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Tax Implications for Colleges in Budget Bill

December 20, 2019
 
 

The U.S. Senate passed budget bills for the 2020 fiscal year, which if signed by President Trump would avert a government shutdown that would begin today. Higher education and scientific research programs generally fared well under the budget. And Congress generally ignored deep cuts in both areas that the White House had proposed.

The budget bills include several provisions on taxation relating to higher education. The National Association of College and University Business Officers said those provisions should have positive outcomes for colleges.

A parking tax levied under the 2017 tax cuts would be repealed in the budget. That tax applied to parking and transportation benefits for employees of all nonprofit organizations, including colleges.

The budget also would nix the "kiddie" tax. This provision, which was part of the 2017 tax cuts, caused certain students who received scholarships to be taxed at high rates.

Ted Mitchell, president of the American Council on Education, applauded Congress for repealing the tax he said hurt hundreds of thousands of low- and middle-income students who rely on scholarship aid.

"Taxing these students at the same rate as wealthy individuals, in a mistake that also affected some 'Gold Star' families receiving survivor benefits, resulted in a draconian tax hike on the backs of individuals who could ill afford it and already have been forced to shoulder this additional burden for the 2018 tax year," Mitchell said in a written statement. "Fortunately, this fix will both restore lower tax rates to these individuals and provide an opportunity to obtain a refund for the extra taxes they were forced to pay in the meantime."

NACUBO also cited the budget's repeal of the so-called Cadillac tax, an excise tax under the Affordable Care Act that was expected to result in significant costs for employers (including colleges) related to health insurance plans they offer employees.

In addition, the bills would extend a tax credit that can help public colleges with energy efficiency projects. And the budget would reinstate a deduction for eligible taxpayers of up to $4,000 for higher education expenses.

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