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Congress Expected to Vote This Week on Tax Bill with Negative Implications for Higher Education

December 18, 2017

 

​Congress is poised to take final votes this week on the version of a sweeping tax bill released late Friday by a House-Senate Conference Committee that contains a number of provisions harmful to students and their families and the higher education institutions that serve them.

ACE and nearly 50 other higher education associations had expressed serious concerns ahead of the release of the Conference Committee version of the Tax Cuts and Jobs Act about provisions in the legislation that would make postsecondary education more expensive and erode the financial stability of colleges and universities. ACE President Ted Mitchell said in a statement Friday night that the legislation is a “big step in the wrong direction.”

The Conference Committee version of the bill, which reconciles the House-approved and Senate-passed versions, is an improvement over the previous bills, particularly the House measure. It does not include provisions in the House bill that repealed an array of education benefits that help students and their families finance a college education, including tax-exempt tuition waivers for graduate students and dependents of institutions’ employees, and maintaining the student loan interest deduction. 

Campus leaders, students, faculty, and staff mobilized to communicate to their members of Congress regarding the impact of the proposed tax bill. Over 9,300 responders sent nearly 29,000 individual messages to lawmakers via the Tax Reform and Higher Education website coordinated by ACE. Graduate students, including the National Association of Graduate and Professional Students, mobilized to lead a national campaign against the proposed tax on tuition waivers.

The Conference Committee bill also adopted the narrower Senate version of a new 1.4 percent excise tax on some private college endowments, affecting about 30 schools with endowments worth at least $500,000 per student. The House proposed a tax on endowments with a value of $250,000 per student.

Still, Mitchell noted, regardless of how many institutions it affects, the concept of an endowment tax “is a remarkably bad idea that takes money that would otherwise be used for student aid, research, and faculty salaries and sends it to the Department of the Treasury to finance corporate tax cuts.”

The Conference Committee bill also changes the standard deduction in ways expected to significantly reduce the use of the charitable deduction, with a concomitant loss of charitable gifts that will harm all nonprofit institutions, including colleges and universities. The final bill also still makes changes to the state and local tax deduction that will likely harm state budgets and lead to decreased state investment in public higher education.

Other issues of concern in the final legislation to higher education include:

  • Though it drops a House-passed provision repealing private activity bonds, the Conference Committee measure still repeals advance refunding bonds. Both programs are used by colleges and universities to lower the overall cost of funding for large infrastructure projects and save taxpayer dollars.
  • It adopts a Senate-passed provision requiring institutions to compute unrelated business income tax (UBIT) separately for each trade or business in a so-called “basketing” fashion. This requires all losses and gains to be calculated by activity rather than in the aggregate, resulting in disparate treatment for nonprofit institutions.

ACE Senior Vice President Terry Hartle told The Washington Post, “On balance, the final bill is far better news—especially for students and families—than it could have been.”

However, Mitchell noted in Inside Higher Ed​ that the final legislation overall still has serious negative implications for higher education: “At a time when postsecondary degrees and credentials have never been more important to individuals and the nation, this tax reform legislation would make higher education more expensive and less accessible.” 

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