Two members of Congress have contacted U.S. Treasury secretary John Snow expressing "grave concern and disappointment" over proposed changes in IRS regulations that would eliminate an existing Social Security tax (FICA) exemption for graduate employees. U.S. Rep. Sander M. Levin (D-Mich) and Rep. Jim Ramstad (R-Minn.) this month wrote to Secretary Snow on the IRS changes, which would create a significant financial hardship for graduate employees who typically scrape together a subsistence during their time on campus.

The propsed rule change would require FICA payment from anyone who qualifies as a "career employee." Given the current definition, the term could apply to both graduate and undergraduate students who work on campus: The IRS describes a "career employee" as anyone who works more than 40 hours a week, is classified as "professional," or receives benefits such as paid vacation or life insurance. "Adoption of the standards ... will result in the erroneous exclusion of many thousands of student employees from the exception from FICA taxes," wrote Reps. Levin and Ramstad in a letter this month. "Considering the intense pressure institutions are under to control tuition increases, and in an environment of unprecedented drops in state support, the proposed regulations place an additional strain on colleges, universities and most importantly students working while they pursue degrees."

Earlier this year, Scott Henkel, president of the Graduate Employees Union/AFT at Michigan State University, spoke at an IRS hearing on Capitol Hill and urged officials to preserve the existing FICA exemption for graduates. David Hecker, president of the Michigan Federation of Teachers & School Related Personnel, helped arrange a meeting for Henkel with Rep. Levin to ask for the congressman's help in protecting graduate employees from a provision that the AFT says was never meant to apply to them.

Henkel's testimony built on ongoing AFT efforts to fight the IRS rule change. In a letter to the IRS, AFT in-house counsel David Strom outlined the union's opposition to the change, noting that it "punishes graduate teaching and research assistants for receiving benefits such as paid vacation or sick leave even though the benefits do not change the temporal nature of their employment."

If the IRS finalizes the rule, Rep. Levin will consider proposing a bipartisan repeal in Congress. [Barbara McKenna]

December 20, 2004