GOP Plan Would Tax Endowments, Slam Higher Ed Breaks

DC Shuttle …

House Tax Plan Would Hit Higher Education. Republican leadership in the U.S. House released its draft “Tax Cuts and Jobs Act”, which would have major implications for the higher education community. A new tax would make private colleges subject to a 1.4% excise tax on the net investment income of their endowments. The provision would apply only to private institutions with at least 500 students and total assets valued at $100,000 per full-time student. The bill also eliminates many deductions, with the intention of simplifying the tax code. The current draft eliminates the deduction for interest paid on student loans, the deduction for college tuition, the tax break for tuition discounts that colleges give their employees, the tax break for all employer-provided educational assistance programs, and the Hope Scholarship Credit and Lifetime Learning Credit. The bill includes provisions that would support school choice. The bill would end Coverdell Education Savings Accounts—tax-free accounts that have allowed families to set aside up to $2,000 to cover K-12 costs, like private school tuition—and expand 529 college savings accounts to cover K-12 expenses of up to $10,000 per year. The child and dependent care tax credit would remain. Teachers would no longer be able to claim a $250 deduction for money they spend out of their own pockets on classroom supplies and instructional materials. The reaction from Democrats was swift. Rep. Bobby Scott (D-Va.), the ranking Democrat on the House Education and the Workforce Committee, said “Voters of both parties want Congress to lower the cost of college and put more money, not less, into public education. And yet, House Republicans are proposing to fund tax cuts for corporations and the wealthiest Americans on the backs of students, teachers, and communities.”

Senate Bill Would also Tax Endowments. Not only does last week’s GOP tax bill in the House contain a provision to tax endowments, but reportedly members of the Senate are also considering a standalone provision to tax college endowments at 2%. The House GOP tax plan would implement a 1.4% excise tax on the net investment income of private school endowment. The provision would apply only to private schools with at least 500 students and total assets valued at $100,000 per full-time student. A document leaked by the Senate Finance Committee reportedly also contains an endowment tax, aimed to pay for the Senate bill. The Senate is aiming to introduce its own version of the tax legislation as early as this week, which could reportedly contain that similar provision, only slightly higher. The leaked outline contains a 2% excise tax on private college and university endowments with assets over $100,000 for each full-time student.

Ed Dept to Scale Back Loan Forgiveness for Defrauded Students. The U.S. Department of Education is considering not fully reimbursing the loans of students who have been ruled to have been defrauded by for-profit colleges, despite reports last week to that effect. Education Secretary Betsy DeVos is reportedly working on a plan that would give students only partial relief from the debt. The Obama administration had allowed the debt to be fully forgiven. Sen. Patty Murray (D-Wash.) pressed Education Secretary Betsy DeVos to fully forgive the federal loans made to students found to have been defrauded by for-profit colleges, while the department has not responded to inquiries on the issue.

We publish the DC Shuttle each week featuring higher ed news from Washington collected by the New England Council, of which NEBHE is a member. This edition is drawn from the Higher Education Update in the Council’s Weekly Washington Report of Nov. 6, 2017. For more information, please visit:


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