Universities, Companies Fight to Keep Tax-Free Tuition Assistance

By Melissa KornFeaturesDow Jones Newswires

Universities and companies are joining forces to lobby Congress to keep a tax provision that allows employers to give staff as much as $5,250 in yearly tax-free tuition help.

The tax-overhaul package passed by the Senate earlier this month includes the provision, which has been part of U.S. tax law since the late 1970s. The House version would require employees to pay taxes on the benefit for the first time. Congressional leaders are working to send a final bill to President Donald Trump by Christmas.

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Hewlett Packard Enterprise Co., Starbucks Corp. and others say offering tax-free tuition assistance makes it easier for them to keep and train employees.

Schools say they could lose thousands of students if the tuition program is taxed. The nation's economic development would be stunted if employees shy away from pricey training programs, they say.

"It becomes a huge disincentive to take advantage of postsecondary education and training opportunities," said Terry Hartle, senior vice president of government and public affairs at the American Council on Education.

The association, which represents nearly 1,800 schools and education groups, is also part of a coalition of more than 80 schools, companies and trade associations, including Emory University, the United Auto Workers and Texas Instruments, that is lobbying to include the tax-free tuition benefit in the final version of the tax bill.

Many of these same groups had been pushing to increase the amount of tuition assistance that could be provided tax-free. The benefit has been set at $5,250 since 1986.

Arizona State University, which is in the coalition, has been highlighting the economic case for the program in meetings with its local congressional delegation.

More than 9,000 Starbucks employees attend Arizona State online through its Starbucks College Achievement Plan, launched in 2014. The company covers full tuition for all four years of a bachelor's degree in more than 60 subjects for employees who work an average of at least 20 hours a week.

United Parcel Service Inc. covers up to $25,000 in college expenses -- $5,250 a year -- for employees working at least part time. The company said that since the program began in 1999, it has provided more than $200 million in tuition assistance to upward of 120,000 college students. UPS said it supports the Senate language maintaining tuition assistance.

The House bill also would tax tuition breaks that many colleges and universities offer the families of employees including administrators, faculty and cafeteria workers. That tax-free benefit has gained attention because it would also apply to graduate students whose tuition is covered by their schools.

"The janitor is collateral damage," Mr. Hartle said.

Bucknell University, in Lewisburg, Pa., spends about $4 million a year on tuition benefits for its employees and their families. The school covers 100% of tuition costs for employees' dependents who attend Bucknell and provides a benefit equal to 60% of its own tuition if the children decide to attend other institutions. Bucknell's listed tuition for the current school year is $53,692.

About 160 faculty and staff use the benefit to cover costs for 175 dependent children or partners. President John Bravman said an initial analysis suggests that taxing the benefit could cost plan participants over $600,000 in new tax liability.

On Thursday, Reps. Rodney Davis (R., Ill.) and Mike Turner (R., Ohio), both of whom voted for the House tax bill, circulated a letter urging colleagues to continue to exempt the employer tuition benefits and the tuition breaks for university employees' families from taxation, and to allow employers to cover staffers' student-loan payments tax-free.

The letter, signed by 24 other members of Congress, was sent to House Ways and Means Committee Chairman Rep. Kevin Brady (R., Texas) and Sen. Orrin Hatch (R., Utah), chairman of the Senate Finance Committee.

A spokeswoman from the House committee said Friday that Mr. Brady is working "to reach a positive solution on the treatment of tuition assistance."

Write to Melissa Korn at melissa.korn@wsj.com

(END) Dow Jones Newswires

December 11, 2017 07:14 ET (12:14 GMT)