[Congressional Record Volume 145, Number 149 (Thursday, October 28, 1999)]
[Senate]
[Pages S13404-S13406]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 1820. A bill to amend the Internal Revenue Code of 1986 to exclude 
national service educational awards from the recipient's gross income; 
to the Committee on Finance.


                  americorps scholarship fairness act

  Mr. KERRY. Mr. President, I rise today to introduce legislation on 
behalf of thousands dedicated volunteers around the country. The 
legislation I am offering addresses an inequity in the tax code that 
adversely affects AmeriCorps volunteers. I urge my colleagues to pass 
it immediately.

  Since 1994, in 4,000 communities across the country, AmeriCorps 
participants have tutored and mentored more than 4 million children, 
developed after-school programs for over one million young people, and 
helped build more than 11,000 homes. Their dedication and commitment 
are a tribute to the American tradition of public service. Currently, 
at the conclusion of 1,700 hours of service, AmeriCorps members receive 
an education award of $4,725. The award may be used by former 
volunteers to pay for tuition expenses or the repayment of student 
loans.
  Under long-established tax law, scholarships and grants are 
excludable from income. However, because the AmeriCorps awards are 
considered to represent payment for services rendered, they must be 
included in taxable income at the end of the year. This tax treatment 
creates a significant hardship for former volunteers. Because 
AmeriCorps education awards are sent directly to the loan agency or 
educational institution, they do not represent income from which a 
portion may be reserved by the beneficiary for the payment of tax. 
After serving in AmeriCorps, many former volunteers work part-time to 
pay for college, and the education award pushes their income above the 
standard income tax deduction, creating tax liability for an individual 
with little means to pay for it.
  Mr. President, allow me to illustrate. Maleah Thorpe of Sunderland, 
Massachusetts, is a two-year AmeriCorps participant. Most recently, 
Maleah served as a volunteer with Massachusetts Campus Compact. The 
Massachusetts Campus Compact coordinates formal and informal assistance 
for students, staff, and faculty in the areas of: America Reads and 
early childhood literacy initiatives, America Counts and math education 
initiatives, and other Campus and community partnerships. Maleah's 
service has benefited our community and our country, while at the same 
time, has provided a rewarding personal experience.
  Listen to what Maleah has to say about AmeriCorps:

       My experiences with AmeriCorps have been life-changing, 
     introducing me to so many opportunities and a new 
     appreciation of both the diversity and strength of people in 
     our nation. I consider myself fortunate and am thankful that 
     I will have not one, but two educational awards should I need 
     to use them. However, I am at the same time dreading the out-
     of-pocket expense that will accompany their use * * *. 
     Although I was anxious to use the educational award earned 
     during my first year of service to reduce my undergraduate 
     loan debt, the cost of paying taxes on the amount has 
     prohibited me from doing so.
       When I entered AmeriCorps two years ago, I did so for the 
     service. I also anticipated that approximately 75 percent of 
     my undergraduate loan debt would be paid within three years 
     of graduation, something that helped justify the financial 
     cost of living on only the minimal stipend. Instead, I will 
     enter graduate school in the fall, my undergraduate loans 
     will continue to accrue interest and I will likely acquire 
     additional loans to cover some expenses because I can simply 
     not afford to use and pay taxes on my educational awards 
     while I am a student.
       I know that I am not alone in this predicament. Many alumni 
     with whom I served are either students or completing 
     additional years of service, solely responsible for 
     educational and living expenses. Many of us do not have 
     additional income to pay taxes on the educational awards nor 
     the ability to ask friends or relatives to assist us.
       I have given two years to serve my fellow citizens of the 
     nation and the Commonwealth and would never give up those 
     experiences. However, I should not now be punished for this 
     choice by the burden of additional taxes.

  Similar situations arise with other programs. Congress has recognized 
these inequities and acted to address them. For example, this summer's 
Taxpayer Refund and Relief Act would have specifically provided that 
scholarships received through the National Health Service Corps, the 
Armed Forces Health Professions program, and the National Institutes of 
Health Undergraduate program are tax exempt. Let's do the same for the 
thousands of volunteers who, through the AmeriCorps program, give up 
two years of their lives to make a difference in communities across our 
nation.
  The AmeriCorps Scholarship Fairness Act clarifies that AmeriCorps 
education awards should receive the same tax treatment as a traditional 
college scholarship. Under the proposal, amounts received by an 
individual as part of a national service education award would be 
eligible for tax-free treatment as a qualified scholarship

[[Page S13405]]

under section 117 of the tax code, without regard to the fact that the 
recipient of the scholarship has provided services as a condition for 
receiving the scholarship. The Joint Tax Committee estimates the cost 
in lost revenue would be $2 million the first year, $15 million over 
five years, and $32 million over ten years.
  The government should cherish, not punish, volunteerism and public 
service. I hope my colleagues will join me in enacting this simple but 
meaningful legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
three letters from Massachusetts constituents be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1820

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXCLUSION OF NATIONAL SERVICE EDUCATIONAL AWARDS.

