Senate Rule Blocks Effort to Help Berea College

December 20, 2017

The Senate parliamentarian ruled Tuesday ahead of a vote on the Republican tax reform plan that three provisions of the bill -- including one taxing the endowments of private colleges but exempting Berea College -- violate the chamber's rules. The Senate went on to pass the bill without those provisions.

Two others involved a provision allowing the use of 529 savings plans for homeschooling expenses and the name of the tax bill itself.

The ruling addresses language exempting Berea College, a private Christian institution, from a 1.4 percent excise tax on investment income of colleges with assets valued at $500,000 per full-time student. The tax would have excluded colleges with fewer than 500 tuition-paying students. The only institution fitting that bill was Berea, which is in the home state of Senate Majority Leader Mitch McConnell, a Kentucky Republican. But the parliamentarian said that exemption was impermissible.

The House of Representatives, which passed the reconciled tax-reform package earlier Tuesday, will have to vote on the bill a second time as a result of the parliamentarian's ruling. The House is expected today to pass a version of the bill -- identical to the revised Senate bill -- without the provision.

Karin Johns, director of tax policy at the National Association of Independent Colleges and Universities, said the Berea development illustrated why the new endowment tax is a "huge mistake." And while the formula in the tax bill would only capture Berea for now, she said, over time it will affect more and more of the group's members and other tuition-free work colleges.

"Why Congress came up with a formula that taxes only private colleges and now, a tuition-free faith-based institution, where all students are low income and Pell eligible, is beyond our comprehension," Johns said in an email.

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