Date: Tue, 29 Jul 1997 01:12:56 -0400
From: tombrown@jhunix.hcf.jhu.edu (Thomas F Brown)
Subject: Re:  GTA Tax situation update?
To: socgrad@csf.colorado.edu
Message-id: <199707290512.BAA16913@jhunix.hcf.jhu.edu>
The news is generally good. The tuition credit is probably safe.
Here's the latest update:

7/24/97

NAGPS Update
Conference Report on Tax Bill Released
Kevin Boyer, NAGPS Executive Director


** Thanks to NAICU, CGS and the Chronicle of Higher Ed for help in
accessing this information **

The Republican agreement on the Tax Bill has been made public via a
report from the Joint Committee on Taxation titled "Summary of Conference
Agreeement Relating to the Major Revenue Provisions of HR 2014 "The
Revenue Reconciliation Act of 1987."  NAGPS is still attempting to get
clarification on some of the provisions of interest to grad students.
This update will focus just on graduation/professional students - a
future update may broaden the information to include various tax
proposals of interest to undergraduates.

1.      117d - WE WIN!

        As promised over the last 3 weeks, section 117d of the Internal
Revenue Code was not eliminated from the tax code in the conference bill.
Though language does not appear in the summary, this is being interpreted
as an indication that the conferees chose to leave Section 117d of the
Internal Revenue Code alone.  NAGPS was promised by conferees' staff that
graduate teaching and research assistants would be protected ("we get the
message," they said).  The tax exemption of undergraduate tuition benefits
for faculty, staff and dependents of university employees appears to have
also survived.  Many have suggested to us that the work of the grad
students on the tuition waiver tax issue may have pulled the faculty/staff
benefits with it in the minds of the conferees.  We are thrilled that the
Senate position prevailed, and appreciate the hard work of the House
members (both Republican and Democratic) who worked to ensure 117d
remained part of the tax code.

2.      127 - WE LOSE!

        Section 127 of the Internal Revenue Code allows for employer
provided educational assistance to be given to an employee without that
benefit accruing tax on the first $5,250 of the benefit.  Present law
expired for undergraduate tuition on 5/31/97, and for graduate tuition on
6/30/96.  The Senate position was to make Section 127 permanent for
undergrads and grads.  The House position was to extend Section 127 for
undergrads only through 12/31/97.  The conferees chose to extend Section
127 for undergrads only through 6/30/00 (3 years).

        We are disappointed in this development and we urge students and
their families to contact the White House to ask that the president push
for the original Senate position in this legislation.  The Senate
position has broad bipartisan support in both the House and the Senate.

3.      Student Loan Interest Deduction - WE WIN!

        If this legislation becomes law, student loan interest will be tax
deductible for the first time since 1986!  This has been at the top of the
NAGPS legislation agenda for 10 years and we are ecstatic that the Senate
provision survived the conference.  President Clinton has indicated
strong support for this provision, as well. Thanks should go to the
Senators on the Finance committee, particularly Senators Grassley,
Moynihan and Roth, for their support of this provision.

        The win is not completely untainted, however.  The original Senate
provision allowed for an up to $2,500 deduction for interest payments for
the first five years of repayment.  This provision would have been
phased out for single taxpayers earning between $40K and $50K.  Married
taxpayers would have had the phase out between $80K and $100K if filing
jointly.  The conference position increases the phaseout for single
taxpayers, phasing out between $40K and $50K.  The married phase out,
however, was dropped to from between $60 and $75K.  This reduction
essentially punishes married couples if both work.

        The idea behind the $2,500 deduction is to help graduate students
manage their post-graduation debt.  This debt for some professional
students exceeds $100,000.  NAGPS supports a return to the original Senate
position on the married couples phase out and we will urge the President
to stand firm to avoid this marriage penalty.

4.      Tuition Tax Credit - UNCLEAR

        The conference position on tuition tax credits is not yet clear
to us.  The conferees accepted the Senate position of a $1,500 credit for
the first two years of college (Hope scholarship).  However, the tuition
tax credit beyond the first two years is only 5% of up to $5,000 in
expenses.  (This translates to a $250 reduction in tax liability for
those paying $5,000 or more in tuition).  The Joint Conference Committee
report says "5% credit for up to $5,000 of expenses for education after
second year of college."  On the surface, this would seem to imply that
graduate education would qualify for the tuition tax credit, as well.
However, today's Wall Street Journal says that the tax credit is
available for students in their 3rd and 4th years of college.  The WSJ
article doesn't suggest that the credit will NOT be available for
graduate education - indeed, the WSJ reporter may not have even thought
of graduate education.

        NAGPS has phone calls into the tax staffers to gain clarification
on this issue.

        If graduate education qualifies for a tuition tax credit, we will
be pleased to have something in this part of the bill.  However, this is
a far cry from the President's proposal of a 20% tax credit on up to
$5,000 in tuition through the year 2000 and 20% tax credit on up to
$10,000 in tuition  afterward.  The President's proposal is 4 times
better over the next 3 years and 8 times better after that.  While a $250
credit would be welcome, NAGPS continues to strongly favor the
President's proposal.  We will be asking the President to clarify the tax
credit to ensure that it goes for graduate education, and ask him to
negotiate for a higher tax credit than 5%.

5.      IRA withdrawals - WE WIN!

        The proposal to allow for penalty-free withdrawals from all IRAs
for undergraduate, post-secondary vocational, and graduate education
expenses was included in the compromise bill.

6.      Education IRAs - WE WIN!

        The Senate proposal to allow for Education IRAs that could be
used, tax-free, for undergraduate and graduate education was included in
the compromise bill (the House version would have extended many of the
benefits to undergraduate tuition only).

In summary, the Conference Agreement provides some real tangible tax
relief to graduate/professional students.  We are relieved that in many
cases, the Senate negotiators prevailed on the Senate position, since the
House bill had little or nothing in it that focused on graduate education.

NAGPS is disappointed that some of the provisions in the Senate bill were
apparently lost in conference.  We are particularly concerned about
Section 127, the married income phase-out for the Student Loan Interest
Deduction, and the decision to lower the tuition tax credit beyond the
first two years of school (and the lack of clarity on this issue as it
applies to graduate education).

Interested graduate/professional students should communicate a strong
pro-education message to the White House, asking that the President
continue to strongly negotiate for the provisions that were in his
original proposals and which will benefit graduate education.  We
appreciate the President's support of graduate/professional education and
encourage him to keep this vital segment of our nation's post-secondary
educational system at the top of his list when negotiating with the Congress.

Specific details on the message we will recommend, and to whom you should
direct your comments will be forthcoming in the next several hours.  In
the meantime, you may direct email messages to the President at
president@whitehouse.gov, and to the Vice President at
vice-president@whitehouse.gov.  Watch our web site for sample text,
additional contact names, numbers and email addresses, and more updates.

In summary, NAGPS is very proud of the role we have played in preserving
tax benefits for the nation's graduate TAs and RAs.  But we are even
prouder of the strong citizen advocacy of our nation's
graduate/professional students.  Those of you who exercised your
democratic right to participate in the political process are really the
reason we saved 117d, and your voices were definitely heard.  Please
don't stop now - negotiations on the tax bill continue, and
appropriations legislation and higher education reauthorization
legislation now take center stage.  Without your voices, NAGPS is not as
strong in Washington, DC.

Thank you!

Kevin Boyer
NAGPS Executive Director
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