The United States has an approved federal budget for FY20 – and alongside it, a tax amendment delivered several legislative victories for colleges, universities, and students.
Notable Tax Provisions
The tax amendment that passed with the budget bill included many of the items that NACUBO has been advocating for in recent years. These provisions include:
- Repeal of the parking tax: This tax was levied under the 2017 Tax Cuts and Jobs Act (TCJA) on the parking and transportation benefits all nonprofit organizations, including colleges and universities, offer to their employees.
- Repeal of the “kiddie” tax: This glitch in the TCJA caused a child’s unearned income over $2,100 to subsequently be taxed at the trusts and estates rate instead of their parents’ top marginal tax rate, and inadvertently included taxable scholarship amounts. The tax fix for these scholarship recipients, as well as other unintentionally impacted communities, was included in a piece of retirement legislation, the SECURE Act, which also passed as part of the appropriations package.
- Retroactive extension of 179D: This credit, which expired in 2017, assists public colleges in making energy efficient enhancements to buildings and in undertaking energy efficient new construction projects.
- Repeal of the so-called “Cadillac” tax: This excise tax, enacted under the Affordable Care Act, would have resulted in significant costs for higher education employers related to the health insurance plans they offer to employees.
- Retroactive reinstatement and extension of the above-the-line tuition deduction: The bill also reinstated a deduction for eligible taxpayers of up to $4,000 for higher education expenses.
The budget bill itself, which funds the federal government and agencies, also included positive developments for education. Notable funding changes include:
Education Funding: $72.9 billion overall for the Department of Education, a 1.8 percent, or $1.3 billion, increase
- $22.48 billion for the Pell Grant Program with an increase in the maximum award to $6,345. This overall funding level is equal to the previous fiscal year; the increase in the award amount will draw from the Pell reserve.
- $865 million for the Supplemental Education Opportunity Grant (SEOG) Program, $1.2 billion for the Federal Work-Study Program, and $1.1 billion for the TRIO Program, a joint increase of about 3 percent.
- $365 million for the GEAR UP Program, a 1 percent increase.
- $76.2 million for international education programs, a 6 percent increase.
- A provision that will allow individuals to draw from 529 savings accounts for student loan repayment.
Science, Research and Arts Funding
- $8.28 billion to the National Science Foundation, a 2.5 percent increase.
- $7.1 billion to the National Aeronautics and Space Administration (NASA), a 3.4 percent increase.
- $3.4 billion to the National Oceanic and Atmospheric Administration (NOAA), a 37 percent decrease (much of which is due to a planned ramp-down of several NOAA programs).
- $2.6 billion for Department of Defense Science and Technology Basic Research 6.1 accounts, a 2.9 percent increase, and $16.07 billion for 6.1-6.3 Science and Technology accounts combined, a 0.7 percent increase.
- $3.46 billion for the Defense Advanced Research Projects Agency (DARPA), a 0.8 percent increase.
- $7 billion to the Department of Energy’s Office of Science, a 6.3 percent increase.
- $425 million to the Department of Energy’s ARPA-E program, a 16.1 percent increase.
- $716 million to the Environmental Protection Agency’s Office of Science and Technology, a 1.4 percent increase.
- $41.7 billion for the National Institutes of Health, a 6.6 percent increase.
- $235 million for USAID’s higher education programs, flat funding with FY19.
- $162.3 million for the National Endowment for the Humanities, a 4.7 percent increase.
Lawmakers also included several directives within the bill that could potentially impact higher education. They made requests to the Department of Education to make clear foreign gift reporting requirements for colleges and universities under Section 117 of the Higher Education Act and for quick implementation of the ED/IRS data-sharing agreement as passed in the FUTURE Act. Congress also asked ED for an evaluation of its recently implemented program that restores Pell eligibility to incarcerated individuals.
The appropriations package also contained a seven-year reauthorization of the Terrorism Risk Insurance Act, which NACUBO and other higher education associations advocated for.