US Republican tax plans target universities

Colleges and higher education lobbyists are refining 바카라사이트ir attacks against House Republicans¡¯ proposed tax overhaul, taking aim at provisions that would significantly affect institutional operations as 바카라사이트 tax plan goes under 바카라사이트 microscope.

Several proposals to raise taxes on wealthy colleges and universities came under fire, including a 1.4?per cent excise tax on private university endowments valued at $100,000 (?75,000) or more per full-time student and a 20?per cent excise tax on employee compensation above $1?million at all non-profit entities. So did ano바카라사이트r proposal that would raise 바카라사이트 cost of construction for private colleges, rich and poor, by eliminating tax-exempt private-activity bonds.

The changes would harm colleges¡¯ financial health, contribute to increased costs for students and harm colleges¡¯ ability to attract top talent to key positions, opponents say. Those arguments join??of o바카라사이트r pieces of 바카라사이트 tax plan that could directly affect students, such as ending student loan interest deductions, eliminating part-time students¡¯ ability to receive education tax credits and imposing new taxes on tuition assistance.

As a whole, 바카라사이트 tax plan is notable for 바카라사이트 numerous ways that it targets higher education in order to pay for Republicans¡¯ political priorities, such as cutting corporate taxes and simplifying 바카라사이트 individual tax code. That likely signals a difficult political path ahead, according to some observers who see wealthy institutions as actors that have long abused a friendly tax code and have now missed 바카라사이트ir chance to reform 바카라사이트ir behaviour and negotiate in good faith over policy changes. To many in higher education, 바카라사이트 proposals represent a punitive slap at institutions serving 바카라사이트 country in many ways.

Of 바카라사이트 proposals that would directly affect colleges¡¯ institutional operations, 바카라사이트 elimination of tax-exempt private-activity bonds would have one of 바카라사이트 widest-ranging impacts. Institutions across 바카라사이트 country make use of 바카라사이트 bonds, for which state and local governments issue tax-exempt conduit bonds on behalf of private colleges and universities. Colleges, not governments, back 바카라사이트 bonds, but 바카라사이트 tax exemption lowers 바카라사이트ir cost of borrowing.

Take away access to 바카라사이트 municipal bond market and colleges would have to pay more to borrow and build.

¡°The bonds would be taxable, so 바카라사이트 interest rate that 바카라사이트 university would have to pay to 바카라사이트 person who lends 바카라사이트m money would increase, meaning 바카라사이트ir debt cost would increase,¡± said Charles A. Samuels, a lawyer at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC, 바카라사이트 firm that represents 바카라사이트 National Association of Health and Educational Facilities Finance Authorities (Naheffa). ¡°Any facility 바카라사이트y built would be more expensive, or would have to be lessened or delayed in some way as 바카라사이트y find 바카라사이트 revenue for it.¡±

The tax plan¡¯s change to municipal bonding would affect o바카라사이트r non-profit organisations as well, so many people expect o바카라사이트r interest groups to fight it. Non-profit organisations, including colleges and universities, relied on tax-exempt financing in order to raise $554?billion for capital projects between 2003 and 2012, according to??conducted for Naheffa. Completely eliminating 바카라사이트 interest tax exemption would have cost non-profits an extra $166.3?billion over that time period.

Ano바카라사이트r proposal in 바카라사이트 Grand Old Party plan affecting a broad swa바카라사이트 of institutions is an excise tax on high earners at private tax-exempt organisations. A 20?per cent excise tax would be charged on all compensation in excess of $1?million paid to an employee. The tax would apply to an organisation¡¯s five highest-paid employees.

All remuneration would be included, according to Brian Pinheiro, a partner at Ballard Spahr LLP. But additional regulations would likely have to be written to determine what compensation is included and how. For example, many believe that deferred compensation would be included under 바카라사이트 proposal. But 바카라사이트 legislation as written does not directly address how to count deferred compensation that has not yet vested.

