The President signed mandatory spending and tax bills into law on August 5, 1997. He used the line-item veto for the first time in history on August 11, but did not strike any provisions affecting the geosciences. The House passed H.R. 2015, balanced budget legislation which makes changes in mandatory spending such as entitlements and sales of government property by a vote of 346-85 on July 30. The Senate passed the legislation the following day by a vote of 85-15. The Majority staff of the House and Senate Budget Committees prepared a summary of the legislation which is available on the web. On July 31, the House passed H.R. 2014, tax cut legislation, by a vote of 389-43 and the Senate passed the legislation 92-8. A summary of provisions relating to education, research, oil and gas, brownfields and land conservation is provided below. For more information on the continuing appropriations process, visit AGI's web site.
In good news for graduate students and children of faculty, Section 117(d) of the tax code, the tax exemption on tuition wavers, was left intact. Section 127 of the code was reauthorized for 3 years, allowing employer-provided undergraduate educational assistance to be given to an employee without tax accruing on the first $5,250 of the benefit through June 2000. More information on these provisions is available from past updates on AGI's web site.
The benefits to education came partly at the expense of TIAA-CREF, an organization which administers retirement plans to which many members and employees of AGI's member societies contribute. As part of the House-Senate conference, the House agreed to drop its phase-out of Section 117(d) in exchange for the Senate taxing TIAA-CREF. The final bill made TIAA-CREF's contingency reserves, the money the company saves for unexpected events, taxable. TIAA-CREF views the change as an additional expense which they will try to control and a representative from TIAA-CREF assured us that the change will have a very limited effect on account holders.
Information on additional education provisions included in the tax bill is provided by the American Council on Education.
In addition, the agreement establishes a "lifelong learning" tax credit equal to 20 percent of the first $5,000 (later increasing to $10,000) in tuition in years after the HOPE tax credit is claimed. The credit can be used for both undergraduate and graduate education, as well as education to acquire or improve job skills. It is available for tuition and fees paid, less grants and scholarships, for classes starting on or after January 1, 1998. The lifelong learning tax credit is phased out over the same income ranges as the HOPE tax credit.
Oil and Gas Provisions
The tax bill suspended the property-income limitation for percentage depletion of marginal oil and gas properties for two years beginning in 1998. Rep. Wes Watkins (R-OK), an instrumental supporter of the provision, explained, "Our provision is directed at ending the tax penalties on the most economically at-risk segment of the domestic oil and natural gas industry. This tax incentive will keep our marginal and stripper wells in operation rather than producers being forced to plug or abandon wells." Under present law, the maximum percentage depletion deduction for a particular property is 100% of the net income from that property.
The tax bill extended the Research and Experimentation Tax Credit through June 30, 1998. In addition, Senator Connie Mack introduced S. 1131, which would permanently extend the credit. In his introduction of the bill, he stated "The research credit has provided a valuable economic incentive for US companies to increase their investment in R&D in order to maintain their competitive edge in the global marketplace."
The tax bill includes $1.5 billion in tax incentives for the development of brownfields, areas previously contaminated by low-level waste. According to the White House, this measure will allow for the redevelopment of 14,000 brownfields.
In an effort to combat urban sprawl, the tax bill contains a 40% exemption for land committed to conservation easements up to $500,000. This credit applies to land within 25 miles of metropolitan area, nation park, or wilderness area or within 10 miles of an urban forest.
Sources: American Council on Education, National Association of Graduate and Professional Students, Washington Post, American Association of Engineering Societies, Environment and Energy Weekly, Independent Petroleum Association of America
Contributed by Kasey Shewey, AGI Government Affairs.
Last updated August 15, 1997