The House Ways and Means Committee on May 13 amended and approved tax reconciliation legislation (H. Con.Res.14, PDF) by a party-line vote of 26-19 (PDF). This legislation complies with reconciliation instructions given to the committee to report legislation that increases the deficit by not more than $4.5 trillion for the period of fiscal years 2025 through 2034 [refer to Washington Highlights, April 11]. The legislation the committee considered proposes several new tax policies, including additional taxation for higher education institutions and other nonprofits.
The bill would expand the existing tax on higher education institutions with an endowment by establishing a tiered system based on endowment size per student. The bill also includes language that would exclude certain international students from the endowment tax calculation, increasing the number of universities that are impacted by the endowment tax. In his opening statement, committee chair Jason Smith (R-Mo.) detailed his approach to the endowment tax, remarking, “This bill also means the end of Washington special treatment of wealthy elites. Exclusive universities with the largest endowments, many of whom have failed to protect their Jewish students, will pay an endowment tax as high as the corporate tax rate.” Democrats offered several amendments to alleviate the impact of the endowment tax, including an amendment from Rep. Terri Sewell (D-Ala.) that would eliminate the endowment tax (PDF) and an amendment from Rep. Gwen Moore (D-Wis.) to exempt graduate school programs from the endowment tax (PDF). However, all Democrat-led amendments were withdrawn or failed along party-lines.
In addition to the endowment tax, the bill includes provisions to increase taxes on employees of tax-exempt organizations, expand unrelated business taxable income, and provide authority to the administration to eliminate tax-exempt status of organizations they deem as “terrorist supporting.” The legislation also would increase charitable deductions for non-itemizers, a provision the AAMC previously has supported [refer to Washington Highlights, Dec. 6, 2024].
The House Budget Committee packaged multiple committees’ reconciliation bills into one final bill as part of a May 16 markup. However, the legislation was rejected by a 16-21 vote, with five Republicans joining Democrats in opposition. House Republicans are expected to continue negotiations before the Budget Committee revisits the measure.