A provision that would have taxed graduate tuition waivers, thus adding thousands to students’ annual IRS bills, was left out of the GOP’s final tax plan. Bloomberg quotes Sen. Mike Rounds (R-South Dakota) as saying, “Folks who are in grad school will feel pretty good about the final result.” The bill also no longer includes a provision to repeal student loan interest deductions. However, according to Inside Higher Ed, the bill includes “a 1.4 percent excise tax on investment income at private colleges with an enrollment of at least 500 students and with assets valued at $500,000 per full-time student.” About 35 schools will likely be impacted.
As of Sunday afternoon, the bill had not yet passed Congress, though the support of Florida Senator Marco Rubio appeared to guarantee its imminent passage.
In other news, UC Regent Norman Pattiz has come under renewed pressure to resign. Pattiz was recently sued for allegedly brandishing a loaded gun at a former employee who resisted Pattiz’s orders to falsify data. In 2016, a recording surfaced of Pattiz asking a colleague whether he could hold her breasts. At a fall meeting of the Regents, students called on Pattiz to step down. However, in a subsequent interview with the Daily Cal, the successful radio mogul said, ““I’ve been around for 15 years. I’ve seen students protest everything and anything. I never thought it would be me. I’m not going to resign.”
The Huffington Post reported last week that in late November, Lt. Governor Gavin Newsom, California Superintendent of Public Instruction Tom Torlakson and UC Student Regent Paul Monge “asked university officials to make clear what they have done or will do about Pattiz.”
Pattiz cannot be removed by the other Regents or even the governor, who appointed him to a 12-year term in 2014, but instead would have to volunteer his resignation. According to the Huffington Post, “(Governor Jerry) Brown wants Pattiz to resign, according to two sources familiar with his thinking. He has had a senior staff member request Pattiz’s resignation at least once, the sources said, but Pattiz refused.”
12/11 – Radio Mogul Under Pressure To Resign From Powerful California University Board (HuffPo): A lawyer for Pattiz said if Newsom “took a moment to learn the facts, then he would not have sent the letter he did.”
12/13 – Tentative Tax Deal Scraps Hit on Tuition for Graduate Students (Bloomberg): The short piece was the first to report the news.
12/13 – Proposed Tax on Graduate Students’ Tuition Waivers Appears to Be Dead (Chronicle): The article frames the growing opposition among GOP senators to the provision.
12/14 – Apparent Relief for Grad Students (IHE): The article cites the role graduate student mobilization played in ending the provision.
12/15 – Final GOP Bill Would Tax Large Endowments (IHE): In addition to listing the 35 schools impacted by the endowment tax, the article breaks down all of the major implications for higher ed in the massive bill:
- Graduate student tuition waivers: The plan leaves in place a provision of the tax code allowing colleges and universities to waive or discount tuition for graduate students without having those benefits count as taxable income. The House bill would have eliminated the tax-exempt status of those tuition waivers.
- Employee-dependent tuition benefits: The final bill leaves untouched tax-exempt benefits for the spouses and dependent children of college employees. The House bill would have eliminated the tax-exempt status of those benefits.
- Student loan interest deductions: The plan maintains tax benefits for student loan borrowers, allowing them to deduct up to $2,500 paid toward student loan interest from their taxable income each year. The House bill had proposed eliminating that provision.
- Private endowments tax: The bill includes a 1.4 percent excise tax on investment income at private colleges with an enrollment of at least 500 students and with assets valued at $500,000 per full-time student. That reflects the more narrow proposal included in the Senate bill. The House bill would have taxed colleges with assets valued at $250,000 per full-time student. The provision is estimated to raise about $1.8 billion in revenue over 10 years. Lawmakers have estimated it will affect about 35 institutions.
- State and local tax deductions: The bill allows taxpayers to deduct up to $10,000 in state and local taxes from their federal tax bill. Many public higher education leaders had warned that the proposal in the original Senate tax plan to eliminate the deductions would put pressure on state budgets that support public universities — and possibly lead to cuts in funding. The cap on those deductions will likely still create new worries for public universities in high-tax states like California and New York.
- Student loan discharge: The bill includes a House proposal that makes student loan debt discharged for death or disability tax exempt. That provision will sunset by 2025.
- Standard deduction: The bill doubles the amount of the standard deduction to $24,000 for joint filers and $12,000 for individuals. That means the number of taxpayers who would benefit from itemizing deductions — including charitable contributions to entities like colleges and universities — would shrink. Nonprofit groups, including colleges, say that change would lower the incentive for donating to colleges.
- Tax-exempt bonds: The bill maintains the tax-exempt private activity bonds, but eliminates advance refunding bonds.