TAXATION OF FRINGE BENEFITS

Section 127 of the Internal Revenue Code expired at the beginning of 1984. Section 127 is that part of the law that makes employer-paid tuition benefits tax-exempt. This is an important fringe benefit for teachers and equally important for our society.

Employer-paid tuition benefits represent one of the best ways to compensate workers and at the same time help them to develop skills and increase their own productivity. Because of the impasse on tax policy, reenactment of Section 127 is going very slowly and the AFT has received reports that graduate students at the University of Michigan are having large amounts of their paychecks withheld.

This withholding is not required by the IRS and constitutes a form of harassment by the University against some of its lowest paid employees. Because of the lapse in Section 127, however, the AFT has been unable to take effective action to stop the University's action.

The House and Senate are ready to adopt in differing forms legislation to protect fringe benefits from taxation and to reauthorize Section 127. The Senate bill would provide for a three-year reauthorization of Section 127 and would specifically protect graduate students receiving these benefits.

RESOLVED, that the AFT strongly supports a permanent reauthorization of Section 127 so that employer-paid tuition benefits continue to be available and tax exempt; and

RESOLVED, that the AFT calls upon the U.S. Congress to adopt a freeze prohibiting any further taxation of existing fringe benefits.