Federal tax policy is crucial in facilitating both student access and institutional success. Tax benefits that ease the burden of financing a college education are vital to ensuring progress toward U.S. educational attainment goals. As nonprofit institutions that increasingly rely on philanthropic funding sources, state colleges and universities’ public purpose missions are greatly facilitated by federal tax policies that recognize their unique role. AASCU monitors and advocates for sound student- and institution-related federal tax policies that promote student access and success.
Tax Policy-Policy Advisories
Public Policy Agenda
AASCU Public Policy Agenda Priorities Related to Tax Policy
Student-Related Tax Policy
- Support the extension or permanency of the American Opportunity Tax Credit (AOTC) as established in the American Recovery and Reinvestment Act in order to assist needy students. AOTC expands the HOPE tuition tax credit for 2009 and 2010, increasing it from $1,800 to $2,500 for those two years. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials. Up to a maximum of 40 percent of the amount of the credit is “refundable.”
- Advocate for a provision in AOTC that exempts Pell Grants from being applied toward tuition and fees used to determine the tax credit, in order for low income individuals to take full advantage of the credit.
- Support the establishment of a federal tax exemption for loan forgiveness proceeds for borrowers in the Income Contingent Repayment and Income Based Repayment programs.
- Support the reinstatement of the above-the-line tax deduction for up to $4,000 in tuition and fee expenses, which expired in 2009.
- Continue support for a refundable tax credit for student loan interest paid by low-income borrowers.
- Oppose any proposed modification of the Federal Insurance Contributions Act (FICA) exemption for students working on college and university campuses.
Institution-Related Tax Policy
- Support the reinstatement and permanency of the Individual Retirement Account (IRA) Charitable Rollover, which expired in 2009, permitting individuals 70½ and older to transfer up to $100,000 from an IRA tax-free to charitable and other nonprofit organizations. This will help colleges and universities generate new or increased contributions to maintain benefits to students, particularly financial aid.
- Oppose any proposal to restrict deductions for noncash gifts to the amount paid for such property, rather than the current standard of fair market value.
- Support legislation that would allow taxpayers who do not itemize deductions on their federal income tax returns to claim a deduction for charitable contributions.
- Oppose a permanent extension of the federal estate tax repeal, and call on Congress to instead consider estate tax reforms that balance the needs of farmers and small business owners with those of states and charitable organizations.
- Support the active enforcement of existing laws and regulations governing the tax-exempt status of nonprofit and charitable organizations over the expansion of these laws and regulations. Specifically, AASCU supports current law that places the burden of proof for reasonable compensation under the intermediate sanctions law of the Internal Revenue Service.
- Oppose any attempt to repeal the existing exemption of tuition remission for college and university employees.
- Oppose any proposal to increase the federal tax liability of public college and university employees by changing the treatment of their contributions to state retirement plans.
- Oppose IRS attempts to create standardized definitions for early or normal retirement age with regard to governmental plans; rather, IRS should defer to applicable state or local laws, regulations and policies governing the plan.
- Oppose any proposal to make the Medicare Payroll Tax mandatory for all public sector employees, regardless of hire date or participation in another insurance plan.
- Oppose any proposal to restrict or eliminate the ability of state and local governments to advance refund their tax exempt bonds (i.e. refinancing of outstanding bonds before they reach their call date).
- Oppose any legislation mandating institutions of higher education to spend down their endowment assets.