Tax Reform

TAX REFORM AND THE HIGHER EDUCATION TAX BENEFITS

In September 2017, House and Senate Leadership, in cooperation with the Trump Administration, released a Framework for tax reform.  Unlike past proposals, the Framework supports maintaining both charitable giving and higher education tax benefits in Congressional tax reform bills.  However, the Framework does suggest consolidating the higher education benefits in the interest of simplification.

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.

The 2017 Framework represents a step in the right direction by recognizing that even under radical simplification, some tax benefits for higher education should be retained.

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.
 

Outlook

Typically, a fundamental reform package would not move forward, or be considered by either chamber, due to the fact that the elimination of so many much-loved tax benefits is too controversial and politically dangerous to garner much support from either party. However, with an all-Republican Congress and President, we are seeing a renewed focus on, and energy for, tax reform in 2017.

In many substantial ways, higher education tax reform has already been done through 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 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.  In this way, simplification of tuition benefits for tax payers has already been achieved.

While NAICU supports some additional reform of the tuition benefits to allow the AOTC to be available beyond the first four years of college, and thereby negating the need for the Lifetime Learning credit, the three-tiered structure of tax benefits that assists students saving for college, paying tuition, and repaying loans must be maintained.

In the News

 

NAICU Washington Updates

WHAT YOU CAN DO

Let Members of the House Ways and Means and the Senate Finance Committees know:

  • The importance of maintaining the three tiers of higher education tax benefits in any reform proposals – including the benefits to help save for college, pay tuition, and repay student loans.
  • We are grateful Congress has made the AOTC permanent.  We also support further enhancements to the AOTC so it can be consolidated with the lifetime learning tax credit.  If the AOTC were extended beyond its current four-year limit, it would negate the need for the lifetime learning credit.
  • We do not support further consolidation of higher education tax benefits.

Resources  

NAICU Contact

Karin Johns: Karin@NAICU.edu
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