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NACUBO, together with a cross section of higher education associations, recently provided comprehensive input to the Senate Finance Committee on a number of tax concerns.

The feedback was in response to a bipartisan effort, announced in March by Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), to gather the public's input to inform their efforts to overhaul the tax code. The senators established five working groups to explore different areas of tax policy, produce findings and draft legislative recommendations.

Tax-Exempt Status

NACUBO submitted a statement on behalf of 10 higher education associations to the working group on business income tax. In it, NACUBO highlighted members' commitment to accountability and good governance; asked the working group to explore streamlining reporting requirements; and reaffirmed the public value and interest in providing tax-exempt status to colleges and universities.

"There is great diversity in the organization and guiding principles of colleges and universities in the United States that collectively are responsible for educating more than 20 million students each year," the statement reads. " Tax-exempt status leverages the value of that revenue, helping our institutions meet the needs they face in serving their students, and in many cases their research and service missions."


Another Senate working group is exploring policies related to community development and infrastructure. NACUBO urged this group to protect tax-exempt bond financing, increase the bank qualified annual debt limit, and consider federal policy options to stimulate energy efficiency and renewable energy investments at colleges and universities.

NACUBO co-led development of a statement signed by 15 different associations and organizations on the importance of protecting tax-exempt bond financing; the signatories represent thousands of U.S. colleges, universities and hospitals, as well as the finance authorities that provide capital financing for not-for-profit health care and higher education institutions. The statement urges Congress to, "protect tax-exempt bond financing, including qualified 501(c) (3) private-activity bonds, which is necessary for the continued financial health of hospitals, colleges, universities and other charitable organizations."

Together with groups representing issuers, dealers, community banks and hospitals, NACUBO asked the working group to consider permanently increasing the bank qualified annual debt limit from $10 million to $30 million, index that amount for inflation, and apply it to individual borrowers. The statement notes, "By permanently enacting these changes, local governments, schools, hospitals, colleges and others, will be able to more easily access capital markets, and sell debt in a more efficient, less costly manner."

The community development and infrastructure working group is also examining elements of the tax code that impact national energy policy. NACUBO reasserted its interest in promoting energy efficiency and renewable energy investments at colleges and universities and encouraged the working group to think about federal policy options to defray the costs of financing these projects.

NACUBO's comments on energy tax policy point out, "In recent years, a number of federal grant opportunities, loan guarantees, and tax credits have been structured in ways that exclude or limit participation by private nonprofit and public institutions of higher education."

Specifically, NACUBO calls for the extension and expansion of Section 179D and for allowing tax-exempt revenue bond financing to prepay power purchase agreements.

Higher Education Tax Provisions and Charitable Giving

The American Council on Education (ACE) took the lead on a statement, signed by 16 higher education associations, to the working group on individual income tax , which is focusing on education tax benefits and charitable giving, among other provisions.

The associations point out, "Although originally enacted discretely, the current federal tax code contains a number of provisions that taken together create a framework that functions as a kind of ‘three-legged stool' intended to advance three important goals: 1) to encourage saving for higher education; 2) to help students and families pay for college; and, 3) to assist with the repayment of student loans."

The ACE document also emphasizes the importance of the charitable deduction to higher education. It urges the Finance Committee to recognize that, "While there is no replacing the investments made by federal government in student financial aid and scientific research, private charitable giving plays an increasingly important role in supplementing them. We should continue as a nation to encourage strong charitable giving to support student financial aid, research and other academic programs. The current charitable deduction does just that."

What Happens Next?

Each working group will now review comments received from the public and produce recommendations by the end of May. Those recommendations will then be considered as tax reform legislation is developed.

Lawmakers, however, remain deeply divided on the overall framework for tax reform. Democrats are opposed to cutting individual tax rates; and although they have signaled some interest in bipartisan efforts to make business-only changes to the tax code, that approach has obstacles. For example, many businesses are structured as "passthrough" entities that pay taxes through their owners as individuals. Even if the Republican-led Senate and House can pass tax reform measures without Democratic support, they face a veto threat from President Obama.

Comprehensive reform may not be a near-term reality, but the working groups are bringing attention—both critical and supportive—to the many ways the tax code impacts students and their families, the higher education workforce, and the fundamental business operations of colleges and universities . Institutions should be prepared for policymakers to consider advancing reform proposals as stand-alone measures or as part of other legislative packages.

The statements can be found here on the NACUBO website and at the following links:


Liz Clark

Vice President, Policy and Research


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