Ways and Means tax proposals include measures that would affect higher education

Tax provisions relevant to higher education

Tax provisions relevant to higher education

The House Ways and Means Committee today began its markup of proposals that include tax incentives and other measures relevant for institutions involved in higher education. 

Background

House Ways and Means Committee Chairman Richard E. Neal (D-MA) released legislative tax proposals on Friday, September 10, 2021. Retirement tax savings proposals also were approved by the Ways and Means Committee on September 9, 2021.

These proposals are part of a larger legislative effort by the Ways and Means Committee to contribute to the “Build Back Better Act” currently moving through the House.

Read a September 2021 report [PDF 1.2 MB] prepared by KPMG LLP that describes these proposals [but does not include the tax increase proposals released by Chairman Neal on Monday, September 13, 2021].

Provisions relevant to higher education

The proposals primarily would provide tax incentives and tax benefits for various taxpayers, including a number of provisions relevant to higher education.

One provision that could affect certain private colleges and universities is a proposal that would phase out the excise tax on net investment income under section 4968 for institutions providing qualified aid awards to first-time, full-time undergraduate students. Under this proposal, an applicable educational institution could fully phase out its section 4968 excise tax liability by making qualified aid awards to first-time, full-time undergraduate students equal to or greater than 33% of aggregate tuition and fees from such students. 

Another provision would provide a tax credit to donors equal to 40% of contributions to certain certified public universities for research infrastructure. 

Other provisions that could affect higher education include proposals that would:

  • Make federal Pell grants fully excludible from gross income
  • Repeal the prohibition that excludes students convicted of a federal or state felony offense relating to the possession or distribution of a controlled substance from qualifying for the American Opportunity Tax Credit
  • Create a new refundable tax credit for certain higher educational institutions that incur costs during a tax year as part of a “qualified environmental justice program” that receives a credit dollar allocation

What’s next?

The Ways and Means Committee today began to mark up the proposals, with the markup to continue tomorrow, September 15, 2021.  The expectation is that the markup will begin with many of the tax incentives and benefits, with the bulk of the tax increase proposals to be considered tomorrow.  The current schedule anticipates that the Ways and Means Committee will conclude its markup of all portions of the Build Back Better Act under its jurisdiction by the end of the day of September 15, 2021.


For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

Carrie Garber Siegrist | +1 202 533 3056 | carriesiegrist@kpmg.com

 

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