Results of “Taxpayers’ Relief Act of 1997"

On August 5, President Clinton signed both the spending and the tax elements of the budget reconcilliation deal in a bipartisan White House ceremony. The dual reconcilliation bills are intended to bring the federal budget into balance by 2002, while providing a net tax cut of $95 billion over the same five-year period.

As FYI #85 reported, prior to conference, the House and Senate tax bills differed on some provisions of concern to many in the science community. However, once a final version of the bill was worked out in conference, both chambers approved “The Taxpayers’ Relief Act of 1997" (H.R. 2014) by large margins (92-8 in the Senate; 389-43 in the House.)

Below, details are provided on the resolution of those issues of concern in the bill, as signed by the President:

TUITION WAIVERS FOR GRADUATE ASSISTANCESHIPS: The conference report (H. Report 105-220) states that, “A special rule provides that qualified tuition reductions under section 117(d) [of the Tax Code] may be provided for graduate-level courses in cases of graduate students who are engaged in teaching or research activities for the educational organization.” The House had contemplated making taxable the tuition waivers received by graduate students with teaching or research assistanceships. However, this provision was rejected in the final bill, leaving in place the exemption from taxes of tuition waivers.

TUITION AID FOR FACULTY AND STAFF FAMILIES: University faculty and staff and their children who receive a tuition reduction would also remain exempt from taxes on the value of that reduction.

EMPLOYER-PAID TUITION: Assistance provided by an employer for graduate courses is, and will continue to be, taxed as part of an employee’s income. Regarding employer-provided assistance for undergraduate courses, the first $5,250 in assistance each year is currently non-taxable, and will continue to be exempt through June 1, 2000.

PENSION: An employer’s contingency reserve for TIAA-CREF is now taxable under the new law. This would apparently not affect the tax-deferred status of an individual’s accumulation.

R&E TAX CREDIT: The Research and Experimentation Tax Credit has been extended until June 30, 1998. The extension applies retroactively to when the credit expired on May 31, 1997. Both the Administration and many Members of Congress have long advocated making this tax credit permanent.