DESCRIPTION OF THE TAX PROVISIONS OF H.R. 5204, 

THE “STOP TAXING DEATH AND DISABILITY ACT” 

Scheduled for Markup 

by the 

HOUSE COMMITTEE ON WAYS AND MEANS 

on September 14, 2016 

Prepared by the Staff 

of the 

JOINT COMMITTEE ON TAXATION 

 

 

September 13, 2016 

JCX-80-16
i 

CONTENTS 

Page 

INTRODUCTION .......................................................................................................................... 1

A. Treatment of Student Loans Discharged on Account of Death or Disability .................. 2

B. Estimated Revenue Effect ................................................................................................ 4
1 

INTRODUCTION 

The House Committee on Ways and Means has scheduled a committee markup on 

September 14, 2016, of the tax provisions of H.R. 5204, the “Stop Taxing Death and Disability 

Act.” This document,1

 prepared by the staff of the Joint Committee on Taxation, provides a 

description of the bill. 

 1

 This document may be cited as follows: Joint Committee on Taxation, Description of the Tax Provisions 

of H.R. 5204, the “Stop Taxing Death and Disability Act” (JCX-80-16), September 13, 2016. This document can 

also be found on the Joint Committee on Taxation website at www.jct.gov. 
2 

A. Treatment of Student Loans Discharged on Account of Death or Disability 

Present Law 

Discharges of Student Loans 

Gross income generally includes the discharge of indebtedness of the taxpayer. Under an 

exception to this general rule, gross income does not include any amount from the forgiveness 

(in whole or in part) of certain student loans, provided that the forgiveness is contingent on the 

student’s working for a certain period of time in certain professions for any of a broad class of 

employers.2

Student loans eligible for this special rule must be made to an individual to assist the 

individual in attending an educational institution that normally maintains a regular faculty and 

curriculum and normally has a regularly enrolled body of students in attendance at the place 

where its education activities are regularly carried on. Loan proceeds may be used not only for 

tuition and required fees, but also to cover room and board expenses. The loan must be made by 

(1) the United States (or an instrumentality or agency thereof), (2) a State (or any political 

subdivision thereof), (3) certain tax-exempt public benefit corporations that control a State, 

county, or municipal hospital and whose employees have been deemed to be public employees 

under State law, or (4) an educational organization that originally received the funds from which 

the loan was made from the United States, a State, or a tax-exempt public benefit corporation. 

In addition, an individual’s gross income does not include amounts from the forgiveness 

of loans made by educational organizations (and certain tax-exempt organizations in the case of 

refinancing loans) out of private, nongovernmental funds if the proceeds of such loans are used 

to pay costs of attendance at an educational institution or to refinance any outstanding student 

loans (not just loans made by educational organizations) and the student is not employed by the 

lender organization. In the case of such loans made or refinanced by educational organizations 

(or refinancing loans made by certain tax-exempt organizations), cancellation of the student loan 

must be contingent on the student working in an occupation or area with unmet needs and such 

work must be performed for, or under the direction of, a tax-exempt charitable organization or a 

governmental entity. 

Finally, an individual’s gross income does not include any loan repayment amount 

received under the National Health Service Corps loan repayment program, certain State loan 

repayment programs, or any amount received by an individual under any State loan repayment or 

loan forgiveness program that is intended to provide for the increased availability of health care 

services in underserved or health professional shortage areas (as determined by the State). 

Description of Proposal 

The proposal modifies the exclusion of student loan discharges from gross income, by 

including within the exclusion certain discharges on account of death or disability. Loans 

eligible for the exclusion under the proposal are loans made by (1) the United States (or an 

 2

 Sec. 108(f). 
3 

instrumentality or agency thereof), (2) a State (or any political subdivision thereof), (3) certain 

tax-exempt public benefit corporations that control a State, county, or municipal hospital and 

whose employees have been deemed to be public employees under State law, (4) an educational 

organization that originally received the funds from which the loan was made from the United 

States, a State, or a tax-exempt public benefit corporation, or (5) private education loans (for this 

purpose, private education loan is defined in section 140(7) of the Consumer Protection Act).3

Under the proposal, the discharge of a loan as described above is excluded from gross 

income if the discharge was pursuant to the death or total and permanent disability of the 

student.4 

Effective Date 

The proposal applies to discharges of loans before, on, or after the date of enactment. 

 

 3

 15 U.S.C. 1650(7). 

4

 Although the proposal makes specific reference to those provisions of the Higher Education Act of 1965 

that discharge William D. Ford Federal Direct Loan Program loans, Federal Family Education Loan Program loans, 

and Federal Perkins Loan Program loans in the case of death and total and permanent disability, the proposal also 

contains a provision providing generally for an exclusion in the case of a student loan discharged on account of the 

death or total and permanent disability of the student, in addition to those specific statutory references. 
4 

B. Estimated Revenue Effect 

Fiscal Years 

[Millions of Dollars] [1] [2] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-21 2017-26 

 

-27 -8 -8 -8 -8 -8 -8 -8 -9 -8 -58 -99 

NOTE: Details do not add to totals due to rounding. 

[1] Estimate provided by the Joint Committee on Taxation and the Congressional Budget Office. 

[2] Estimate includes the following outlay effects: 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-21 2017-26 

 

10 1 1 1 1 1 1 1 1 1 14 19