July 10, 1997 - Tax Exempt Status for Tuition Waivers

We are writing on behalf of the American Society for Microbiology (ASM), the largest single life science organization in the world comprising more than 42,000 members, with regard to the House/Senate conference committee on the revenue reconciliation legislation. The ASM urges you to support continuing the tax exclusion of tuition waivers for graduate research and teaching assistants and to reject the House proposal in H.R. 2014 to phase out this exclusion.

The House proposal would eliminate Section 117(d) of the Internal Revenue Code which excludes tuition waivers from taxation. Universities throughout the United States waive tuition costs for graduate researchers and teaching assistants in exchange for their research and teaching assistance. Under the House proposal the cost of tuition would become taxable income for these graduate researchers and teaching assistants.

Tuition waivers provide an incentive for many students to pursue a Ph.D., and without the waiver many of these students would be unable to afford the high cost of graduate education. Many Ph.D. programs require more than five years of study and research. Additionally, many graduate researchers and teaching assistants are unable to seek employment while completing their course of study and receive small stipends from their institutions to pay their cost of living. Taxing the value of tuition waivers would increase the taxable income of these students, significantly reducing their modest stipends, leaving many students well below the poverty line.

Graduate researchers and teaching assistants provide a cost-effective means for colleges and universities to provide quality education to all students while reigning in the rising costs of education. If tuition waivers become taxed, these institutions will have to provide larger stipends to their graduate researchers and teaching assistants to make up the difference. In turn, colleges and universities would have to raise tuition for all students in order to cover these new costs, or run the risk of losing valuable graduate research and teaching assistance.

The United States must continue to lead the world in scientific and technological innovation. This nation must encourage the best and the brightest youth to pursue higher education and continue to perform research to solve this nation's most complex health, environmental, and technological problems. The elimination of section 117 (d) could discourage students from pursuing higher education at a cost to the entire nation. The ASM strongly urges you to continue to provide a tax exclusion for tuition waivers to graduate researchers and teaching assistants under section 117(d) of the Internal Revenue Code.