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Policy & Advocacy

Tax and Finance Issues

Tax and finance related policy issues broadly impact universities.  Tax benefits that support students and families to make higher education more affordable, incentives to promote charitable giving that supports institutions’ educational and research missions, bonds to facilitate expansion and improvement of university infrastructure, and policies that impact universities as tax-exempt entities and employers, are some of the issues in this area on which APLU advocates.

Issues

  • Higher Education Tax Benefits
    In 2012, the U.S. Government Accountability Office reviewed the extent to which taxpayers appropriately utilize the numerous tax credits and deductions related to higher education. Unsurprisingly, the GAO found that the interaction between the myriad of benefits, including the American Opportunity Tax Credit, tuition and fees deduction, Lifetime Learning Credit, and Hope Scholarship Credit, among others, often leads confusion.  The result is that many students and families are not fully taking advantage of the benefits available to them. You can view the GAO report here.

    APLU strongly supports simplifying and consolidating higher education tax benefits in order to reduce taxpayer confusion and focus attention on those providing the maximum benefit.  A number of bills in the last congress have sought to accomplish this including the Student and Family Tax Simplification Act, H.R. 3393, offered by Representatives Dianne Black (R-TN) and Danny Davis (D-IL) and a comprehensive tax reform bill introduced by then Ways and Means Committee Chairman Dave Camp (R-MI). H.R. 1. The American Opportunity Tax Credit Act, introduced by Representative Lloyd Doggett (D-TX) in the 114th Congress and President Obama’s budget request for Fiscal Year 2016 also include tax proposals which would consolidate and eliminate higher education tax benefits.

    While all proposals include some positive aspects with the exception of the Doggett bill, all the other proposals would eliminate the Lifetime Learning Credit (LLC) without providing a new benefit for graduate and non-traditional students who rely on the LLC for education beyond the four years in which students are eligible for the AOTC. You can view a higher education association letter of support for the American Opportunity Tax Credit Act here.

    APLU supports consolidation of higher education tax benefits but in a way that does not disadvantage graduate and nontraditional students who may take longer than four years to graduate.
  • Charitable Giving Incentives
    Tax incentives for charitable giving are important tools to encourage taxpayers to donate to non-profit entities, including universities.  Since the Great Recession and the corresponding reduction of state funding for public higher education, public universities have had to increasingly rely on other sources, including charitable giving, to support their educational and research missions.

    The tax deduction for charitable giving, which allows taxpayers to reduce their taxable income, by the amount of the donation, is an essential incentive to motivate donors. The IRA charitable rollover is another essential tool.

    This provision in the tax code permits individuals age 70½ and older to donate up to $100,000 from their Individual Retirement Accounts (IRAs) and Roth IRAs to public charities, including colleges and universities, without having to count the distributions as taxable income. Unfortunately, the rollover is not a permanent feature of the tax code and has required reauthorization on an annual basis, which Congress often does only days before expiration.  The result is that donors often cannot plan their charitable giving accordingly, significantly reducing the impact the rollover might have if greater certainty existed as to its availability.  APLU strongly supports making the IRA charitable rollover permanent.