Today, the final version of the Tax Cuts and Jobs Act was sent to President Trump for his signature, which is expected soon. After concerted efforts from higher education representatives throughout the legislative process, the measure evolved to address many of the items of particular interest to the university community.
One top concern with the legislation that passed out of the House in November was a proposal to tax tuition waivers as income. Congressional leadership backed away from the proposal after listening to the concerns of students and universities. The final version of the bill will continue to exempt the value of reduced tuition from income tax calculations. For students, faculty and staff who are receiving tuition waivers, this is a welcome maintenance of the status quo.
While it was originally proposed for elimination, the deduction for student loan interest is also maintained, as is the Lifetime Learning Credit.
“I’m extremely pleased the new legislation does not tax graduate students for tuition waivers and that it preserves deductions for student-loan interest payments and credits for tuition,” said CU Boulder Chancellor Philip P. DiStefano. “The American Opportunity Tax Credit, Hope Scholarship Credit and Lifetime Learning Credit help students afford their education. I want to especially thank Colorado’s congressional delegation, students, faculty and staff for advocating for students and for higher education.”
People’s efforts to support students in this process have been key to the outcome.
Graduate students nationwide were particularly instrumental in raising awareness about the potential impacts of the original tax reform proposal.
“The Graduate School thanks the many graduate student leaders, staff and faculty who have worked in recent weeks to raise awareness of the negative impact that taxing tuition waivers would have had on graduate students and graduate education,” said Graduate School Dean Ann Schmiesing. “We are also grateful to CU’s government relations team for providing us with regular updates and for advocating on behalf of CU at the federal level.”
Advocacy moved the needle on many items of interest, however, not all of the provisions affecting higher education have changed. While Private Activity Bonds, which the university uses for infrastructure projects, have been maintained, the tax exemption for Advance Refunding Bonds has been eliminated. These types of bonds, often used by university systems and municipalities to refinance major infrastructure projects when financing rates are favorable, recently saved CU Boulder $13 million in borrowing costs.
What remains to be seen is the long-term effect of the bill as a whole. For example, there is concern the doubling of the standard personal income-tax deduction will reduce the incentive to itemize, which may lead to a reduction in charitable giving. A provision eliminating the charitable deduction for seat-license fees for sporting events is also likely to impact revenues.
The relationship between federal taxes and state taxes is also expected to have long-term effects as state budgets are impacted by changing revenue and liabilities. The administration will be watching this interaction closely and assessing its impact on higher education and the CU community.