HR7594-119

What This Bill Does

This bill adds post-graduation scholarship grants to the Internal Revenue Code scholarship exclusion. A post-graduation scholarship grant is a program established by a 501(c)(3) tax-exempt private foundation or qualifying community trust that repays part of an individual’s qualified education loan, requires the grantee to live and work in an applicable community, pays the loan holder directly, and is not provided to an employee of the granting organization or a related entity. Applicable communities are areas where bachelor’s degree attainment is below the state or national average based on Census Bureau data. The bill also makes these grants permissible private-foundation grants under section 4945(g), prevents student-loan interest paid through an excluded grant from also counting for the section 221 student-loan interest deduction, directs Treasury to issue reporting requirements and regulations, requires Treasury to report to Congress within three years and periodically thereafter on implementation and effectiveness, and requires GAO within five years to publish a study on grant duration, amounts paid, disposition of funds, and loan holders benefiting from the grants. The exclusion applies to taxable years beginning after enactment.

Who Benefits and How

Student loan borrowers, graduates who live and work in lower-degree-attainment communities, community trusts, private foundations, rural or underserved workforce-development programs, and loan holders receiving direct payments benefit from tax-free loan repayment grants and clearer foundation authority.

Who Bears the Burden and How

The Internal Revenue Service, Treasury Department, private foundations, community trusts, GAO, tax preparers, federal taxpayers, and grant administrators must administer eligibility, direct loan payments, reporting requirements, double-benefit restrictions, implementation reports, and grant studies.

Key Provisions

• Excludes qualifying post-graduation scholarship grants from gross income under IRC section 117.
• Requires eligible grants to repay qualified education loans directly to loan holders and require grantees to live and work in applicable communities.
• Limits grant sponsors to certain 501(c)(3) private foundations or community trusts and excludes employees of the grantor or related entities.
• Adds the grants to private-foundation scholarship grant rules and denies duplicate student-loan interest deductions.
• Requires Treasury regulations, Treasury implementation reports, and a GAO study on grant duration, amounts, fund disposition, and loan holders.