Tax reform proposals making their way through Congress would harm the financial security of our students and their families and threaten UC’s ability to carry out its research, education, health care, and public service missions.
If passed, the House of Representatives (H.R. 1, the Tax Cuts and Jobs Act) and Senate (Chairman’s Mark) tax reform proposals would make higher education more expensive and less accessible, with a negative financial impact on the university and our students, faculty, staff and retirees.
UC is especially concerned about the following provisions:
• Higher Education Tax Benefits
UC estimates that at least 30 percent of our students and their families rely heavily on the current law’s tax provisions – this includes everything from the Lifetime Learning Credit and the Hope Scholarship to the deduction for Qualified Tuition and Related Fees and the Student Loan Interest Deduction, the latter of which is a tax incentive available to help students pay their loan costs.
Qualified Tuition Reductions, which make it possible to provide graduate students with a non-taxable tuition reduction while they work as research and teaching assistants, would also be repealed. In 2015-16, more than 23,000 UC graduate students earned over $250 million in tuition benefits as part of Qualified Tuition Reductions. The House bill would treat tuition remission amounts provided by UC to graduate students as taxable income, thus increasing the tax liability for many students and making it more difficult for them to afford their graduate programs.
UC is pleased that the Senate proposal protects many of these critical tax benefits and urges Congress to reject the higher education tax-benefit provisions in H.R. 1 as the legislative process moves forward.
• Charitable Giving
Charitable contributions are important to all aspects of UC’s operations, including helping to ensure that UC students receive the institutional financial support they need.
UC is concerned that the House and Senate tax reform bills would negatively impact charitable giving. UC supports a universal, above-the-line deduction for charitable giving that allows tax payers to subtract charitable donations from their income, regardless of whether they file itemized returns. The changes included in both proposals would adversely impact this support, with the potential to drastically reduce charitable giving to UC.
• Tax-Exempt Bond Financing
The House legislation would terminate private activity bonds and advance refunding bonds, which are important tools used by the university to finance capital projects. The repeal of these tax-exempt bond financing options would hinder UC’s ability to make necessary investments in the university’s facilities and infrastructure, including academic and medical facilities, student housing and other projects across the system. UC is pleased that the Senate bill protects private activity bonds, but UC opposes the repeal of advance refunding bonds, which is included in the Senate bill.
UC urges Congress to not include changes to tax-exempt bond financing mechanisms as part of tax reform legislation.
• Individual Mandate Repeal
UC opposes the repeal of the Affordable Care Act’s (ACA) individual coverage mandate requirement for individuals to purchase health insurance, which is included in the Senate’s proposal.
Passage of the ACA has allowed as many as 1.5 million Californians, who otherwise would be ineligible for health insurance, to purchase private insurance through California’s state health exchange. If the individual mandate is repealed, many Californians dependent upon exchange health plans would likely see their premiums increase.
UC’s complete analysis of the House and Senate proposals, including other provisions of concern to the university, is available here.