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Business Officer Magazine

Federal File

Coverage of legislation and regulatory activity that affects higher education

By Liz Clark

Enduring Legislation Advances Higher Education Purposes

One hundred and fifty years ago, even as Union and Confederate forces were clashing during the Civil War, President Abraham Lincoln signed into law the Morrill Land-Grant Act of 1862, laying a foundation for U.S. public higher education. Named after Congressman Justin Smith Morrill, a Republican from Vermont, it is one of several landmark pieces of legislation that have shaped and influenced American colleges and universities. Each state was granted a parcel of federal land that was to be sold and the proceeds of which were to be invested in an endowment for support of at least one public college.

Over the years, subsequent legislation would initiate federal investments in research and cooperative extension; create programs to enable soldiers, veterans, and low- and middle-income students to access America's world-class institutions; and shape many other attributes of higher education as we know it today.

A Tradition of Support for Veterans

In 1944, Congress turned its attention to providing educational support to veterans in order to help the former enlistees avoid unemployment and to provide an opportunity for education and training that may have been forgone because of military commitments. The original GI Bill—the Servicemen's Readjustment Act of 1944—covered up to $500 per year for tuition, books, and other fees. The benefits proved to be immensely popular, and college enrollment demands swelled across the nation.

Today, federal legislators continue to preserve the goals and underlying purposes of the various pieces of legislation that underpin American higher education.

Over the years, federal veterans' education programs have evolved, with the Post-9/11 Veterans Educational Assistance Act of 2008 being the most recent iteration; it too is presently experiencing heavy demand. The Montgomery GI Bill, enacted in 1984, extended benefits to active duty forces and is still available to service members and immediate family members.

Investing in Institutions and Students

Early in 1965, President Johnson called on the nation to support opportunities to enable lower- and middle-income families to access higher education. His administration requested investments of federal resources at institutions of higher education and direct financial assistance to students. On November 8 of that same year, Johnson signed into law the Higher Education Act of 1965, "to strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education." The act has been reauthorized nine times, and work on another reauthorization is expected to begin soon on Capitol Hill.

As colleges and universities grew and flourished across the country, federal legislators were also laying the foundation for the tax-exempt sector in the United State Tax Code. The Revenue Act of 1913 established an income tax system that allowed for tax exemption of certain organizations, and in 1943, Congress set forth the first requirements for filing of the Form 990. Institutions of higher education qualify as tax-exempt charitable organizations specifically because they meet the requirements of Internal Revenue Code Section 501(c)(3), established in 1954, which includes "[c]orporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes."

History Repeats Itself

Today, as NACUBO celebrates its 50th anniversary, and as a college education continues to fundamentally foster the civic capacities of citizens, federal legislators continue to preserve the goals and underlying purposes of the various pieces of legislation that underpin American higher education. However, recent history, an evolving marketplace, and current events elicit questions and concerns about colleges and universities, as well as tax-exempt organizations, writ large in the media, by the public, and by government officials. Recognized by Washington policy makers and others as an authoritative resource on the business and financial management of higher education, and with 50 years of history behind the organization, NACUBO is a voice sought after by public officials.

For example, on Wednesday, May 16, the House Ways and Means Subcommittee on Oversight called on NACUBO to provide a witness to respond to questions and concerns regarding the oversight of tax-exempt organizations. Joanne DeStefano, vice president for finance and chief financial officer at Cornell University, Ithaca, New York, testified on behalf of NACUBO.

"As stewards of federal education, research, and student aid funding; as large employers; as significant operators of, in some cases, massive physical plant operations; and as home to our nation's college students, institutions of higher education take very seriously their approach to compliance with a host of federal rules and regulations, including those issued by the IRS," testified DeStefano.

Another May 16 congressional hearing focused on President Obama's recent executive order, which calls for principles of excellence for educational institutions serving veterans, service members, and their families. Subcommittee Chairman Marlin Stutzman (R-IN) called the hearing in order to solicit views on potential challenges to implementation and estimated new costs and administrative burden affiliated with the order, as well as to examine what measures institutions are taking to monitor recruiting and marketing practices targeted to veterans and current enlistees.

Judith Flink, executive director of student financial services and cashier operations for the three campuses of the University of Illinois, testified on behalf of NACUBO. Flink underscored the commitment of NACUBO's membership to our nation's service members by stating, "We affirm that these students—indeed all students—deserve high quality academic and support services that enable them to make informed decisions about their education."

As new challenges emerge and Washington policy makers consider new laws, rules, and regulations that influence the future of colleges and universities, NACUBO will continue to offer college and university business officers' knowledge and experience to the Congress, federal agencies, and standard-setting bodies, and to advocate on behalf of a membership dedicated to the mission of higher education.  

NACUBO CONTACT Liz Clark, director, congressional relations, 202.861.2553

Major Federal Legislation Affecting Higher Education, 1862–Present

1862: Morrill Act establishes the first land-grant colleges.

1887: Hatch Act gives federal funds to land-grant institutions for conducting agricultural and scientific research.

1890: The Second Morrill Act provides further funding, part of which is to be used for institutions for black students, leading to the creation of historically black land-grant colleges.

1913: Revenue Act of 1913 establishes income tax system with tax exemption for certain organizations.

1914: Smith-Lever Act designates federal support for land-grant institutions to offer educational programs and share research locally and throughout the state.

1917: Revenue Act of 1917 introduces individual income tax deduction for charitable donations.

1943: Revenue Act of 1943 requires first Forms 990 to be filed.

1944: Servicemen's Readjustment Act of 1944 commonly known as the GI Bill of Rights, provides education benefits to every veteran who had been on active duty during the war years.

1950: Revenue Act of 1950 establishes unrelated business income tax.

1954: Revenue Act of 1954 establishes modern tax code, including section 501(c) for
exempt organizations.

1965: Higher Education Act of 1965 strengthens the educational resources of colleges and universities and provides financial assistance for students in postsecondary and higher education.

1984: Montgomery GI Bill extends benefits to active duty forces.

1994: Federally Recognized Indian Tribe List Act extends land-grant status to 29 Native American colleges, creating Tribal Colleges.

2006: Pension Protection Act of 2006 requires section 501(c)(3) organizations to make their Forms 990-T available for public inspection.

2008: Post-9/11 Veterans Educational Assistance Act of 2008 expands the educational benefits for military veterans who have served since Sept. 11, 2001.

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