       (a) In General.--Section 117 of the Internal Revenue Code 
     of 1986 (relating to qualified scholarships) is amended by 
     adding at the end the following:
       ``(e) Qualified National Service Educational Awards.--
       ``(1) In general.--Gross income for any taxable year shall 
     not include any qualified national service educational award.
       ``(2) Qualified national service educational award.--For 
     purposes of this subsection--
       ``(A) In general.--The term `qualified national service 
     educational award' means any amount received by an individual 
     in a taxable year as a national service educational award 
     under section 148 of the National and Community Service Act 
     of 1990 (42 U.S.C. 12604) to the extent (except as provided 
     in subparagraph (C)) such amount does not exceed the 
     qualified tuition and related expenses (as defined in 
     subsection (b)(2)) of the individual for such taxable year.
       ``(B) Determination of expenses.--The total amount of the 
     qualified tuition and related expenses (as so defined) which 
     may be taken into account under subparagraph (A) with respect 
     to an individual for the taxable year shall be reduced (after 
     the application of the reduction provided in section 
     25A(g)(2)) by the amount of such expenses which were taken 
     into account in determining the credit allowed to the 
     taxpayer or any other person under section 25A with respect 
     to such expenses.
       ``(C) Exception to limitation.--The limitation under 
     subparagraph (A) shall not apply to any portion of a national 
     service educational award used by such individual to repay 
     any student loan described in section 148(a)(1) of such Act 
     or to pay any interest expense described in section 148(a)(4) 
     of such Act.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts received in taxable years beginning 
     after December 31, 1999.
                                  ____



                                                   AmeriCorps,

                                    Sunderland, MA, July 20, 1999.
     Senator John Kerry,
     Russell Senate Office Building, Washington, DC.
       Dear Senator Kerry, My name is Maleah Thorpe. I am a two 
     year alumna of AmeriCorps, serving with City Year Rhode 
     Island (1997--98) and most recently as a VISTA with 
     Massachusetts Campus Compact (1998-99) working at the 
     University of Massachusetts at Amherst.
       My experiences with AmeriCorps have been life-changing, 
     introducing me to so many opportunities and a new 
     appreciation of both the diversity and strength of people in 
     our nation. These past two years have left an immeasurable 
     impact on my life, changed my perspective on many things, and 
     even altered my future plans; in September I will begin 
     graduate studies at UMass Amherst.
       I consider myself fortunate and am thankful that I will 
     have not one, but two, Educational Awards should I need to 
     use them. However, I am at the same time dreading the out-of-
     pocket expense that will accompany their use. I had a small 
     preview of what is to come last December when I used my 
     Interest Payment option from my first year of AmeriCorps 
     service. For choosing to use this ``benefit'' of $543, I was 
     required to pay an unexpected $120 in state and (mostly) 
     federal taxes. While this may seem like a small sum, I assure 
     you that it is not to someone living on a VISTA stipend where 
     every penny is accounted for to cover basic living expenses.
       Although I was anxious to use the Educational Award earned 
     during my first year of service to reduce my undergraduate 
     loan debt, the cost of paying taxes on the amount has 
     prohibited me from doing so.
       When I entered AmeriCorps two years ago, I did so for the 
     service. I also anticipated that approximately 75% of my 
     undergraduate loan debt would be paid within three years of 
     graduation, something that helped justify the financial cost 
     of living on only the minimal stipend. Instead, I will enter 
     graduate school in the fall, my undergraduate loans will 
     continue to accrue interest and I will likely acquire 
     additional loans to cover some expenses because I can simply 
     not afford to use and pay taxes on my Educational Awards 
     while I am a student.
       I know that I am not alone in this predicament. Many alumni 
     with whom I served are either students or completing 
     additional years of service, solely responsible for 
     educational and living expenses. Many of us do not have 
     additional income to pay taxes on the Educational Awards nor 
     the ability to ask friends or relatives to assist us.
       I have given two years to serve my fellow citizens of the 
     nation and the Commonwealth and would never give up those 
     experiences. However, I should not now be punished for this 
     choice by the burden of additional taxes. As a citizen of the 
     Commonwealth and on behalf of those who have served and will 
     serve in the future, I ask that you work to remove this 
     burden of taxation of the AmeriCorps Educational Awards.
       Thank you for your time and efforts.
           Sincerely,
     Maleah F. Thorpe.
                                  ____

