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Business Officer Magazine

Federal File

Coverage of legislation and regulatory activity that affects higher education

By Liz Clark

Tax Provisions at Stake for Higher Education

On August 2, the Senate Finance Committee approved the Family and Business Tax Cut Certainty Act, which extends some expired and expiring tax breaks. The legislation, however, did not include extension of the American Opportunity Tax Credit (AOTC) or employer-provided educational assistance (Section 127) benefits. The House has not yet taken action on an extenders package, and no final action on these or other tax measures is expected until the end of the year.

NACUBO and several other higher education associations joined the American Council on Education in an August 1 letter to congressional leaders calling for the reinstatement and extension of higher education-related tax provisions that have already expired or will expire soon. Also scheduled to expire at the end of the year are the expanded Student Loan Interest Deduction (SLID) and expanded Coverdell Education Savings Accounts (ESAs).

Two other tax provisions important to students, families, and institutions—the above-the-line deduction for qualified tuition and related expenses and the IRA charitable rollover-—expired at the end of 2011. The tuition deduction is particularly beneficial to graduate students who are ineligible for the AOTC.

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Shutdown Averted?

During the final week in congressional session, just before departing for the annual August break, Senate Majority Leader Harry Reid,  Speaker of the House John Boehner, and the White House announced agreement on a six-month continuing resolution that will provide the federal government funds until March 31, 2013, at a level of $1.047 trillion. While not official until a vote is held sometime in September (before the October 1 start of FY13), the agreement would postpone until well after the November elections what is expected to be a contentious debate. Without this agreement or an FY13 budget in place, the nation would again face the threat of a government shutdown—something most, but not all, elected officials want to avoid before Election Day.

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Congress Faces Major Economic Decisions

On July 25, the Senate voted 51–48, with no Republican support, to approve the Middle Class Tax Cut Act (S. 3412), which would extend for one year the Bush tax cuts for single taxpayers with income less than $200,000, and for married taxpayers with income less than $250,000.

On August 1, the House voted 256–171, mostly along party lines, to approve the Job Protection and Recession Prevention Act (H.R. 8), which would extend all the Bush-era tax cuts through 2013 for all taxpayers.

Thus, with little common ground between Democrats and Republicans, the Bush-era tax cuts, which also expire on December 31, will be the primary issue of debate on Capitol Hill in the fall, both before and after the November elections. It will likely be a lame-duck Congress that decides whether to extend the current rates for all taxpayers, as well as the payroll tax cut, jobless benefits, and the aforementioned tax extenders.

NACUBO CONTACT Liz Clark, director, congressional relations, 202.861.2553

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