Higher Ed in the Senate Tax Bill

Tax on wealthy private college endowments is included. Deductions for state and local taxes -- viewed as essential by public higher ed -- would be killed. Some other provisions of House bill opposed by colleges are not included.

November 10, 2017
 

The Senate tax reform proposal released late Thursday night includes an excise tax on large private college endowments that has been strongly opposed by higher ed groups.

The tax is similar to one in the House of Representatives bill. Private college leaders say the tax would effectively punish colleges that have built up endowments that support student aid, research and other functions of higher education. And while the tax would be applied only to the wealthiest colleges, many fear a precedent in which the assets of colleges -- traditionally exempt from tax -- are taxed.

The Senate plan would also eliminate the deduction on state and local taxes, in a measure that is similar but not identical to the House plan. Public higher education leaders are very concerned about any change in that deduction, which effectively encourages states to invest in public colleges and other state institutions. Eliminating the deduction could increase pressure to cut state spending.

But the Senate proposal appears to largely leave untouched many education tax credits and tax exemptions eliminated in the House GOP tax bill.

The House plan released last week eliminated several deductions that benefit both undergraduate and graduate students. Eliminating one of those deductions would mean tuition waived for graduate students is taxed as income. That prompted a campaign by graduate students on social media to push back against the provision.

The Senate bill does include some provisions that could be of concern to colleges. The proposal, for example, would treat any licensing of a college or university logo as an unrelated business tax. Many colleges and universities earn significant revenue through licensing of their logos.

Craig Lindwarm, director of congressional and governmental affairs at the Association of Public and Land-grant Universities, said some of the most concerning provisions from the House bill were not referenced in the Senate proposal.

“However, colleges, universities and students should take nothing for granted,” he said. “The legislative process is just beginning, and some of the most concerning provisions can be added throughout this process.”

Lindwarm said it is critical that colleges and universities remain vigilant in advocating that harmful provisions of the House bill are not added later to the Senate proposal.

“A number of provisions that would seemingly be included would drive up the cost to universities to engage in our education, research and engagement mission. Ultimately, this would have significantly negative consequences on students through the services they receive and the tuition they pay,” he said.

Some advocates saw evidence that the Senate proposal showed members have heard many of the criticisms of the House tax reform plan.

“Although existing higher ed tax benefits could stand to be streamlined, simplified and better targeted, members of the Senate seem to have heard loud and clear how important these benefits have become for students, as well as for colleges and employers, and that gutting them to pay for corporate tax cuts while college costs and debt continue to rise makes no sense at all,” said Jessica Thompson, policy and research director of the Institute for College Access and Success.

Sam Leitermann, president and CEO of the National Association of Graduate-Professional Students, said the group was happy that the Senate version of tax reform does not include any provisions negatively affecting graduate education. 

"It's early so things can change on the Senate side, so we’ll keep pushing both the House and Senate to protect us," he said. 

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