                                          Ware, MA, July 19, 1999.
       To Whom it May Concern: My name is Jamie Rutherford and I 
     am a resident of Ware, Massachusetts. Following graduation 
     from the University of Hartford in 1996, I entered the 
     AmeriCorps National Civilian Community Corps. I served two 
     10-month terms in the program, 1996--97 in Denver, CO, and 
     1997-98 in Charleston, SC.
       My motivation for joining AmeriCorps included my desire to 
     travel, to learn new skills, to lend myself to the community, 
     and to earn an educational award that I would be able to 
     apply toward my substantial student loans. I greatly enjoyed 
     my experience the first year in Denver, and had very little 
     difficulty deciding to reapply for a second year in South 
     Carolina. Over those two years I took part in fourteen 
     separate projects pertaining to the environment, education, 
     public safety, and unmet human needs. I traveled to nine 
     states and enjoyed experiences ranging from inner city 
     tutoring, to midwestern trailbuilding, to even Gulf Coast 
     erosion control.
       My experiences in AmeriCorps were wonderful, and have 
     instilled in me a great appreciation for national service. I 
     did, however, face several daunting challenges during my term 
     of service. The most difficult challenges usually involved 
     personal finance. The living stipend provided to us was 
     minimal, and it was often quite difficult to get by on such 
     meager funds. We did receive additional allotments for food 
     and travel, however, and got by as well as possible. Upon 
     completion of my first year in Denver, I applied my first 
     award to my student loan provider here in Massachusetts. The 
     greatest challenge for me came with the taxation of that 
     award during my second term in South Carolina. When I 
     discovered that I owed $350 to the Internal Revenue Service 
     due to the taxation of the award, I was forced to go on a 
     monthly payment plan during that second term. This was very 
     difficult for me considering our minimal living stipend. I 
     could not then and cannot now understand why the award was 
     taxable as such, or why the taxed amount could not at least 
     be subtracted from the $4,725 award initially.
       Nearly a year after completing my second term and receiving 
     my second award, I still maintain the $4,725 balance of that 
     award. My current finances greatly necessitate the 
     utilization of the award toward my substantial student loan 
     bills. Nevertheless, I am reluctant to do so due to 
     uncertainty for my future financial viability. I fear that I 
     will not be able to afford another heavy taxation. Though the 
     award seems to be so beneficial, it threatens to actually be 
     somewhat detrimental to me.
       My hope and request is that this taxation be abolished. It 
     simply does not seem reasonable that young people devoting 
     themselves to the improvement of our country should be so 
     unjustly penalized. I greatly support AmeriCorps and all the 
     good that it represents. I only wish that this one matter 
     would be reconsidered in order to lift the gray cloud that 
     has fallen over my memories of two wonderful years of 
     national service.
           Thank you.
     James E. Rutherford.
                                  ____

                                 Jamaica Plain, MA, July 20, 1999.
       Dear Senator: My name is Brendan Miller and I am an alumnus 
     of AmeriCorps. I served two years, one with the Northwest 
     Service Academy in Oregon and one with City Year in South 
     Carolina as an AmeriCorps Leader. My AmeriCorps experience 
     changed my life and set me on a path of public service that I 
     now know is my calling.
       I currently live in Boston, Massachusetts. As a supporter 
     of AmeriCorps you surely know a benefit of the AmeriCorps 
     experience is the Education Award that is granted at the end 
     of one's service. I used approximately $6,000 of this award 
     in January to pay off my loans from college. Unfortunately, 
     the Ed Award is considered income for tax purposes, so I will 
     be burdened with significantly higher taxes this year. In 
     fact, I chose not to use my whole Award this year in order to 
     split the tax burden between two years. If I had used the 
     entire Award this year, my financial situation would surely 
     have prevented me from meeting this tax without significant 
     hardship.
       I am working for the Boston Plan for Excellence in 
     Education, which is a non-profit that is seeking to encourage 
     lasting school reform in the Boston schools. Although I 
     receive great satisfaction from this work, it does not pay 
     that well. Since my AmeriCorps experience, I have committed 
     myself to

[[Page S13406]]

     doing work that I feel is really making a difference, but 
     this also means living on a tighter budget.
       I know many of my friends in service have also made similar 
     commitments to a life of service. However, our resolve can be 
     tested by the need to pay our bills. As a graduate of Brown 
     University with a degree in Computer Science, I could be 
     making significantly more money in the for-profit sector, and 
     I am often tempted to break my commitment to a life of 
     service.
       As a supporter of AmeriCorps and national service, I know 
     you want to make it easy as possible for America's citizens 
     to serve their country. I ask you to remove the tax on 
     Education Awards to take a giant step forward in this effort.
       Please don't hesitate to contact me if you have any 
     additional questions. I look forward to hearing of your 
     leadership on this issue.
           Sincerely,
                                                   Brendan Miller.
                                 ______