S-5533-119
Read twice and referred to the Committee on Finance.
Sponsored by Michael Bennet (D-CO)
What it does
This bill would amend the Internal Revenue Code so that national service educational awards under the National and Community Service Act of 1990 (the AmeriCorps education awards) are not counted as gross income for individuals. It would do this in two places: by adding the awards to the list of qualified scholarships in section 117(c)(2), and by adding a new rule to section 108(f) covering amounts received under these awards. The changes would apply to taxable years ending after the bill's enactment date.
Who benefits
AmeriCorps members who earn and use education awards, who would owe less or no federal income tax on those amounts. Their households, especially lower-income members and those using awards to repay student loans. Indirectly, AmeriCorps programs and sponsoring nonprofits, which may find it easier to recruit members if the awards are tax-free.
Who is hurt
The federal Treasury, which would collect less income tax revenue on these awards. Taxpayers generally could bear that cost indirectly through offsetting changes or larger deficits. Other education-benefit recipients, such as some work-study or employer-aid participants, may argue they are treated less favorably. The IRS and awarding organizations may face minor administrative updates.
Supporters argue
Supporters argue that AmeriCorps members receive modest living stipends and that taxing the education award reduces the value of a benefit meant to make college or loan repayment affordable. They contend that other scholarships and similar service-related education benefits are already excluded, so this change would treat service members consistently. The bill's bipartisan sponsors, including senators from both parties, signal broad support for removing a tax burden on national service participants.
Opponents argue
Opponents argue that the exclusion would reduce federal revenue without offsetting spending cuts or tax increases, adding to deficits. They contend that carving out one more income category adds complexity to the tax code and invites requests for similar treatment from other groups. Some also argue that if the goal is helping members afford education, direct increases in the award amount are more transparent than a tax exclusion.
Constitutional context
Congress's power to lay and collect taxes under Article I, Section 8, Clause 1 and the Sixteenth Amendment's authority to tax incomes cover this exclusion, and Congress has broad discretion to define what counts as taxable income. The bill is a revenue measure, so the Origination Clause (Art. I, Sec. 7) expects such bills to begin in the House, and this one was introduced in the Senate. The bill raises no other significant constitutional question.
Checks and balances
Congress changes the tax code, the Treasury and IRS would implement it, and the President can sign or veto; no branch gains new authority.
Historical precedent
Congress has previously created targeted exclusions for education-related benefits, such as the section 117 scholarship exclusion and the exclusion for certain student loan forgiveness for service-related work.