[Congressional Record Volume 142, Number 91 (Wednesday, June 19, 1996)]
[Senate]
[Page S6518]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FRIST:
  S. 1886. A bill to amend the Internal Revenue Code of 1986 to clarify 
the treatment of educational grants by private foundations, and for 
other purposes; to the Committee on Finance.


                     educational grants legislation

 Mr. FRIST. Mr. President, I introduce a bill which is 
essential in building a higher educated and more productive labor force 
as we move toward the next century. My bill would encourage private 
foundations to increase the amounts they currently provide for 
educational assistance to students in their communities.
  Currently, guidelines developed by the Internal Revenue Service can 
have the effect of prohibiting certain foundations from being able to 
provide the maximum amount of educational assistance to local students. 
As the Federal Government faces greater and greater fiscal constraints, 
we must look for ways to encourage the private sector to fill unmet 
educational needs.
  Essentially, under current law, a private foundation will not suffer 
tax penalties if it meets certain tests when providing scholarships or 
educational loans to employees, or children of employees, of a 
particular employer. While there is a facts and circumstances test 
which can be met, uncertainty surrounding application of this test to 
an employer-related grant program results in much greater usage of a 
safe-harbor percentage test which has been developed by the Internal 
Revenue Service. This safe-harbor percentage test basically limits the 
amount of scholarships and loans that a foundation may provide to one 
out of four applicable children of employees of a particular company. 
This 25-percent test can cause hardship, especially in cases where a 
substantial percentage of the community at large works for a single 
employer.
  My proposal eliminates this rigid 25-percent test.
  I hope my colleagues will join me in supporting this essential 
education bill. By providing these private foundations relief from the 
IRS' rigid 25-percent test, we will be granting valuable and badly 
needed educational support to America's hard-working families.
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