About

Fundamentally reforming the Internal Revenue Code is one of the most common priorities for both Republicans and Democrats on the tax-writing committees. Fundamental tax reform is also enormously difficult for Congress to ever successfully address. Various members and committee chairman have embarked on attempts to rewrite the tax code since the last major reform bill in 1986, with little progress.

Several tax bills have been signed into law since the 1986 Act, and nearly all bear the word “Reform” in their title.  However, none of them were truly fundamental reform bills that replaced the current tax code with a new tax system.  Even the Tax Cuts and Jobs Act of 2017, which is touted as a massive tax reform effort, and does reform the tax code somewhat, is actually more of a large-scale tax relief bill.
 

Outlook

With the Tax Cuts and Jobs Act (TCJA) in the rearview mirror, there will be very little interest in tax reform in Congress for the foreseeable future.  With the majority party shifting in the House, the Democrats have not attempted to undo most of the provisions in the TCJA.  However, the House and Senate successfully repealed both the "parking tax" and rate increase in the so-called "kiddie tax" that affected room and board awards for students.  The parking tax elimination is also refundable - meaning amounts paid in 2018 or 2019 can be reclaimed.  NAICU advocated for the repeal of both of these harmful policies. 
 
Otherwise, TCJA was the vehicle for Congress to eliminate the higher education benefits, consolidate them, or improve them.  In the end, all of the current student and family, and charitable giving benefits were left in place without any changes.
 
Unfortunately, the bill did eliminate bond advance refunding, which is an important refinancing tool for private colleges, and imposed a purely punitive excise tax on private colleges with certain endowment/net investment assets valued at $500,000 per full time equivalent student.  So, while the student and family benefits haven't changed, some NAICU institutions are facing significant lost revenue as a result of these measures.  NAICU will continue to advocate for the reversal of these new harmful policies.

In many substantial ways, higher education tax reform had already been done in the Omnibus Tax and Spending package that was passed by Congress and signed into law by President Obama in December 2015.  That bill made the American Opportunity Tax Credit (AOTC) permanent, allowing two other confusing tuition tax benefits (the above-the line tuition deduction and the HOPE tax credit) that duplicated much of what the permanent AOTC also covers, to be phased out.  While that was a good start to consolidating the tuition benefits, the budget deal signed into law in February 2018, reinstated the tuition deduction retroactively for 2017, which likely caused more confusion than benefit anyone paying tuition.  Congress continues to renew this benefit each year, even though it intended to phase it out. 

Throughout the tax reform debate, NAICU has supported some additional reform of the tuition benefits to allow the AOTC to be available beyond the first four years of college, thereby negating the need for the Lifetime Learning credit.  However, the top priority was always to maintain the three-tiered structure of tax benefits that assists students saving for college, paying tuition, and repaying loans.