements.

NACUBO is part of an inter-association effort developing comments on behalf of the higher education community, led by the American Council on Education. Individual institutions are also encouraged to submit comments on their own behalf. Please share your institution's response with us via email to mary.bachinger@nacubo.org.

The deadline for submitting comments to Treasury is April 29.