To: The University Community
From: Joel Seligman
As you may know, House Republicans released their comprehensive tax reform bill and the Senate Republicans released their version of a tax bill last week. Both of these bills would adversely impact higher education in a number of important ways.
The University supports tax reform that promotes economic growth, fosters a well-educated, productive workforce, and preserves strong incentives for charitable giving. These are critical to our nation’s prosperity and global competitiveness. However, the proposed legislation would eliminate or consolidate a number of tax deductions and provisions that offset the costs of higher education for students and their families, impact charitable giving, and increase costs for colleges and universities. These include:
- elimination of several student-centered provisions, such as employer-provided educational assistance and the student loan interest deduction;
- elimination of access to the tax-exempt bonds that provide discounted financing for our classrooms, research labs, and patient care facilities; and an
- excise tax on some nonprofit private university endowments.
The House and Senate bills differ on what changes are made to tax benefits for tuition paid by graduate students and by employers as a benefit to their employees, but both bills have adverse impact to students and employees using tuition tax benefits to advance their education. The University will provide a detailed summary of the financial impact of these tax changes to students and employees once the provisions in these bills are reconciled and become firmer.
In an unprecedented move, both bills also propose an excise tax on investment income from private university endowments. While these provisions, as currently written, may not impact the University, the principle behind this tax is deeply troubling. An arbitrary tax on endowments redirects funds away from their charitable purpose while making it more difficult for institutions to meet their legal and fiduciary obligations to donors in support of our education, research, and health care missions. In working with Congress, we want to continue to ensure our ability to effectively manage our endowment for its intended charitable purposes to maximize societal benefits. For example, our endowment allows us to meet the full demonstrated need of all our undergraduate students. Continued growth in our endowment is essential to strengthening access, affordability and the quality of a Rochester education, which is among the best offered by our nation’s leading universities, as well as expanding our research and patient care capacity.
Legislation is moving very quickly. The House bill was approved by the Ways and Means Committee and is scheduled for a vote on the House floor this week. The Senate bill is being actively considered in committee now. The two bills would need be reconciled and passed by both the House and Senate before being sent to President Trump for his signature. Congressional leadership would like legislation sent to the President by the end of the year.
I want to assure you that the University of Rochester is closely monitoring the legislative process of finalizing these bills. We are working with our national professional organizations to voice our strongest objections and concerns to members of the New York Congressional delegation. University leadership and the Office of Government and Community Relations have been meeting and communicating with our Congressional delegation.
Recently, 45 higher education associations sent a letter to House committee leaders expressing “grave concerns” with the legislation’s impact on students, families, and higher education as a whole. The letter notes the legislation would greatly discourage participation in postsecondary education, make college more expensive, and weaken the financial stability of colleges and universities.
The American Council on Education and our other associations that work on tax policy have also launched a web page to better explain the impact of tax reform on higher education. I would encourage you to visit the site to learn more and to stay informed on the latest developments. Additionally, they have created a “Contact Congress” tool to help higher education leaders, faculty, staff, and students share views and concerns about the legislation with lawmakers. Should you desire to register your concerns, please visit the site for proposed letters you can send to Congress.
I will continue to keep you updated on any changes, but felt it was important that the University community was aware of what is at stake.