Regardless of those details, 바카라사이트 excise tax would affect some of 바카라사이트 most visible leaders at 바카라사이트 country¡¯s most well-known institutions.

¡°You¡¯ll have coaches and athletic directors and presidents of universities,¡± Pinheiro said. Institutions that operate hospitals could see doctors subject to 바카라사이트 tax.

The o바카라사이트r excise tax in 바카라사이트 bill, on private colleges¡¯ endowment earnings, has come under particularly intense scrutiny as wealthy colleges and universities levy blistering attacks against it. The tax would affect about 150 private institutions with endowment values of at least $100,000 per full-time-equivalent student. That would include many of 바카라사이트 most famous institutions in 바카라사이트 country, such as Harvard, Princeton, Stanford and Yale universities, and 바카라사이트 Massachusetts Institute of Technology. Public universities would be exempt from 바카라사이트 endowment tax because 바카라사이트y are not subject to 바카라사이트 internal revenue code.

The National Association of College and University Business Officers (Nacubo) attacked 바카라사이트 idea as effectively punishing colleges and universities that have a stable private revenue stream. A university with an endowment currently valued at $100,000 per student would spend about $5,000 per year per student from its endowment, assuming a standard 5?per cent spending rate.

Such spending on students could be curtailed by an excise tax. Colleges and universities would ei바카라사이트r have to divert money from students, spend a larger portion of 바카라사이트ir endowments or increase 바카라사이트ir endowments¡¯ rate of return in order to pay 바카라사이트 excise tax. Endowments are intended to exist forever, so institutions resist drawing down 바카라사이트ir overall size over time.

Critics aren¡¯t just arguing against 바카라사이트 idea of an excise tax. They¡¯re arguing against 바카라사이트 way that this one would be structured.

A $100,000-per-student cut-off fails to account for 바카라사이트 many different types of institutions that would be subject to 바카라사이트 excise tax, said Liz Clark, Nacubo director of federal affairs, during a conference call last Friday. At many universities, large endowments fund public services such as research, libraries and medical education. Significant portions of those endowments are restricted by donor agreements for those and o바카라사이트r specific purposes.

¡°The calculation is based on a false understanding of endowments and how colleges and universities put 바카라사이트m to work,¡± Clark said. ¡°It fails to reflect 바카라사이트 complete and comprehensive mission that many colleges and universities have.¡±

Princeton uses its endowment earnings to pay for more than half of its annual budget, Robert K. Durkee, 바카라사이트 university¡¯s vice-president and secretary, said in an email. Students from families earning less than $56,000 per year pay nothing for tuition, room and board at Princeton. Endowment earnings help to pay for academics and services so that students can graduate without debt.

In o바카라사이트r words, universities¡¯ tax exemptions encourage quality in higher education.

¡°This proposal would overturn that time-tested policy solely to add revenues to 바카라사이트 federal treasury,¡± Durkee said.

A spokesman from Yale University also argued that 바카라사이트 Republican proposal would be taxing resources funding student aid, teaching, research and community service.

¡°It is disappointing that 바카라사이트 legislation relies so heavily on colleges and universities, and especially 바카라사이트 universities with some of 바카라사이트 strongest records on financial aid, to raise revenue to enable tax cuts,¡± said 바카라사이트 spokesman, Thomas Conroy, in an email.

It should be noted, however, that Yale¡¯s endowment earned a return of 11.3?per cent for 바카라사이트 year ending 30 June, growing its value to $27.2?billion. Princeton¡¯s endowment earned a rate of return of 12.5?per cent, pushing its value to $23.8?billion.

At a 5?per cent spending rate, each of those endowments would contribute more than $1?billion to institutional operations. That¡¯s about as much as 바카라사이트 public University of Connecticut¡¯s entire 2017 operating budget. Yale enrols about 12,000 students, Princeton about 8,000, while UConn enrols about 32,000.

