STATE OF CONNECTICUT
THE STATE COMPTROLLER
MEMORANDUM NO. 2000-23
May 1, 2000
TO THE HEADS OF ALL STATE AGENCIES
|Attention:||Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers|
|Subject:||Extension of Exclusion for Employer-Provided Educational Assistance|
The purpose of this memorandum is to provide notification of an extension of Section 127 of the Internal Revenue Code (IRC). This memorandum will outline how tuition reimbursements for state employees should be processed. This memorandum replaces Memoranda Nos. 95-36, 97-7, 97-7a and 97-48.
The Tax Relief Extension Act of 1999, Title V of Public Law 106-170, contains a provision extending the exclusion for employer-provided educational assistance. Section 127 of the Internal Revenue Code, "Educational Assistance Programs," has been extended until December 31, 2001 for undergraduate courses. The exclusion does not apply to graduate courses.
III. EDUCATIONAL ASSISTANCE PROGRAMS - SECTION 127 IRC
Section 127 states: "Employee benefits under an employer's nondiscriminatory educational assistance plan are not includable in the employee-recipient's gross income. The exclusion is limited to $5,250 per year. Reimbursements in excess of $5,250 per year are not excludable."
Section 127 continues: "The term education includes any form of instruction that improves or develops the capabilities of an individual. The educational courses covered by the plan need not be job-related or part of a degree program. Courses in sports, games or hobbies (unless involved in the employer's business) cannot be covered. However, education that instructs employees as to how to maintain and improve health can be covered as long as it is not recreational in nature."
IV. EXCLUSION OF CERTAIN FRINGE BENEFITS FROM GROSS INCOME SECTION 132 IRC
Educational assistance exceeding the $5,250 limit may be excludable under "Exclusion of Certain Fringe Benefits from Gross Income", IRC Section 132. The amount exceeding $5,250 may be excludable based on the following guidelines.
If the education is not required for an employee's position and it maintains or improves skills needed in the current position, it is non-reportable.
This includes refresher courses, courses on current developments, and academic or vocational courses.
Courses taken to meet the minimum educational requirements for an employee's current position are reportable.
Courses that are a part of a program of study that can qualify for a new trade or business are reportable even if the individual is not seeking a new job.
Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are reportable because that qualifies as a new profession.
V. REQUESTS FOR PAYMENT
The following procedures are to be used when processing employee tuition reimbursement payments:
A. Non-Reportable Tuition Reimbursements - Agency Funds
Payments that meet the criteria outlined in Section III of this memorandum are non-reportable and the processing of the payment should be submitted on form CO-17XP-PR and processed through the payroll system using D/OE Code 1T.
B. Reportable Tuition Reimbursements - Agency Funds
If the reimbursement does not meet the criteria outlined in Section III of this memorandum, the payment is reportable and should be paid through payroll. Form CO-17XP-PR must be completed and D/OE Code 2G - Reportable Tuition is indicated.
C. Fund 9916 - Reportable Tuition Reimbursements
Payment requests for reimbursement of tuition and other professional development costs from fund 9916 must meet the same criteria as outlined in Section III of this memorandum. The payment should be processed by submitting a CO-17XP-PR form to the Comptroller's Management Services Division - Support Services Unit.
D. Fund 9916 - Non-Reportable Tuition Reimbursements
Non-reportable tuition reimbursements continue to be submitted on a CO-17XP to the Comptroller's Management Services Division - Support Services Unit.
Please direct questions as follows:
Payroll Procedures: Payroll Services Division, (860) 702-3463;
Fund 9916 Procedures: Management Services Division, (860) 702-3327;
Memorandum Interpretation: Policy Services Division, (860) 702-3440.
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