Federal bill aims to tax tuition waivers

Emily DeLetter

Republican lawmakers in the House of Representative are proposing a tax reform bill that has been largely opposed by higher education institutions.

Several areas of the bill were contested, including a 1.4 percent excise tax on “private university endowments valued at $100,000 or more per full-time student and a 20 percent excise tax on employee compensation above $1 million at all nonprofit entities,” according to Inside Higher Ed.

While this excise tax would not affect WKU, other private colleges and universities in Kentucky, such as Centre College and Transylvania University, could see significant changes.


This bill would also tax tuition waivers for graduate students. The bill would count these waivers as taxable income. Such an increase could raise the graduate students’ bills by thousands of dollars, according to the American Council of Education.

The American Council of Education estimated that if the House of Representatives’ plan passed, it would raise the cost of attending college for students by more than $65 billion between 2018 and 2027.

The bill would also restructure the American Opportunity Tax Credit, or AOTC, which gives credit for qualified education expenses paid for an eligible student for the first four years of higher education, according to their website.

One way to be eligible for AOTC is to not have finished the first four years of higher education at the beginning of the tax year. Tax benefits for part-time students, graduate students and students who take more than five years to graduate under AOTC would be eliminated by the House bill.

“Taken in its entirety, the House tax reform proposal released today would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” the council said in an official statement.

The Senate came out with a similar reform proposal last Thursday which would eliminate the deduction on state and local taxes, unlike the House bill. This deduction could have a large effect on public universities, as it could create pressure to cut state spending.

The Senate bill would also keep the excise tax on private university endowments, but would not include the tax on tuition waivers.

Graduate students traditionally receive tuition waivers when they work for their universities as research or teaching assistants. The Office of Institutional Research reported in their Fall 2017 Enrollment Report that 2,601 graduate students were enrolled at WKU.

President of the Association for American Universities Mary Sue Coleman said in an interview with Chemical and Engineering News that the senate bill places a large burden of fixing the tax system on nonprofit universities.

“Congress seems eager to redirect these funds to the federal government’s coffers, with no clear benefit to America’s hardworking students and their families,” Coleman said.

President Donald Trump tweeted Monday his support for the bill.

“I am proud of the Rep. House & Senate for working so hard on cutting taxes {&reform.} We’re getting close! Now, how about ending the unfair & highly unpopular Indiv Mandate in OCare & reducing taxes even further? Cut top rate to 35% w/all of the of the rest going to middle income cuts?” Trump tweeted.

The House of Representatives will vote on the bill Thursday.

Reporter Emily DeLetter can be reached at 270-745-6011 or [email protected]. Follow her on Twitter at @emilydeletter.