NAICU Washington Update

2010 Tax Extender Bill Possible During Lame Duck Session

September 02, 2010

Anticipation is growing that a "lame-duck" session could be unusually busy for higher education this November.  (See earlier Washington Update story.)  Recent conversations with Hill staff indicate that higher education tax extenders are increasingly likely to be pushed to the post-election session, along with funding for the student aid programs.  The lame duck session starts when Congress reconvenes after the November election, and lasts until adjournment.

Senate staff remain unconvinced that the Senate will be able to garner the votes to pass a retroactive extension of the already-expired 2009 tax extenders - including the IRA charitable rollover and the tuition deduction - prior to the November elections. However, the Senate Finance Committee is moving forward with plans to address an extension of a multitude of 2010 expiring provisions before the end of the year.

Over $1 trillion in tax relief provisions were part of estate tax relief legislation passed during the Bush administration in 2001, including several provisions important to higher education.  The bill had a ten-year life, meaning every provision in it expires at the end of 2010, unless extended or made permanent. Interestingly, most of the items are considered revenue-neutral and exempt from "paygo" requirements if extended prior to expiration.  House and Senate leadership want to do just that - and quickly, before offsets become necessary, and before their expiration generates massive tax increases. The political battle will lie in limiting the benefits to filers reporting less than $250,000 per year in earnings.

For colleges and universities, the provisions soon to expire include Sec. 127, employer-provided education assistance for both graduate and undergraduate course work, which would expire in its entirety.  Also expiring are improvements in student loan interest deduction and Coverdell Education Savings Accounts.

Also of importance, the American Opportunity Tax Credit (AOTC) is also set to expire at the end of 2010.  AOTC allows a partially refundable tax credit of $2,500, and was enacted in 2008 in economic stimulus legislation,  This credit does have "paygo" implications, so its cost would have to be offset.  It's unclear if an AOTC extension would be included in the 2010 extenders bills, or if it would have to be dealt with separately. Extending the AOTC is a priority for the White House.

NAICU will continue to advocate for the extension of expired, and expiring, provisions important to our colleges and our students.

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