Excerpt from Description of Revenue Reconciliation Proposal, Vol. 2: Expiring Provisions, Child Care Initiative and Iras; Scheduled for Markup by the Senate Committee on Finance on October 3, 1989
Under present law, an employee is required to include in income, for income and employment tax purposes, the value of educational assistance provided by an employer to the employee, unless the cost of such assistance qualifies as a deductible job-related expense of the employee. Amounts expended for education qualify as deductible job-related expenses if the education (1) maintains or improves skills required for the employee's current job, or (2) meets the express requirements of the individual's employer that are imposed as a condition of continuing employment in the same job.
Under prior law, an employee's gross income for income and employment tax purposes also did not include amounts paid or incurred by the employer for educational assistance provided to the employee if such amounts were paid or incurred pursuant to an educational assistance program that met certain requirements (sec. The exclusion was limited to of educational assistance with respect to an individual during a calendar year.
For years prior to 1988, educational assistance included assistance related to graduate-level course work. However, for years beginning in 1988, the exclusion did not apply to any payment for, or the provision of any benefits with respect to, any graduate-level courses.
The Deficit Reduction Act of 1984 required that employers file information returns with respect to educational assistance plans under section 127 (sec. 6039d) The purpose of this requirement was to collect data with respect to the use of such plans so as to provide Congress with a means to evaluate the effectiveness of the exclusion.
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