Tax Reform
TAX REFORM AND THE HIGHER EDUCATION TAX BENEFITS
In 2013, then-Ways and Means Committee Chairman Dave Camp (R-MI) released a discussion draft of fundamental tax reform concepts that would generally eliminate most of the current credits and deductions across the board – in all areas of tax policy – in exchange for lower rates. While the draft caused a lot of heartburn for a variety of constituencies, it never advanced beyond draft form.
In November 2017, the House and Senate each debated very different versions of tax bills, touted as significant tax reform measures, and eventually passed the largest tax bill in two decades – the Tax Cuts and Jobs Act of 2017 (TCJA). TCJA was signed into law by President Trump in December 2017, and was widely considered to be a major accomplishment for Congress and the Administration in tax reform policy.
While TCJA maintains the higher education tax benefits for students and families, they were slated for elimination in the House bill, which was similar to the 2013 draft released by former Ways and Means Chairman Camp. The Senate bill maintained those benefits as did the final conference report.
There were changes made to tax rates in TCJA that may ultimately have a negative effect on charitable giving, but the charitable deduction and IRA charitable rollover were maintained.
There was a new excise tax included in TCJA that purposefully targets approximately 30 private colleges and universities with large endowments. Public college were excluded. In addition, there was a new excise tax on the compensation of certain college and university employees that also excluded public colleges.
There was also a new tax on nonprofit employers who offer parking and other mass transit benefits to employees, and a tax rate increase on scholarship and grant amounts students receive that are used for room and board. Fortunately, these two new taxes were recently repealed.
Lastly, the TJCA eliminated advance bond refunding. This, combined with the net investment tax on private college endowments, will result in increased costs for colleges and universities, some of which will be significant.