August 4, 1997
Volume 49, No. 36
Republican House and Senate conferees met with White House negotiators during the end of July to hammer out a tax plan that all parties could agree on. Congress and the White House finished negotiations just before Congress' August break, delivering both good news and bad for universities nationwide. But the plan's good points outweigh the bad.
The biggest victory for faculty, staff and graduate students was the removal of the provision that would have imposed a tax on the tuition waivers given to graduate teaching assistants and to the children of faculty and staff.
Other good news from the agreement: a Pell Grant increase from the current $2,700 to $3,000 for low-income students; students and former students can deduct up to $2,500 over four years for interest paid on student loans; and a three year extension was granted that allows undergraduate students to deduct up to $5,250 in tuition costs paid by their employers from their taxable income.
Additional items in the tax plan include a Hope Scholarship tax credit of up to $1,500 a year for the first two years of college. The credit would be phased out for individuals earning more than $50,000 and for families earning more than $100,000. A lifelong learning tax credit, which offers a 20 percent tax credit on up to $5,000 of tuition and fees that could be used for any year of education after the first two.
A $500 per child individual retirement account deduction for families making under $160,000 a year and a provision that allows tax-free status for scholarship programs awarded as part of students' community service programs are also in the agreement.
On the down side, TIAA-CREF confirmed early reports that the provision that removes its tax exemption is indeed among the items agreed upon by the Clinton administration and Republicans negotiating the new federal tax bill.
John Biggs, chairman and CEO of TIAA-CREF, said, "I am satisfied that we made the best effort we could to retain our exemption. I appreciate the support we've had from participating institutions and from so many individual participants across the U. S.
"As we consider the implications of TIAA and CREF becoming taxable entities, we have an opportunity to reexamine many activities which previously have been closed to us because of our exempt status. At the same time, we will explore every avenue for minimizing the negative consequences for our participants of losing the tax exemption," Biggs said.
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