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ip: tax threats to grad students . . .
From: David Farber <farber () cis upenn edu>
Date: Tue, 08 Jul 1997 15:48:02 -0400
I asm amazed at how the congress wants to damage the nations competative future foe the sake of a few $s. Stupid!!!! djf ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Colleagues: Many faculty, staff, and students from around the University have contacted my office over the last week concerning the budget and tax proposals now under consideration in Congress. I am writing to advise you of what I know about the situation and to join others who are asking you to contact legislators about your concerns. Most relevant to graduate education here is a proposal that would potentially subject the dollar value of the tuition scholarships provided to RFs, RAs and TAs to federal income tax. There is good reason for concern and for action. While the higher education lobbying community in Washington is optimistic about protecting graduate student tuition from taxation, they warn that we must all be making the case to our legislators for this to happen. It is VERY IMPORTANT that the legislators hear from students, faculty, parents, and not just from administrators and lobbyists. Grass roots efforts of students and faculty can make a difference! Last year, the higher education community had virtually written off the Javitts Fellowship program which provided graduate fellowships in social sciences and in the humanities. The White House had not included funding for this program in its recommendations, and there were no strong supporters in Congress. A campaign by current and former holders of that fellowship was critical to saving the program. Even more is a stake here and a grass roots campaign can make a difference. Below, I attach more details on the issues and on what can be done. Janice Madden Professor and Vice Provost for Graduate Education University of Pennsylvania ************************************************ DETAILS ON THE PROPOSALS: Complete proposals are available from the House -- www.house.gop.gov and the Senate -- www.senate.gov/~finance Also, the National Association of Graduate and Professional Students shares their views on the issues: www.nagps.com/NAGPS/ Thomas Linney of the Council of Graduate Schools summarizes the issues as follows: "The (U.S. House) Ways and Means proposals are of considerable variance from previous White House/Treasury proposals with respect to the Hope Scholarship and Tax Deduction and other education related tax provisions including proposals to extend Section 127 Employer Provided Educational Assistance and Section 117/qualified scholarships and fellowships. Under the proposals passed by the Ways and Means committee, Section 127 would be extended only through December 31, 1997 and the extensions would apply only for undergraduate courses. Section 117 would be amended by phasing down Section 117d tuition benefits provided to employees of colleges and universities. This apparently includes graduate students performing teaching and research services and treated under Section 117 as employees or like employees under Section 117d-5 of the Internal Revenue Code. The Ways and Means Committee's intent appears to be create one new set of tax benefits related to education. These will include elements of the President's proposals and additional new benefits proposed by the Chair of the Ways and Means Committee, Bill Archer (R-TX). The committee will also collapse or cause to expire other educational benefits as a cost containment/revenue offset measure. For graduate students, a set of problems arise, since they are a relatively small segment of the populations (visa vis tax policy) and are subject to wide variety of employment provisions depending on the institution and set of individual conditions that prevail at any one institution. With respect to Section 117d-5 as passed into law in 1998 and the draft implementing regulations as published by the IRS and the statement of managers or Blue Book published by the joint tax committee subsequent to the 1986 and 1988 tax acts. The general consensus of opinion has been that compensation for service is taxable (Section 117c); that providing reasonable compensation is provided for services rendered, tuition remissions, fee waivers, qualified tuition reductions, tuition scholarships, fellowships, and other aid forms of the same general type are excludable. The existing House proposals unless changed will modify the relationship between TAs, RAs, and qualified tuition reductions. They would be phased down between 1998 and 2002, to be replaced by other benefits, some which would apply to graduate education. It would make partially taxable any scholarship and fellowship provided to students related to any service provided. It would leave in effect the tax-free status of tuition, fees, books and equipment with no service requirement for a course of study and provided via a qualified scholarship or fellowship. It would also make taxable in a five-year phase in at 20% per year all college and university tuition benefits furnished to faculty and staff their dependents and graduate students via existing tax code provisions. The Senate Finance Committee mark up appears to be very different. In the Senate bill, Section 127 is extended for both graduate and undergraduate courses on a permanent basis. Section 117 is not mentioned in the Senate bill as limited or as a revenue raiser. Additionally, yet another version of the Hope Scholarship is crafted with some graduate student eligibility at 50% of tuition and book expenses up to a $3000 cap, subject to limits at income levels above $50,000 AGI. An above the line tax deduction for student loan interest up to $2,500 is created for the first five years of repayment. Additional enhanced provisions for IRA's are created, with tax free distributions for graduate and undergraduate expenses. There are also extended provisions for the R & D tax credit and an increase in the tax exempt bond cap for colleges and universities." ******************************************* WHAT YOU CAN DO Distribute this information to students, faculty, and department and graduate program administrators at Penn. Call (or fax or email) your Senators and Representatives! It is critical that your voice be heard by your own members of Congress. Shear numbers of calls will make an impact. Make a special effort to swamp the members of the Conference Committee with calls, as they will make