§127 — Educational assistance programs
53 cases·4 followed·5 distinguished·4 questioned·1 criticized·39 cited—8% support
Statute Text — 26 U.S.C. §127
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 subsection (b).
If, but for this paragraph, this section would exclude from gross income more than $5,250 of educational assistance furnished to an individual during a calendar year, this section shall apply only to the first $5,250 of such assistance so furnished.
For purposes of this section an educational assistance program is a separate written plan of an employer for the exclusive benefit of his employees to provide such employees with educational assistance. The program must meet the requirements of paragraphs (2) through (6) of this subsection.
The program shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are highly compensated employees (within the meaning of section 414(q)) or their dependents. For purposes of this paragraph, there shall be excluded from consideration employees not included in the program who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that educational assistance benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
Not more than 5 percent of the amounts paid or incurred by the employer for educational assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.
A program must not provide eligible employees with a choice between educational assistance and other remuneration includible in gross income. For purposes of this section, the business practices of the employer (as well as the written program) will be taken into account.
A program referred to in paragraph (1) is not required to be funded.
Reasonable notification of the availability and terms of the program must be provided to eligible employees.
For purposes of this section—
The term “educational assistance” means—
the payment, by an employer, of expenses incurred by or on behalf of an employee for education of the employee (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment),
the payment by an employer, whether paid to the employee or to a lender, of principal or interest on any qualified education loan (as defined in section 221(d)(1)) incurred by the employee for education of the employee, and
the provision, by an employer, of courses of instruction for such employee (including books, supplies, and equipment),
but does not include payment for, or the provision of, tools or supplies which may be retained by the employee after completion of a course of instruction, or meals, lodging, or transportation. The term “educational assistance” also does not include any payment for, or the provision of any benefits with respect to, any course or other education involving sports, games, or hobbies.
The term “employee” includes, for any year, an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (2).
Ownership of stock in a corporation shall be determined in accordance with the rules provided under subsections (d) and (e) of section 1563 (without regard to section 1563(e)(3)(C)).
The interest of an employee in a trade or business which is not incorporated shall be determined in accordance with regulations prescribed by the Secretary, which shall be based on principles similar to the principles which apply in the case of subparagraph (A).
An educational assistance program shall not be held or considered to fail to meet any requirements of subsection (b) merely because—
of utilization rates for the different types of educational assistance made available under the program; or
successful completion, or attaining a particular course grade, is required for or considered in determining reimbursement under the program.
This section shall not be construed to affect the deduction or inclusion in income of amounts (not within the exclusion under this section) which are paid or incurred, or received as reimbursement, for educational expenses under section 117, 162 or 212.
No deduction or credit shall be allowed to the employee under any other section of this chapter for any amount excluded from income by reason of this section.
In the case of any taxable year beginning after 2026, both of the $5,250 amounts in subsection (a)(2) shall each be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2025” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.
For reporting and recordkeeping requirements, see section 6039D.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.127-1 Amounts received under a qualified educational assistance program
- Treas. Reg. §Treas. Reg. §1.127-1(a) Exclusion from gross income.
- Treas. Reg. §Treas. Reg. §1.127-1(b) Disallowance of excluded amounts as credit or deduction.
- Treas. Reg. §Treas. Reg. §1.127-1(c) Amounts received under a nonqualified program.
- Treas. Reg. §Treas. Reg. §1.127-1(d) Definitions.
- Treas. Reg. §Treas. Reg. §1.127-1(e) Effective date.
- Treas. Reg. §Treas. Reg. §1.127-2 Qualified educational assistance program
- Treas. Reg. §Treas. Reg. §1.127-2(a) In general.
- Treas. Reg. §Treas. Reg. §1.127-2(b) Separate written plan.
- Treas. Reg. §Treas. Reg. §1.127-2(c) Educational assistance—(1) In general.
- Treas. Reg. §Treas. Reg. §1.127-2(d) Exclusive benefit.
- Treas. Reg. §Treas. Reg. §1.127-2(e) Prohibited discrimination—(1) Eligibility for benefits.
- Treas. Reg. §Treas. Reg. §1.127-2(f) Benefit limitation—(1) In general.
- Treas. Reg. §Treas. Reg. §1.127-2(g) Notification of employees.
- Treas. Reg. §Treas. Reg. §1.127-2(h) Definitions.
- Treas. Reg. §Treas. Reg. §1.127-2(i) Substantiation.
53 Citing Cases
Based on this, we are not convinced that Congress was attempting to impart legitimacy to the debt-to- equity ratio that was required by the revenue rulings.13 13In Rev.
ion 1461. In 1984 Congress repealed the 30-percent withholding tax imposed by sections 871 and 881 with respect to certain interest paid on portfolio debt, referred to as “portfolio interest”.9 Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369, sec. 127, 98 Stat. 494, 648. Repeal, however, was only prospective in effect, applying to interest payments made with respect to debt obligations issued after July 18, 1984, the date of enactment of DEFRA. See DEFRA sec. 127(g)(1), 98 Stat. 652. For p
The amendments made by DEFRA section 127 generally applied to “interest received after the date of the enactment of this Act with respect to obligations issued after such date, in taxable years ending after such date.” DEFRA sec.
1950) (taxpayer’s election of a war loss deduction under section 127 of Internal Revenue Code of 1939 not revocable under doctrine of election), 25 aff’g 12 T.C.
- 6 - [*6] chapter 30, 31, 32, 34 or 35 oftitle 38 ofthe United States Code, or under chapter 1606 oftitle 10 ofthe United States Code; (3) employer-provided educational assistance that is excludable from income under section 127; or (4) any other educational assistance that is excludable from gross income (other than as a gift, bequest, devise, or inheritance within the meaning ofsection 102(a)).
ts as contracts for the sale of goods in the future by N.M. Stat. Ann. section 55-2-107(1), does not preclude those contracts from also effecting a transfer of an interest in real property under New Mexico law. See also 1 Restatement, Contracts 2d, sec. 127, cmt. b & c (1981). 2. Creation of Servitudes The TEPCO and WEF coal supply contracts created servitudes under New Mexico law. The modern view is that servitudes may be created by contract. See Cafeteria Operators, L.P. v. Coronado- Santa Fe
acts as contracts for the sale of goods in the future by N.M. Stat. Ann. section 55-2-107(1) does not preclude those contracts from also effecting a transfer of an interest in real property under New Mexico law. See also 1 Restatement, Contracts 2d, sec. 127, cmt. b & c (1981). 2. Creation of Servitudes The TEPCO and WEF coal supply contracts created ser-vitudes under New Mexico law. The modern view is that ser-vitudes may be created by contract. See Cafeteria Operators, L.P. v. Coronado-Santa F
For example, 1 Restatement, Trusts 2d, section 127 comment b (1959), states: Where the owner of property, whether real or personal, transfers it in trust to pay the income to himself for a period of years and at the expiration of the period to pay the principal to him, he is the sole beneficiary of the trust.
For example, 1 Restatement, Trusts 2d, section 127 comment b (1959), states: Where the owner of property, whether real or personal, transfers it in trust to pay the income to himself for a period of years and at the expiration of the period to pay the principal to him, he is the sole beneficiary of the trust.