NAICU Washington Update

Congress Passes Tax Bill

December 22, 2010

Just days before adjourning for the year, both the House and Senate finally agreed to a contentious package of tax and unemployment benefits extensions. The "Tax Relief, Unemployment Benefits Reauthorization, and Job Creation Act of 2010," now signed into law, extends every priority higher education tax benefit that either already expired or was set to expire at the end of this year. None of the items important to our students, families, and institutions were left out of the final package.

The bill would retroactively extend for two years provisions that expired on December 31, 2009.  These include the IRA charitable rollover and above-the-line deduction for tuition expenses. A retroactive two-year extension means that the the 2009 benefits will be in effect for all of 2010 and one more year, now being set to expire on December 31, 2011.

The final tax package also extended the new American Opportunity Tax Credit (AOTC) enacted in 2008 economic stimulus legislation under President Obama. The $2,500 partially-refundable credit will remain available for the next two years, expiring on December 31, 2012.

The bill also extends through 2012 the widely publicized tax cuts enacted in 2001 and 2003, during the Bush presidency. This extension includes IRC Sec. 127 - employer-provided education assistance - for both graduate and undergraduate course work, as well as the improvements to the student loan interest deduction (SLID) and Coverdell Education Savings Accounts (ESAs).

The newly-passed tax bill maintains the 2001 Sec. 127 and Coverdell provisions until the end of 2012, when another extension will be necessary. The 2001 tax bill extended Sec. 127 in its entirety until the end of this year. In addition, the 2001 bill increased the income limits and eliminated a five-year limit for claiming SLID. Lastly, it increased the tax-free annual contribution limit to Coverdell ESAs from $500 to $2,000 annually.

NAICU co-chairs the Sec. 127 coalition, a broad group of organizations and institutions committed to making employer-provided tuition assistance permanent. The coalition brings together higher education, labor and employers to advocate for this important provision. Through the coalitions' efforts, we had dozens of meetings with House and Senate tax committee members and staff, as well as with congressional leadership, and made a strong bipartisan case for continuing the benefit for the one million working students nationwide. In addition, we succeeded in generating over 9,000 letters to the Hill through the coalition website

The successful extension of all of the NAICU tax provisions is a huge victory for our students, families and institutions. However, with such short extensions, advocacy efforts will resume shortly after the next Congress convenes - and a host of new members and staff take office.

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