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AAMC Joins Higher Ed Community Letter on Tax Extenders

December 12, 2019

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Brett Roude, Legislative Analyst
Matthew Shick, Sr. Director, Gov't Relations & Regulatory Affairs

The AAMC Dec. 9 joined the higher education community in urging Congressional leaders to pass a year-end tax package that includes fixes to the Tax Cuts and Jobs Act of 2017 (TCJA, P.L. 115-97).

The letter encourages tax authorizers to pass the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act, H.R. 1994),  which contains provisions intended to correct changes that were made to the “kiddie tax” in TCJA [see Washington Highlights, June 28]. The House May 23 passed the SECURE Act by a vote of 417-3.

The TCJA inadvertently changed how nontuition scholarships and grants (such as room and board) are taxed by using the rates for trusts and estates, which are substantially higher and compressed compared to marginal tax rates. The letter emphasizes, “These changes to the kiddie tax sharply increased the tax levied on the portion of scholarships set aside for expenses such as room and board that colleges and universities award to students from families of little or modest means.”

The letter also encourages Congressional leaders to repeal the “parking tax,” a provision of the TCJA that made transportation fringe benefits and parking facilities taxable as unrelated business income. Under this tax, nonprofit tax-exempt universities and hospitals now pay a tax on qualified transportation benefits, including in cities where employers are required by law to offer tax-free public transportation benefits to their employees.

Finally, the letter also urges members to repeal a provision in the TCJA that included a new net investment income tax of 1.4% levied on certain private colleges and universities, known as the “endowment tax.” Similar to private foundations, under the “endowment tax,” certain private schools are subject to taxes on interest, dividends, and rental income, including on any gifts to an institution, student loan interest, and room and board. The AAMC Sept. 30 joined higher education community comments urging the Department of Treasury to delay implementation of the “endowment tax” [see Washington Highlights, Oct. 4]. 

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