To amend the Internal Revenue Code of 1986 to exclude from gross income amounts paid by an employer on an employee's student loans.

Summary: Student Loan Employment Benefits Act of 2012 - Amends the Internal Revenue Code to exclude from the gross income of an employee amounts paid by an employer under a student loan payment assistance program. Limits the amount of such exclusion to $5,000 in a taxable year.

Requires an employer student loan payment assistance program to be a separate written plan of an employer to provide employees with student loan payment assistance. Defines "student loan payment assistance" as the payment of principal or interest on any indebtedness incurred by an employee solely to pay qualified higher education expenses which are paid or incurred within a reasonable time before or after such indebtedness was incurred and are attributable to education furnished during a period in which such employee was a student eligible for federal financial assistance.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Loan Employment Benefits Act 
of 2012''.

SEC. 2. STUDENT LOAN PAYMENT ASSISTANCE PROGRAMS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 127 
the following new section:

``SEC. 127A. STUDENT LOAN PAYMENT ASSISTANCE PROGRAMS.

    ``(a) In General.--Gross income of an employee does not include 
amounts paid or incurred by the employer for student loan payment 
assistance provided to such employee if the assistance is furnished 
pursuant to a program which is described in subsection (d).
    ``(b) Limitation.--The amount taken into account under paragraph 
(1) with respect to an individual for student loan assistance with 
respect to student loan payments during a taxable year shall not exceed 
$5,000.
    ``(c) Earned Income Limitation.--The amount excluded from the 
income of an employee under subsection (a) for any taxable year shall 
not exceed the earned income of such employee for such taxable year.
    ``(d) Student Loan Payment Assistance Program.--
            ``(1) In general.--For purposes of this section a student 
        loan payment assistance program is a separate written plan of 
        an employer for the exclusive benefit of his employees to 
        provide such employees with student loan payment assistance 
        which meets the requirements of paragraphs (2) through (9) of 
        this subsection. If any plan would qualify as a student loan 
        payment assistance program but for a failure to meet the 
        requirements of this subsection, then, notwithstanding such 
        failure, such plan shall be treated as a student loan payment 
        assistance program in the case of employees who are not highly 
        compensated employees.
            ``(2) Discrimination.--The contributions or benefits 
        provided under the plan shall not discriminate in favor of 
        employees who are highly compensated employees (within the 
        meaning of section 414(q)).
            ``(3) Eligibility.--The program shall benefit employees who 
        qualify under a classification set up by the employer and found 
        by the Secretary not to be discriminatory in favor of employees 
        described in paragraph (2).
            ``(4) Principal shareholders or owners.--Not more than 25 
        percent of the amounts paid or incurred by the employer for 
        student loan payment assistance during the year may be provided 
        for the class of individuals who are shareholders or owners (or 
        their spouses or dependents), each of whom (on any day of the 
        year) owns more than 5 percent of the stock or of the capital 
        or profits interest in the employer.
            ``(5) No funding required.--A program referred to in 
        paragraph (1) is not required to be funded.
            ``(6) Notification of eligible employees.--Reasonable 
        notification of the availability and terms of the program shall 
        be provided to eligible employees.
            ``(7) Statement of expenses.--The plan shall furnish to an 
        employee, on or before January 31, a written statement showing 
        the amounts paid or expenses incurred by the employer in 
        providing student loan payment assistance to such employee 
        during the previous calendar year.
            ``(8) Benefits.--
                    ``(A) In general.--A plan meets the requirements of 
                this paragraph if the average benefits provided to 
                employees who are not highly compensated employees 
                under all plans of the employer is at least 55 percent 
                of the average benefits provided to highly compensated 
                employees under all plans of the employer.
                    ``(B) Salary reduction agreements.--For purposes of 
                subparagraph (A), in the case of any benefits provided 
                through a salary reduction agreement, a plan may 
                disregard any employees whose compensation is less than 
                $25,000. For purposes of this subparagraph, the term 
                `compensation' has the meaning given such term by 
                section 414(q)(4), except that, under rules prescribed 
                by the Secretary, an employer may elect to determine 
                compensation on any other basis which does not 
                discriminate in favor of highly compensated employees.
            ``(9) Excluded employees.--For purposes of paragraphs (3) 
