The Administration proposal would also reinstate the exclusion for graduate-level courses, and apply a new tax credit to encourage small businesses to provide educational assistance to their employees. We believe this legislation should be a high priority for this committee. These two problems directly counteract an intended effect of section 127, namely, to encourage additional training for our workforce. It is also important to bear in mind that this is a private sector program. Employers establish the program.
Employers work to identify the educational and training requirements of their employees.
Employers may establish certain academic performance standards to be eligible under their program. However, we encourage your careful review of this and other ways to encourage small companies to establish these plans. Under current law, most grant assistance is not taxed to students. An exception to this rule are grants made to students, in return for which the student is required to perform services for the grantor. For example, Federal Work Study awards, a form of federal student aid, is considered taxable income to students receiving these awards.