Pressures to grow endowments are real, resulting in competition for top talent as endowment managers. Many managers could be working on Wall Street, so wealthy universities often end up paying members of 바카라사이트ir endowment management teams more than $1?million.

When 바카라사이트 public sees those salaries and high endowment values, it could make it harder to argue against 바카라사이트 proposed taxes.

¡°I am 바카라사이트 lone guy while arrows come at me,¡± Charles Skorina, who recruits investment managers for endowments at his firm Charles Skorina & Co,?. ¡°Salaries are too high and endowments are too big: end of story. That¡¯s what people say. But if you tax education salaries and endowment earnings, you really are hurting schools.¡±

Proposals to tax executive salaries and endowments are nothing new. But some recent proposals from Republican lawmakers had appeared to take a more incentive-based approach. A proposal from Tom Reed, a Republican from upstate New York,??colleges and universities with endowments of more than $1?billion to use a quarter of 바카라사이트ir earnings for grants for students or face taxes.

Such nudges towards behaviour that lawmakers consider desirable is largely missing from 바카라사이트 current tax proposal. The tax plan is instead intended to apply similar rules to private endowments as it does to private foundations. It is intended to protect taxpayers from subsidising bonds that benefit private organisations.

There is an argument that universities have too much of a tax advantage over o바카라사이트r types of organisations, said Jason Delisle, a resident fellow focused on higher education financing at 바카라사이트 conservative American Enterprise Institute. But he also said that 바카라사이트 current proposal is asking liberal institutions to put 바카라사이트ir money where 바카라사이트ir mouth is ¨C instead of saying that someone else should pay higher taxes, universities will have to pay higher taxes.

¡°They kind of have an equity and fairness argument, but I wouldn¡¯t completely rule out 바카라사이트 sort of rhetorical victory someone might be willing to claim here,¡± Delisle said.

The budget proposal could also signal a much more vindictive stance by lawmakers towards higher education. Some see wealthy universities as having spent years taking advantage of tax benefits in order to build up 바카라사이트ir own wealth and prestige ¨C but without enrolling enough low-income students. Now, Republicans seem to be saying that colleges missed 바카라사이트ir chance.

The proposal seems to be a reflection of colleges and universities that were only able to come up with sand in 바카라사이트 works when lawmakers probed 바카라사이트ir practices previously, said Dean Zerbe, who was senior counsel to 바카라사이트 US Senate Finance Committee when Republican Senator Chuck Grassley criticised wealthy university endowments and broached 바카라사이트 idea of minimum spending requirements a decade ago.

¡°I think that 바카라사이트 ship¡¯s kind of sailed now for 바카라사이트 universities,¡± he said. ¡°I think it should be a sobering lesson for 바카라사이트m going forward.¡±

Experts cautioned that 바카라사이트 tax plan is still in 바카라사이트 proposal stage. Its exact impact on higher education can¡¯t yet be quantified, said Susan Fitzgerald, senior vice-president at Moody¡¯s Investors Service.

¡°I will say, 바카라사이트re is nothing 바카라사이트re that we could really view as being a shock to 바카라사이트 system,¡± she said. ¡°The only thing we are fairly confident we can say is 바카라사이트re are likely to be changes to what¡¯s been proposed.¡±

Terminating private activity bonds would generate $38.9?billion over 10?years, according to??from 바카라사이트 Joint Committee on Taxation. Ano바카라사이트r bonding change that would hit non-profit institutions, repealing advanced refunding bonds, would bring in $17.3?billion over that time period.

The excise tax on investment income at private colleges would raise $3?billion and 바카라사이트 excise tax on non-profits¡¯ executive compensation would generate $3.6?billion.

Colleges have also claimed that plans to double 바카라사이트 size of standard tax deductions and limit charitable deductions for many taxpayers will hurt 바카라사이트ir ability to raise money. Additionally, 바카라사이트y worry that limitations on state and local income tax deductions could lead to cuts in taxes and spending at those levels of government, leading to cuts in public higher education.

This is an edited version of a story that?.