The 1954 scholarship tax exclusion and 1965 Pell Grants dramatically raised college attendance

Evidence

In the early days of the income tax, the IRS took the position that receipt of a scholarship in exchange for education was an exchange of services, which made scholarships taxable income. Congress, however, disagreed. In 1954, the same year that Brown v. Board of Education was decided, it established a tax exclusion for scholarships. Those milestones, plus the creation of Pell Grants for low-income families as part of the Higher Education Act of 1965, led to significant gains in college attendance rates. The number of white men, white women, and black women attending college had nearly doubled by 1970; the number of black men tripled. — Dorothy A. Brown, The Whiteness of Wealth, 319

Categorization

• XREF: Directly relevant to reader’s goal of naming specific tax provisions that shape the racial wealth gap — scholarship exclusion is a race-neutral-sounding provision.
• DEFINE: Establishes that the scholarship exclusion (IRC section 117) is the named mechanism under discussion.