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Tax Treatment of Employer Educational Assistance for the Benefit of Employees, July 3, 2008 1 (July 3, 2008)

handle is hein.tera/crstax0118 and id is 1 raw text is: Order Code RS22911 July 3, 2008 CRS Repo for Congress Tax Treatment of Employer Educational Assistance for the Benefit of Employees Linda Levine Specialist in Labor Economics Domestic Social Policy Division Summary Educational assistance offered by employers to their employees may be exempt from federal income tax under Section 127 and Section 132 of the Internal Revenue Code. Section 127 is the employer educational assistance exclusion; Section 132, the fringe benefit exclusion for working condition benefits (e.g., job-related education) among other benefits. Congress established the two tax provisions well before it enacted other higher education tax benefits meant to assist taxpayers, their spouses, and dependents - regardless of employment status - pay current educational expenses incurred while obtaining postsecondary degrees and undertaking lifelong learning. A recent focus of Congress has been to add provisions to the Internal Revenue Code (IRC) to help families cope with the rapidly escalating expenses of students pursuing college degrees. For example, the Lifetime Learning Credit (LLC) and the Hope Scholarship Credit were authorized permanently in the Taxpayer Relief Act of 1997. Either credit may be claimed for the tuition and related fees of eligible taxpayers, their spouses, and dependents who are in their first two years of postsecondary education at eligible institutions and enrolled at least half-time in a program that grants a recognized credential.2 The LLC also is available to eligible persons taking one or more courses at the undergraduate or graduate level to acquire or improve job skills. This added feature of the LLC allows it to be claimed for the tuition and fees not only of college juniors and seniors, but also of taxpayers, their spouses, and dependents undertaking lifelong learning For more information on benefits intended to help taxpayers meet current higher education expenses, see CRS Report RL31129, Higher Education Tax Credits andDeduction: An Overview of the Benefits and Their Relationship to Traditional Student Aid, by Linda Levine and Charmaine Mercer. 2 Eligible educational institutions participate in student aid programs authorized under Title TV of the Higher Education Act, which include most colleges and universities as well as many proprietary (for-profit) trade schools. Congressional Research Service The Library of Congress Prepared for Members and Committees of Congress

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