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- A new measure in the Senate GOP tax bill would have exempted universities that do not take federal funding from a new excise tax on college endowments.
- Democrats attacked the provision as a special interest carve out because it appeared to only benefit a single, conservative college. However, the final version of the bill does not appear to benefit the college.
- Republicans said the provision was a sensible change because schools that do not take federal funds should not be subject to a new federal tax.
- The provision was ultimately not included in the bill.
Democrats on Friday slammed a provision in the latest version of the GOP tax bill that they said appeared to only benefit a single, conservative college. Later, four Republicans joined them in preventing the measure from being included in the bill that passed the Senate overnight on Saturday.
The addition would have exempted any college or university that declines federal funding under Title IV from a new excise tax on university endowments. In the original version of the Republican bill, the Tax Cuts and Jobs Act (TCJA), any university with a large endowment would have been subject to a new 1.4% excise tax.
Given that assumption, Democrats said only one college, Hillsdale College in Michigan, had an endowment large enough to qualify for the excise tax and also refuses Title IV funding. Sen. Pat Toomey, who sponsored the language, acknowledged it could benefit the college.
But another last-minute change in the TCJA would have prevented Hillsdale from getting the benefit – for now. In the original Senate bill, the excise tax applied to schools with endowments larger than $250,000 per student. A last-minute change increased that threshold to $500,000 per student.
Hillsdale only has an endowment of just over $360,000 per student, based on most recent enrollment and endowment reports.
But the backlash to the provision spurred the passage of a Democratic amendment that eliminated the language potentially benefitting Hillsdale. The amendment to strike the language passed 52-48, with four Republicans voting for the amendment – Sens. Susan Collins, Lisa Murkowski, Deb Fischer, and John Kennedy.
Hillsdale College is well known for its conservative teaching and ideology. The school has also been subject to some controversy around its racial makeup. In 2013, Hillsdale President Larry Arnn said in a hearing before the Michigan legislature that the Michigan Department of Education sent a letter about the school’s diversity because the college “didn’t have enough dark ones.” Arnn later apologized.
Republicans defended the provision as reasonable since institutions that do not take federal funds should not be subject to new federal taxes.
Democrats said that the measure is simply a handout designed to help a school to which Republicans have connections, including Education Secretary Betsy DeVos.