Senate Passes Tax Reform Bill

The Senate voted 51-49 to approve its version of tax reform legislation on the morning of December 2.  The Tax Relief and Jobs Act (H.R. 1), having already passed the House in mid-November, now heads to a House/Senate conference.  While in conference, differences in the bill will either be negotiated or both chambers will agree to one of the current versions.

While the House bill eliminated almost all of the current student and family benefits, the Senate bill does not.  In addition, the Senate bill would not eliminate Private Activity Bonds.  Unfortunately, the Senate bill proposes a similar excise tax on private college endowments as the House version.

The Senate tax bill would:

• Maintain the current student and family benefits proposed for elimination in the House bill, including the Student Loan Interest Deduction, the Lifetime Learning Credit, Sec. 127 employer-provided education assistance, and Sec. 117(d) tuition remission benefits.  It would also retain Coverdell Education Savings Accounts.
• Maintain Private Activity Bonds, but eliminates the advance refunding of bonds.
• Create a new 1.4% excise tax on certain private college and university endowment investment returns.  The bill uses a formula of $500,000 per Full Time Equivalent student.  Colleges with less than 500 students would be exempt, and the formula would only take into account “tuition paying” students, so work colleges that would otherwise be swept into the formula would be exempt.  Funds used for educational or charitable purposes would be exempt, but – as in the House bill – there is no specific or qualifying language on what that would include or how spending would be monitored.

According to the Joint Committee on Taxation, the revenue loss to colleges and universities as a result of the Senate bill would be approximately $18 billion over 10 years.  In the House bill, however, the price tag in lost revenue to colleges and universities is more than $120 billion over 10 years.

The House and Senate want to move quickly to reconcile the two bills into a final conference report.  Ultimately, they hope to have the final bill approved in both chambers and on President Trump’s desk by the end of the year, if not sooner.