The new Republican tax bill may negatively impact Brandeis and higher education as a whole, but “to the relief of many,” certain provisions which could hinder the accessibility of education—including a tax on graduate student tuition waivers—were absent from the final version, President Ron Liebowitz expressed in an email to the community on Friday, Dec. 22.
President Donald Trump signed the $1.5 trillion tax bill into law on Dec. 22, the largest revision of the tax code in 30 years. After much concern during the development of the bill, the final version eliminates, or scales back, many of the provisions which threatened to impact Brandeis. A proposed tax on graduate tuition waivers which appeared in the House bill passed on Nov. 16 was not present in the Senate or final versions of the bill. Graduate students qualify for tax waivers by working on campus (as teaching assistants or in university labs), but the House provision would treat these waivers as taxable income. With augmented taxable income, the bill could have pushed graduate students into a higher tax bracket.
When the House passed their bill, Provost Lisa Lynch sent a campus-wide email encouraging community members to contact their representatives about the bill, warning of negative consequences such as the potential to “[increase] an individual student’s income tax by thousands of dollars.” The Graduate Student Association was also active in opposing the tax bill, organizing phone banks and attending rallies in Boston.
The House bill included the same tax on employee tuition benefits, but it was likewise excluded from the final version. “Employers—including Brandeis—can continue to offer employee tuition benefits on a tax-free basis,” said Liebowitz. These benefits allow for university employees to take courses on campus and for employees’ children to attend Brandeis at a reduced rate. Graduate students can also put tuition benefits from their employers towards their studies at Brandeis.
The final bill maintains the student loan interest deduction, which allows students to receive a tax deduction on loans they take out for education. The House bill had eliminated this deduction.
Another portion of the bill has to do with bonds that Brandeis uses to finance campus projects. Previous versions of the bill eliminated Brandeis’ ability to issue tax-free bonds. The final bill maintains this ability but eliminates some “money saving procedures,” that allowed the university to avoid the risk of fluctuating interest rates (which Brandeis put pay on its bonds).
“Nonprofits like Brandeis work with government agencies to issue tax-free bonds to support capital improvements, such as our new residence hall, decreasing our borrowing costs,” said Liebowitz. Companies can issue bonds for investors to purchase, essentially loaning the company money. Brandeis took out a $50 million bond to finance construction of the new residence hall, though $10 million will go towards deferred maintenance.
The item in the final tax bill which has caused the greatest upset in the world of higher education is less urgent to Brandeis. The bill includes a 1.4 percent tax on university endowments of at least $500,000 per student, but Brandeis’ endowment equates to $154,000 per student, said Stew Uretsky, the SVP for finance and administration at a presentation on university finances in November.
The university’s endowment would have to approximately triple in size to reach the threshold, said Liebowitz, though he commented that “many significant institutions of higher learning will be hit with this tax, which we think is counterproductive and wrong, because it harms institutions’ ability to invest in vital programs and student financial aid.”
Administrators of many top universities and the Association of American Universities have made similar arguments in speaking out against this provision. Lynch advised in her Nov. 17 email that the provision could “become a binding constraint for our university in the future.”
President Liebowitz signed on to an AAU letter in early November condemning the legislation’s impact on higher education and also sent his own letter to the Massachusetts Congressional delegation and Congressional leaders, according to Julie Jette, director of media relations.
Liebowitz also probed the possibility for the tax bill to affect donations to Brandeis. The changes to available tax deductions may reduce the incentive to make charitable deductions, and thus to donate to nonprofits like universities. Liebowitz further noted the “portion of an estate that can be passed down tax-free was expanded from $5.6 million to $11.2 million per individual,” but it is difficult to estimate what impact this will have on “donors’ estate planning.”