| National Health Service Corps: On
August 29, 1997, the National Health Service Corps sent
notification to health professions schools and students
of its intention to begin withholding federal taxes on
the entire amount of scholarships awards to NHSC
scholarship recipients. The scholarship consists of funds
for tuition, fees, and other reasonable educational
expenses and a monthly stipend for living expenses. The
Rural Health Coalition, a bipartisan caucus of members of
Congress from rural areas, recently heralded the benefits
of the NHSC program and announced that the Coalition
intended to seek a correction. On February 1, in his FY
2000 Budget proposal, the President announced his intent
to "amend current law to provide that any amounts
received by an individual under the National Health
Service Corps (NHSC) … are ‘qualified
scholarships’ excludable from income, without regard
to the recipient’s future service obligation." On January 21, 1998, Senator Jim Jeffords (R-VT) introduced S. 288, to amend the IRS code to exempt NHSC scholarship payments from income for tax purposes. This legislation was introduced with seven cosponsors. The House companion bill, H.R. 324, introduced by Representative Sander Levin (D-MI), currently has two cosponsors. Representative Nancy Johnson (R-CT), who took the lead on this issue on the 105th Congress, is also expected to reintroduce corrective legislation. In addition, Senator Kent Conrad (D-ND) has indicated his interest in improving incentives for NHSC participants and correcting unfair tax burdens as part of a larger bill dedicated to rural health to be introduced shortly. Staff will continue to work to eliminate this impediment to NHSC scholarship recipients.
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