During negotiations on the tax bill, additional tax provisions affecting higher education were proposed for elimination. These included tax deductions for interest on student loans, tuition assistance for employees and graduate students, tuition tax credits and tax-exempt bonds that make it possible for private colleges and universities and other nonprofits to build and maintain physical plants. We deeply appreciate the protection of these provisions in the final bill, and it is our hope that they will remain protected in the years ahead.
Given that relationship, it is difficult to reconcile the job creation goal of the new law with efforts during congressional negotiations to eliminate tax provisions that support and increase access to higher education.
This tax on contributions made for charitable purposes penalizes private, nonprofit colleges and universities while public higher education and other nonprofit organizations with endowments are not affected. No charitable endowments should be taxed.
One of the primary goals of the recent federal tax reform legislation is to encourage the creation of jobs. A 2016 study by the Center on Education and the Workforce found that 99 percent of the 11.6 million jobs created since the recession were filled by individuals with an associate’s, bachelor’s or graduate degree. These findings highlight the critical relationship between the supply of jobs and the demand for college-educated workers.
Estimates of the tax bill’s impact on charitable giving include a reduction from 30 percent of taxpayers who itemize currently to as low as five percent. The elimination of a tax incentive for 25 percent of filers to make charitable donations could be devastating to nonprofits of all types and sizes.
We can only estimate the impact the tax law changes will have on charitable giving – the lifeblood of higher education’s scholarship and academic programs. The question for all nonprofits is how much the expanded standard deduction provision, without the inclusion of a universal charitable giving deduction, will reduce charitable giving.
The excise tax on college and university endowments is a public policy change which penalizes private, nonprofit institutions for maintaining significant endowment funds to use in reducing college costs, funding student aid, and supporting research. Initially, just over 30 institutions nationwide will be taxed, but having set the policy, Congress could easily increase that number.