A bill to amend the Internal Revenue Code of 1954 to repeal the provision which terminates the exclusion for amounts received under certain educational assistance programs.
PL 98-611 (H.R.2568), enacted 10/31/1984

98 STAT. 3176 
PUBLIC LAW 98-611—OCT. 31, 1984 
Public Law 98-611 
98th Congress 
An Act 
Oct 31 1984 
'^^ amend the Internal Revenue Code of 1954 to extend for 2 years the exclusion from 
' 
gross income with respect to educational assistance programs, and for other 
[H.R. 2568] 
purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SECTION 1. AMENDMENTS RELATING TO EDUCATIONAL ASSISTANCE PRO-
GRAMS. 
26 use 127. 
(a) 2-YEAR EXTENSION OF EXCLUSION FROM GROSS INCOME.—Sub-
section (d) of section 127 of the Internal Revenue Code of 1954 
(relating to educational assistance programs) is amended by striking 
out "December 31, 1983" and inserting in lieu thereof "December 31, 
1985". 
(b) ANNUAL EXCLUSION LIMITED TO $5,000.—Subsection (a) of sec-
tion 127 of such Code is amended to read as follows: 
"(a) EXCLUSION FROM GROSS INCOME.— 
"(1) IN GENERAL.—Gross income of an employee does not 
include amounts paid or expenses incurred by the employer for 
educational assistance to the employee if the assistance is 
furnished pursuant to a program which is described in sub-
section (b). 
"(2) $5,000 MAXIMUM EXCLUSION.—If, but for this paragraph, 
this section would exclude from gross income more than $5,000 
of educational assistance furnished to an individual during a 
calendar year, this section shall apply only to the first $5,000 of 
such assistance so furnished." 
(c) SPECIAL RULE FOR CERTAIN GRADUATE STUDENTS.—Subsection 
(c) of section 127 of such Code is amended by adding at the end 
thereof the following paragraph: 
"(8) COORDINATION WITH SECTION ii7(d).—In the case of the 
education of an individual who is a graduate student at an 
educational organization described in section 170(b)(l)(A)(ii) and 
who is engaged in teaching or research activities for such 
i4n^e, p. 887. 
organization, section 117(d)(2) shall be applied as if it did not 
contain the phrase '(below the graduate level)'." 
(d) REPORTING AND RECORDKEEPING REQUIREMENTS.— 
(1) IN GENERAL.—Subpart A of part III of subchapter A of 
chapter 61 of such Code is amended by inserting after section 
6039C the following new section: 
26 u s e 6039D. 
"SEC. 6039D. RETURNS AND RECORDS WITH RESPECT TO CERTAIN FRINGE 
BENEFIT PLANS. 
"(a) IN GENERAL.—Every employer maintaining a specified fringe 
benefit plan during any year beginning after December 31, 1984, for 
any portion of which the applicable exclusion applies, shall file a 
return (at such time and in such manner as the Secretary shall by 
regulations prescribe) with respect to such plan showing for such 
year— 
PUBLIC LAW 98-611—OCT. 31, 1984 
98 STAT. 3177 
"(1) the number of employees of the employer, 
"(2) the number of employees of the employer eligible to 
participate under the plan, 
"(3) the number of employees participating under the plan, 
"(4) the total cost of the plan during the year, and 
"(5) the name, address, and taxpayer identification number of 
the employer and the type of business in which the employer is 
engaged. 
"(b) RECORDKEEPING REQUIREMENT.—Each employer maintaining 
a specified fringe benefit plan during any year shall keep such 
records as may be necessary for purposes of determining whether 
the requirements of the applicable exclusion are met. 
"(c) ADDITIONAL INFORMATION WHEN REQUIRED BY THE SECRE-
TARY.—Any employer— 
"(1) who maintains a specified fringe benefit plan during any 
year for which a return is required under subsection (a), and 
"(2) who is required by the Secretary to file an additional 
return for such year, 
shall file such additional return. Such additional return shall be 
filed at such time and in such manner as the Secretary shall 
prescribe and shall contain such information as the Secretary shall 
prescribe. 
"(d) DEFINITIONS.—For purposes of this section— 
"(1) SPECIFIED FRINGE BENEFIT PLAN.—The term 'specified 
fringe benefit plan' means— 
"(A) any cafeteria plan (as defined in section 12-5), and 
"(B) any educational assistance program (as defined in 
section 127). 
