[Congressional Record Volume 142, Number 97 (Thursday, June 27, 1996)]
[Extensions of Remarks]
[Pages E1189-E1190]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          SUPPORT FOR SCHOLARSHIPS THROUGH PRIVATE FOUNDATIONS

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                             HON. ED BRYANT

                              of tennessee

                    in the house of representatives

                        Thursday, June 27, 1996

  Mr. BRYANT of Tennessee. Mr. Speaker, today Mr. Clement and I 
introduced a bill to help private foundations with educational 
scholarship programs. We should be encouraging greater partnerships 
between private groups, local communities, and aspiring students, but 
current IRS rules sometimes skew the roads to that goal.
  Under current law, a private foundation formed primarily to provide 
scholarships or

[[Page E1190]]

educational loans to employees of a particular company must meet a 
number of criteria to avoid severe Federal tax penalties. Those 
criteria are designed to assure that such foundations were not set up 
as tax shelters or to provide nonmonetary compensation or benefits to 
employees. I agree with the good intentions of the current law, 
however, one of the requirements stifles the ability of private 
foundations to design scholarships for particular purposes. I am 
referring to the ``25-percent test.''
  Under current law, a private foundation--usually established and 
funded by a single individual or employer--can offer scholarships to 
only 25 percent of students who apply. That means three out of four 
applicants must be turned down, not because of lack of merit or lack of 
funds, but to satisfy Federal rules.
  My bill would remove that requirement from Federal law, but keep in 
place the seven guidelines the IRS has drawn up to meet the law's 
``objective and nondiscriminatory'' standard. That way, private 
foundations could design more focused programs without weakening the 
safeguards against using such organizations for tax benefits or as 
hidden compensation. It also removes current law's discrimination 
against small communities with a single large employer.
  Our laws should not discourage support for higher education. 
Foundations, reflecting the demonstrated generosity of their financial 
supporters, should not be told by the Federal Government that they have 
to deny three out of four of the students who may need their help. 
Rather, the door should be open for expanding the opportunities 
available to individuals.

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