the ultimate decision in reconciling the proposals. The following senators are members of the Conference Committee which will be reconciling the House and Senate bills. These are critical people to target: Roth (R-DE), Lott (R-MS), Moynihan (D-NY), Domenici (R-NM), Grassley (R-IA), Nickles (R-OK), Lautenberg (D-NJ), Conrad (D-ND) House Conference Committee members will not be announced until July 7th or 8th. Here are some relevant address and FAX numbers: The Honorable William V. Roth, Jr. (R-DE) Chair, Senate Finance Committee United States Senate 104 Hart Senate Office Building Washington, DC 20510 (202) 224-2441 (202) 228-0354 (fax) The Honorable Daniel Patrick Moynihan (D-NY) Ranking Member, Senate Finance Committee United States Senate 464 Russell Senate Office Building Washington, DC 20510 (202) 224-4451 (202) 228-0406 (fax) The Honorable Bill Archer (R-TX) Chair, House Ways and Means Committee U.S. House of Representatives 1236 Longworth House Office Building Washington, DC 20515 (202) 225-2571 (202) 225-4381 (fax) The Honorable Charles B. Rangel (D-NY) Ranking Member, House Ways and Means Committee U.S. House of Representatives 2354 Rayburn House Office Building Washington, DC 20515 (202) 225-4365 (202) 225-0816 (fax) ================================================================= The Following was Prepared by the Association of American Universities (June 13, 1997) and may be helpful in composing your letter: Impact of Ways and Means Tax and Medicare Bills on Graduate Education The Ways and Means plan imposes new taxes on college employees and graduate students (amounting to $433 million over five years and $1.6 billion over ten years) through the phase out of Section 117 (d) of the Internal Revenue Code. Section 117 (d) currently makes tax free all tuition waivers made to graduate teaching and research assistants and treats these waivers like scholarship aid. Phasing out Section 117 (d) would make taxable all tuition waivers that are received by graduate TAs and RAs. Graduate students already live on modest stipends; the loss of Section 117(d) would significantly increase their tax liability making it difficult, if not impossible, to make ends meet on their stipends. The Ways and Means Committee plan also excludes graduate students from several of its higher education tax cut provisions, including the following: -The plan's $10,000 tax deduction for amounts distributed from a "qualified tuition program" or an "education investment account" specifically excludes expenses for any graduate level course taken by an individual pursuing a program leading to an advanced academic or professional degree. -The plan's six-month extension of Section 127 employer-provided educational assistance covers only undergraduate education. Therefore, graduate students would be required to pay taxes on any employer-provided educational assistance that they receive. -The plan fails to include the much discussed restoration of the student loan interest deduction. This deduction would be particularly beneficial to graduate students, who rely heavily on student loans beyond the debt they have incurred as undergraduates. This convergence of tax policies which negatively impact graduate education would result in a significant disincentive for our nation's most talented students to pursue graduate study. It is in the national interest that the federal government develop tax policies that support graduate education because: -Graduate students are the scientists of tomorrow whose work will increase our national standard of living, improve health care, sharpen the international competitiveness of American businesses, and strengthen our national defense. These students will also teach future generations of Americans and help us develop a better understanding of our culture and our identity. -Graduate students will not only become the scientists and researchers of tomorrow, but they are an integral part of current research: they are active research performers, conducting a large portion of university research and enriching it with new ideas. -The federal role in graduate education is clear: because the students who receive graduate degrees are a national resource whose employment prospects are not bounded geographically, states are reluctant to invest substantially in graduate education. Similarly, industry investment in graduate education is as likely to benefit a given company's competitors as itself. -Federal support for graduate education has decreased substantially over the past several years due to tight discretionary spending caps. For instance, the Department of Education's graduate education programs have been reduced by more than 50 percent within the past five years. Therefore, the use of the tax code to support graduate education is critical. ****************************************************************** SUGGESTIONS FROM GRADUATE STUDENTS AT HARVARD, STANFORD, MIT AND JOHNS HOPKINS ABOUT What to say in your calls and letters: Please be polite and courteous, but let them know that you oppose the loss of section 117(d), the tuition tax waiver for graduate students. This waiver is retained in the Senate version (S. 949) of the Tax Relief Act but eliminated in the House version (H.R. 2014). Be sure to mention that you are concerned that this issue be carefully considered at the meeting of the Joint House- Senate Conference Committee to reconcile the two versions of the Tax Relief Act. Explain to them your concerns for higher education and for research should the tuition tax waiver be lost. Here are some specific points to mention: - how this tax increase will impact your financial status (have numbers to illustrate your point) - how top students will opt to not pursue graduate degrees, threatening America's continued leadership in research - how graduate students will leave graduate school - how losing qualified students in your field will impact the US (e.g., biology: cancer and HIV/AIDS research engineering/physics: national defense) - how this tax will increase costs to universities, leading to an increase in undergraduate tuition - for more specifics, see NAGPS Talking Points: <http://www.nagps.org/Student_Aid/105th/Tax_TalkingPoints.html ***************************************************************************** -- Janice F. Madden MADDEN () ssc sas upenn edu University of Pennsylvania telephone: (215)898-2061 FAX: (215)573-2442 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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