This legislation extends the exclusion for employer-provided educational assistance. The exclusion applies retroactively to June 1, 1997 (the date the former exclusion expired) and extends through May 31, 2000.

The wage exclusion applies to amounts up to $5,250 for employer-provided educational assistance. Prior to 1986, the exclusion was limited to $5,000.

The exclusion applies to taxable years beginning before June 1, 2000.

Educational assistance that does not qualify for the exclusion (e.g., the amount that exceeds the $5,250 limit) can be excluded from wages only if it qualifies as a working condition fringe benefit under section 132 of the IRC. This rule is effective for taxable years beginning after December 31, 1988.

Amounts paid or expenses incurred by an employer for dependent care assistance under a qualified dependent care assistance program (section 129 of the IRC) are excluded from wages.

The exclusion is limited to $5,000 in a taxable year ($2,500 for a separate return filed by the married taxpayer). The exclusion does not apply if the payment is made to a dependent of the employee; the employee's spouse; or, a child under age 19 for whom the employee claims a dependent allowance.

The employer must furnish the employee a written statement showing the amounts incurred or paid for dependent care assistance by January 31 before reporting the amount on the Form W-2.