NAICU Washington Update

Higher Education Benefits Included in Tax Reconciliation Package

September 16, 2021

The House Committee on Ways and Means approved a large package of health, trade, unemployment, green energy, and tax provisions as part of its budget reconciliation efforts this week.  

While the tax portion of the package includes several higher education provisions that are welcome by our sector, unfortunately, there is also a new Treasury Department research grant program that would only be available to public colleges.

The higher education provisions include:
  • Providing endowment/net investment income tax relief for private colleges.  While not a repeal of the endowment tax, the provision will allow private colleges paying the tax to offset taxable amounts with amounts provided in institutional aid.
  • Allowing interest on advance refunding bonds issued from state and local governments to be tax-free, effectively repealing the elimination of bond advance refunding from 2017.
  • Making Pell Grants tax-free. Under current law, portions of Pell Grants not used for tuition are taxable like other forms of grants and scholarships.
  • Repealing the prohibition of individuals with state or federal drug convictions to claim the American Opportunity Tax Credit. (AOTC).
  • Creating a new infrastructure research grant program, operated by the Treasury Department, which will award $500 million annually in credits over five years for STEM projects on an application basis at public colleges only. The provision also includes a new business credit for charitable gifts to the institutions in support of these projects.  
The Committee has developed a summary of the provisions listed above.

The House Committee on the Budget will combine the Ways and Means bill with those from other committees shortly.  However, it’s unclear when floor consideration will occur.  Meanwhile, Democratic leaders in the House and Senate are expected to meet to discuss what moderates in the Senate can support in the various reconciliation bills, and its possible changes might still be made prior to Rules Committee consideration.  The Rules Committee is the last stop before the bill can be brought to the House floor. The Senate schedule will depend on the House successfully completing its work. 

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