Coalition Works to Make Tuition Tax Break Permanent

By Bill Leonard Aug 6, 2010

Business, education and labor groups have joined together to ensure that a popular tax break for employer-provided tuition assistance doesn’t expire at the end of 2010.

The tax break, known as Section 127, was extended for 10 years in 2001, when Congress enacted a series of tax cuts during the administration of President George W. Bush. The tax cuts—including Section 127—are set to expire on Dec. 31, 2010, which led more than 75 businesses, universities and associations to form the Coalition to Preserve Employer Provided Education Assistance (CPEPEA).

The Society for Human Resource Management and the National Association of Independent Colleges and Universities (NAICU) are co-chairing the coalition. The CPEPEA strongly supports passage of the Employee Educational Assistance Act of 2010 (H.R. 5600), which was introduced in the House of Representatives on June 24, 2010, by Rep. Earl Pomeroy, D-N.D., and Rep. Sam Johnson, R-Texas. Sen. Chuck Grassley, R-Iowa, introduced a higher education tax bill (S. 2851) in December 2009 that would make several educational tax provisions—including Section 127—permanent.

Section 127 of the Internal Revenue Code allows employees to exclude up to $5,250 per year in tuition assistance provided by their employers. Employers are not required to provide educational assistance to their employees, however, employers that provide the benefit must offer it to all employees on a nondiscriminatory basis. Congress has extended Section 127 eight times since the tax break was first enacted in 1978.

According to statistics from the NAICU, nearly one in five workers use or have used this educational benefit to help defray the cost of pursuing college degrees and continuing education. The NAICU statistics show that 913,100 students received employer-provided benefits during the 2007-2008 academic year, compared to 431,500 in 1991-1992 or an increase of 112 percent.

“Employees are asked to do more for their jobs. While companies can’t always pay people a higher salary, they can offer better benefits,” said Rep. Johnson when he introduced H.R. 5600. “It’s exciting to know that companies want to invest in their employees with tuition assistance. It’s a win-win situation. For the U.S. to remain competitive with India and China, investing in our future workforce is a must.”

Extending the tax breaks is a hotly debated topic on Capitol Hill as lawmakers grapple with ways to cut government spending and reduce the ballooning federal deficit. Members of the coalition are optimistic that Section 127 will be extended, and sources familiar with the issue believe Congress will address the issue during the fall 2010 session.

Bill Leonard is senior writer for SHRM.


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