        and (8), there shall be excluded from consideration--
                    ``(A) subject to rules similar to the rules of 
                section 410(b)(4), employees who have not attained the 
                age of 21 and completed 1 year of service (as defined 
                in section 410(a)(3)), and
                    ``(B) employees not included in a student loan 
                payment assistance program who are included in a unit 
                of employees covered by an agreement which the 
                Secretary finds to be a collective bargaining agreement 
                between employee representatives and 1 or more 
                employees, if there is evidence that student loan 
                payment benefits were the subject of good faith 
                bargaining between such employee representatives and 
                such employer or employers.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Student loan payment assistance.--
                    ``(A) In general.--The term `student loan payment 
                assistance' means the payment of principal or interest 
                on--
                            ``(i) any indebtedness incurred by the 
                        employee solely to pay qualified higher 
                        education expenses (as defined in section 221) 
                        which--
                                    ``(I) are paid or incurred within a 
                                reasonable period of time before or 
                                after the indebtedness was incurred, 
                                and
                                    ``(II) are attributable to 
                                education furnished during a period 
                                during which the employee was an 
                                eligible student, or
                            ``(ii) any indebtedness used to refinance 
                        indebtedness described in clause (i).
                Such term shall not include any payment of principal or 
                interest on indebtedness owed to a person who is 
                related (within the meaning of section 267(b) or 
                707(b)(1)) to the taxpayer or to any person by reason 
                of a loan under any qualified employer plan (as defined 
                in section 72(p)(4)) or under any contract referred to 
                in section 72(p)(5).
                    ``(B) Eligible student.--The term `eligible 
                student' has the meaning given such term by section 
                25A(b)(3).
                    ``(C) Dependent.--The term `dependent' has the 
                meaning given such term by section 152 (determined 
                without regard to subsections (b)(1), (b)(2), and 
                (d)(1)(B) thereof).
            ``(2) Earned income.--The term `earned income' shall have 
        the meaning given such term in section 32(c)(2), but such term 
        shall not include any amounts paid or incurred by an employer 
        for student loan payment assistance to an employee.
            ``(3) Employee.--The term `employee' includes, for any 
        year, an individual who is an employee within the meaning of 
        section 401(c)(1) (relating to self-employed individuals).
            ``(4) Employer.--An individual who owns the entire interest 
        in an unincorporated trade or business shall be treated as his 
        own employer. A partnership shall be treated as the employer of 
        each partner who is an employee within the meaning of paragraph 
        (3).
            ``(5) Attribution rules.--
                    ``(A) Ownership of stock.--Ownership of stock in a 
                corporation shall be determined in accordance with the 
                rules provided under subsections (d) and (e) of section 
                1563 (without regard to section 1563(e)(3)(C)).
                    ``(B) Interest in unincorporated trade or 
                business.--The interest of an employee in a trade or 
                business which is not incorporated shall be determined 
                in accordance with regulations prescribed by the 
                Secretary, which shall be based on principles similar 
                to the principles which apply in the case of 
                subparagraph (A).
            ``(6) Utilization test not applicable.--A student loan 
        payment assistance program shall not be held or considered to 
        fail to meet any requirements of subsection (d) (other than 
        paragraphs (4) and (8) thereof) merely because of utilization 
        rates for the different types of assistance made available 
        under the program.
            ``(7) Disallowance of excluded amounts as credit or 
        deduction.--No deduction or credit shall be allowed to the 
        employee under any other section of this chapter for any amount 
        excluded from the gross income of the employee by reason of 
        this section.''.
    (b) Conforming Amendments.--Sections 221(d)(2)(A), 414(n)(3)(C) and 
(t)(2), 3121(a)(18), 3306(b)(13), 3401(a)(18), and 6039D(d)(1) of such 
Code are each amended by inserting ``127A,'' after ``127,''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to section 127 the following new item:

``Sec. 127A. Student loan payment assistance programs.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.