"(2) APPLICABLE EXCLUSION.—The term 'applicable exclusion' 
means— 
"(A) section 125, in the case of a cafeteria plan, and 
"(B) section 127, in the case of an educational assistance 
program." 
(2) PENALTY.—Subsection (f) of section 6652 of such Code 
Ante, p. 882. 
(relating to failure to file certain information returns, regi-
stration statements, etc.) is amended by striking out "125(h) 
(relating to information with respect to cafeteria plans)" and 
inserting in lieu thereof "6039D (relating to returns and records 
with respect to certain fringe benefit plans)". 
(3) CONFORMING AMENDMENTS.— 
(A) Section 125 of such Code (relating to cafeteria plans) is 
Ante, p. 882. 
amended by striking out subsection (h) and inserting in lieu 
thereof the following: 
"(h) CROSS REFERENCE.— 
"For reporting and recordkeeping requirements, see section 6039D." 
(B) Section 127 of such Code is amended by adding at the 
26 USC 127. 
end thereof the following new subsection: 
"(e) CROSS REFERENCE.— 
98 STAT. 3178 
PUBLIC LAW 98-611—OCT. 31, 1984 
"For reporting and recordkeeping requirements, see section 6039D." 
(4) CLERICAL AMENDMENT.—The table of sections for subpart A 
of part III of subchapter A of chapter 61 of such Code is 
amended by inserting after the item relating to section 6039C 
the following new item: 
"Sec. 6039D. Returns and records with respect to certain fringe benefit 
plans." 
(e) CLARIFICATION OF DISALLOWANCE OF CREDIT OR DEDUCTION.— 
26 use 127. 
Paragraph (7) of section 127(c) of such Code (relating to definitions; 
special rules) is amended by inserting "to the employee" after 
"allowed". 
(f) EXCLUSION FROM RAILROAD RETIREMENT TAXES OF AMOUNTS 
WHICH MAY BE EXCLUDED UNDER SECTION 127.—Subsection (e) of 
Ante, p. 884. 
section 3231 of such Code (defining compensation for purposes of the 
railroad retirement taxes) is amended by adding at the end thereof 
the following new paragraph: 
"(6) The term 'compensation' shall not include any payment 
made, or benefit furnished, to or for the benefit of an employee 
if at the time of such payment or such furnishing it is reasona-
ble to believe that the employee will be able to exclude such 
payment or benefit from income under section 127." 
26 u s e 127 note. 
(g) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as otherwise provided in this subsec-
tion, the amendments made by this section shall apply to 
taxable years beginning after December 31,1983. 
(2) SUBSECTION (d).—The amendments made by subsection (d) 
shall take effect on January 1,1985. 
(3) SUBSECTION (f).—The amendment made by subsection (0 
shall apply to remuneration paid after December 31, 1984. 
(4) No PENALTIES OR INTEREST ON FAILURE TO WITHHOLD.—No 
penalty or interest shall be imposed on any failure to withhold 
26 use 3101. 
under subtitle C of the Internal Revenue Code of 1954 (relating 
to employment taxes) with respect to amounts excluded from 
gross income under section 127 of such Code (as amended by this 
Ante, p. 3176. 
section and determined without regard to subsection (a)(2) 
thereof) with respect to periods during 1984. 
(5) COORDINATION WITH SECTION ii? (d).—In the case of educa-
tion described in section 127(c)(8) of the Internal Revenue Code 
Ante, p. 3176. 
of 1954, as added by this section, section 117(d) of such Code 
Ante, p. 887. 
shall be treated as in effect on and after January 1, 1984. 
(h) STUDY.— 
(1) IN GENERAL.—The Secretary of the Treasury shall conduct 
a study of the effect of the provisions of section 127 of the 
Internal Revenue Code of 1954. 
PUBLIC LAW 98-611—OCT. 31, 1984 
98 STAT. 3179 
(2) REPORT.—Not later than October 1, 1985, the Secretary of 
the Treasury shall submit a report to the Committee on Ways 
and Means of the House of Representatives and the Committee 
on Finance of the Senate on the study conducted under para-
graph (1) (together with such recommendations as he may deem 
advisable). 
Approved October 31, 1984. 
LEGISLATIVE HISTORY—H.R. 2568: 
HOUSE REPORT No. 98-1049 (Comm. on Ways and Means). 
CONGRESSIONAL RECORD, Vol. 130 (1984): 
Oct. 1, considered and passed House. 
Oct. 11, considered and passed Senate.