Congress Repeals Tax On Scholarship Money

The U.S. Senate on this week approved 70-29 a bill that includes a measure designed to repeal a 1986 law allowing the taxation of financial aid. President Bush is likely to veto it, however.

At issue is a law that allows for the taxation of scholarship and grant monies that exceed $17,000 and are used for room, board, travel and any expenses other than tuition. The law affects roughly one-fifth of Harvard students who receive financial aid.

Last March, the Internal Revenue Service (IRS) required Harvard to turn over the financial aid records of 3500 former and current students. The IRS action was part of a "compliance check" which targeted Harvard students in an attempt to gauge whether or not to wage a more comprehensive investigation nationwide.

At least one Harvard graduate was audited by the IRS. Karen E. Esielonis '80, who received a scholarship from the state of Massachusetts to help pay for a graduate program in Fine Arts, was ordered to pay $700 in back taxes this summer.

James G. Miller, director of financial aid, said he was unaware of the passage of the new bill.

"We'd be delighted [to see the taxation of scholarships repealed]," Miller said. "That has always struck me as a regressive tax...it taxes the people who have the most need."

University Attorney Marianna C. Pierce, who led Harvard's attempt to prevent the IRS from securing the aid records, said she hoped the bill would become law.

"Who knows if it will go through?" said Pierce. "It would be terrific. But it is veryuncertain at this point."

The financial aid provision is part of the HR11bill, officially titled the Revenue Bill of 1992.Lawmakers will now debate its merits in jointcommittee.

The Senate bill proposes to raise $8 billionthrough extended real estate taxes and capitalgains taxes to pay for planned "enterprise zones."Bush has said that he will veto any bill thatraises taxes.

Bill Cahir, staff assistant of the Senate LaborCommittee chaired by Sen. Edward M. Kennedy'54-'56 (D-Mass.), said he believed the Presidentwould follow through on his promise of a veto.

"This is the last opportunity for tax reformthis year" Cahir said. "[If it doesn't pass] wewill have to wait until next year for a newSenate, a new House and a new President--althoughI probably shouldn't speculate on that."

Cahir said concerned Harvard students should"pay attention to what happens in committee andstay informed."

"Send letters to President Bush expressing yoursupport," said Cahir. "If he approves it, then itis law.

The financial aid provision is part of the HR11bill, officially titled the Revenue Bill of 1992.Lawmakers will now debate its merits in jointcommittee.

The Senate bill proposes to raise $8 billionthrough extended real estate taxes and capitalgains taxes to pay for planned "enterprise zones."Bush has said that he will veto any bill thatraises taxes.

Bill Cahir, staff assistant of the Senate LaborCommittee chaired by Sen. Edward M. Kennedy'54-'56 (D-Mass.), said he believed the Presidentwould follow through on his promise of a veto.

"This is the last opportunity for tax reformthis year" Cahir said. "[If it doesn't pass] wewill have to wait until next year for a newSenate, a new House and a new President--althoughI probably shouldn't speculate on that."

Cahir said concerned Harvard students should"pay attention to what happens in committee andstay informed."

"Send letters to President Bush expressing yoursupport," said Cahir. "If he approves it, then itis law.