A tax reform plan released Thursday by Senate Republicans omits several of the provisions contained in its House counterpart that would affect students’ ability to afford college.
The Senate legislation — the text of which has not yet been released — would not eliminate the Lifetime Learning Credit, student loan interest and tuition deductions, employer educational assistance or qualified tuition reductions, as the House’s version of the Tax Cuts and Jobs Act (H.R. 1) would.
Concerns over charitable deductions, state revenues
But the Senate bill does have two provisions that could have serious impacts on community colleges. Like the House legislation, the Senate plan would double the standard deduction, thereby greatly reducing the number of people who itemize deductions on their tax returns. Since there is no tax benefit to charitable contributions to those who do not itemize, many fear that this change will have an adverse effect on charitable giving, including gifts to community colleges.
Neither bill contains a “universal” deduction for charitable contributions that would be available to non-itemizers, a provision advocated by the charitable giving community.
State and local taxes, including property taxes, would no longer be deductible under the Senate bill. The House legislation eliminates the deduction for state and local income and sales taxes, but would keep a deduction for property taxes up to $10,000. Without this deduction, states may find it more difficult politically to raise sufficient revenue to adequately support public institutions, such as community colleges.
Lacking on tax credit
The Senate plan, like its House counterpart, also does not contain a fix to the American Opportunity Tax Credit (AOTC) long sought by community colleges. Currently, the AOTC penalizes Pell Grant recipients by deducting the amount of grants received from the educational expenses that determine a student’s AOTC amount. As a result, many of the neediest community college students do not qualify for an AOTC at all. The American Association of Community Colleges continues to advocate for a remedy to this situation.
The Senate Committee on Finance is expected to begin consideration of the Tax Cuts and Jobs Act on November 13. The full Senate will likely take up the legislation after Thanksgiving. The House Committee on Ways and Means has approved its version of the bill, with the full House expected to take up H.R. 1 the week of November 13.