I
106TH CONGRESS
1ST SESSION
H. R. 2265
To amend the Internal Revenue Code of 1986 to provide that certain edu-
cational benefits provided by an employer to children of employees shall
be excludable from gross income as a scholarship.
IN THE HOUSE OF REPRESENTATIVES
JUNE 17, 1999
Mr. LEVIN (for himself, Mr. ENGLISH, Mr. WAXMAN, Mr. COYNE, Mr.
MCGOVERN, Ms. KILPATRICK, Mr. BALDACCI, Mr. FROST, Mr. REYES,
Mr. EVANS, Mr. PASTOR, Mr. NEAL of Massachusetts, Mr. GEJDENSON,
Mr. POMEROY, Mr. KENNEDY of Rhode Island, Mr. PALLONE, and Mr.
HINCHEY) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
that certain educational benefits provided by an employer
to children of employees shall be excludable from gross
income as a scholarship.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. CERTAIN EDUCATIONAL BENEFITS PROVIDED
BY AN EMPLOYER TO CHILDREN OF EMPLOY-
EES EXCLUDABLE FROM GROSS INCOME AS A
SCHOLARSHIP.
(a) IN GENERAL.—Section 117 of the Internal Rev-
enue Code of 1986 (relating to qualified scholarships) is
amended by adding at the end the following new sub-
section:
‘‘(e) EMPLOYER-PROVIDED EDUCATIONAL BENEFITS
PROVIDED TO CHILDREN OF EMPLOYEES.—
‘‘(1) IN
GENERAL.—In determining whether
any amount is a qualified scholarship for purposes
of subsection (a), the fact that such amount is pro-
vided in connection with an employment relationship
shall be disregarded if—
‘‘(A) such amount is provided by the em-
ployer to a child (as defined in section
151(c)(3)) of an employee of such employer,
‘‘(B) such amount is provided pursuant to
a plan which meets the nondiscrimination re-
quirements of subsection (d)(3), and
‘‘(C) amounts provided under such plan
are in addition to any other compensation pay-
able to employees and such plan does not pro-
vide employees with a choice between such
amounts and any other benefit.
For purposes of subparagraph (C), the business
practices of the employer (as well as such plan) shall
be taken into account.
‘‘(2) DOLLAR LIMITATIONS.—
‘‘(A) PER CHILD.—The amount excluded
from the gross income of the employee by rea-
son of paragraph (1) for a taxable year with re-
spect to amounts provided to each child of such
employee shall not exceed $2,000.
‘‘(B) AGGREGATE LIMIT.—The amount ex-
cluded from the gross income of the employee
by reason of paragraph (1) for a taxable year
(after the application of subparagraph (A))
shall not exceed the excess of the dollar amount
contained in section 127(a)(2) over the amount
excluded from the employee’s gross income
under section 127 for such year.
‘‘(3) PRINCIPAL
SHAREHOLDERS
AND
OWN-
ERS.—Paragraph (1) shall not apply to any amount
provided to any child of any individual if such indi-
vidual (or such individual’s spouse) owns (on any
day of the year) more than 5 percent of the stock
or of the capital or profits interest in the employer.
‘‘(4) DEGREE REQUIREMENT NOT TO APPLY.—
In the case of an amount which is treated as a quali-
fied scholarship by reason of this subsection, sub-
section (a) shall be applied without regard to the re-
quirement that the recipient be a candidate for a de-
gree.
‘‘(5) CERTAIN OTHER RULES TO APPLY.—Rules
similar to the rules of paragraphs (4), (5), and (7)
of section 127(c) shall apply for purposes of this
subsection.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
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