‘Fiscal Cliff’ Bill Makes Popular HR Tax Provisions Permanent

SHRM instrumental in solidifying employer-provided education assistance

By Bill Leonard Jan 3, 2013

The tax relief package passed by Congress on Jan. 1, 2013, to keep the U.S. from tumbling over the so-called “fiscal cliff” included a huge holiday gift for human resource professionals. The legislation permanently extends the tax break for employer-provided education assistance, also known as Section 127 of the Internal Revenue Code. A permanent extension of Section 127 has been at the top of many HR professionals’ wish lists for years.

The provision allows employees to exclude from taxable income up to $5,250 per year in employer-provided tuition assistance for undergraduate or graduate level courses and had become a very popular benefit.

Several employer and business groups, including the Society for Human Resource Management (SHRM), had been actively seeking passage of a permanent extension of the tuition tax credit, which expired at the end of 2012. Congress had approved temporary extensions of Section 127 several times, so the permanent extension of the popular tax break was hailed as an important victory for the HR profession by the Coalition to Preserve Employer-Provided Education Assistance (CPEPEA).

“The coalition is thrilled that this valuable benefit, which has been utilized by more than 1 billion students, has been made a permanent part of our tax code,” said Karin Johns, director of tax policy for the National Association of Independent Colleges and Universities and co-chair of CPEPEA. “The passage of H.R. 8 that makes Section 127 benefits permanent is something the coalition has been working on for more than 20 years.”

The intensive effort to make Section 127 permanent will have a positive impact on employers and employees alike, according to Kathleen Coulombe, senior associate, government relations for SHRM.

“Employees and employers alike will now have certainty when planning on furthering their education, and the education of their workforce,” said Coulombe, who also serves as co-chair of CPEPEA. “This will ensure that the U.S. labor pool remains globally competitive.”

In addition, the tax relief package extends the increase for an exclusion for employer-provided transit and vanpool benefits through 2013. The exclusion had been increased to $240 per month through 2012 but was set to drop back to $125 at the beginning of 2013. In addition, the fiscal cliff bill reverses a $600 deduction in the $3,000 credit for child and dependent care that was set to take effect on Jan. 1, 2013.

The fiscal cliff measure as approved by Congress also extends the federal emergency unemployment benefits for one year, plus the bill reinstates and extends the Work Opportunity Tax Credit through December 2013. The legislation did not include an extension of the 2 percent payroll tax cut that had been part of the economic stimulus package enacted by Congress in 2010.

President Barack Obama signed the bill into law Jan. 3.

Bill Leonard is senior writer for SHRM.

Related SHRM Article:

'Fiscal Cliff' Law Affects Payroll Tax Withholding and Employee Benefits, SHRM Online Benefits, January 2013


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