Controversial Tax Reform Legislation Passes in the Senate

Controversial Tax Reform Legislation Passes in the Senate – Last night, just before 2AM on Saturday, December 2, the Senate passed their version of major tax reform legislation 51-49 with Senator Bob Corker (R-TN) the only Republican not voting for the bill.  The House passed a different version of tax reform a few weeks ago.  The Senate bill, which included about $1.4 trillion in tax cuts, would lower the corporate rate to 20% from 35%, reshape international business tax rules and temporarily lower individual taxes. It also contained other provisions, including opening the Arctic National Wildlife Refuge to oil drilling and repealing the mandate that individuals purchase health insurance, which would adversely impact the 2010 Affordable Care Act. But some objectives, such as repealing the alternative minimum tax, fell by the wayside in the last minute amendment process.  The Senate bill can be read here. The House and Senate bills differ and will have to be resolved in conference.  Congressional leadership is hopeful they can resolve their differences, have a final compromise bill passed (again) in identical form by both Houses of Congress, and on the President’s desk for signature by Christmas.

There are number of issues in these bills that are problematic for institutions of higher education and/or students.  For example, the House bill proposes to eliminate a section from the existing tax code which allows colleges and universities to provide their employees and their spouses or dependents with tuition reductions for undergraduate education that are excluded from taxable income. This same section of the current code also allows colleges and universities to lower the cost of graduate education for their students who are serving as teaching or research assistants as part of their academic training without the tuition reductions being treated as taxable income.  The House bill also proposes to eliminate the allowance for employers to provide tuition reimbursement to employees, tax free which encourages the private sector’s investment in the advancement of its employees and encouraging partnerships with colleges and universities.  

The Senate bill is not as problematic to the higher education community as the House bill as it retains the student benefits the House version would eliminate including the House’s provision to tax tuition waivers for graduate students. The Senate bill creates a new excise tax on endowments at certain private institutions. Senator Tomey had included an amendment that provided a special exemption to this excise tax for a single institution — Hillsdale College in Michigan. Towards the end of the debate, with Democrats objecting to this special provision, Senator Merkely offered an amendment to remove this exemption which was adopted by the vote of 52 to 48. The Senate bill does contain a number of provisions that would negatively impact students and institutions by reducing charitable giving, increasing costs and the regulatory burden on many colleges and universities, reducing the ability to access tax-exempt bonds for capital projects, and threatening state investment in higher education. 

To address concerns of Senator Susan Collins (R-ME), the Senate bill will allow taxpayers to deduct up to $10,000 in state and local property taxes paid and allow lower-income individuals to claim the medical expense deduction.  In an effort to get Senator Jeff Flake of Arizona on board, leaders agreed to work on providing “fair and permanent protections” for the beneficiaries of an Obama-era effort that protects young undocumented immigrants from deportation, known as Deferred Action for Childhood Arrivals, or DACA.

The Association of Public & Land Grant Universities (APLU) has highlighted many of these issues in their analysis available here.  The Association of American Universities (AAU) has also identified shortcomings of the House and Senate proposals. The American Council on Education (ACE) also released a letter commenting on the Senate bill representing the interests of 46 different higher education associations.  Additional information will be available in the coming days as the House and Senate prepare to try and reconcile their versions of their tax reform bills.

On November 15, about 40 different scientific societies and associations co-signed a letter expressing concerns about the tax reform legislation.  The lettersigned by the American Association for the Advancement of Science, the National Association of Marine Laboratories, the Consortium for Ocean Leadership, the American Meteorological Society, the American Geophysical Union and others said, “…While the goal of the House tax reform plan is to help grow the U.S. economy, the language to repeal the student loan interest deduction, graduate student tuition waivers, the Hope Scholarship Credit, the Lifetime Learning Credit and educational assistance programs ultimately will have the opposite effect. By making advanced education less affordable, it is likely to drive some students away from seeking higher education. Because a majority of graduate students are in the key areas of science, technology, engineering, and math (STEM), these provisions will have an outsized impact in the sciences…” 

Funding the Federal Government After December 8 -- As for funding the Federal Government past Dec 8 when the current continuing resolution expires, Congress and the White House remain locked in discussions that have centered around increasing the statutory spending caps for defense and non-defense discretionary programs.  The White House and Republicans want to substantially increase defense spending while Democrats are pushing for increases in non-defense spending and a legislative solution to the DACA issue that would allow so-called “dreamers” to remain in the U.S. These negotiations have yet to result in an agreement.  With the December 8 deadline looming, Congress will have to extend the continuing resolution or the Nation faces a Federal Government shutdown.  Currently in the House there are plans to pass an extension to the current continuing resolution until December 22 and then a second one running until mid-January.  This would leave the Congress more time to complete negotiations on adjusting the overall spending caps and resolving differences on the pending appropriations bills.  Democrats may not support the new continuing resolution as they are advocating for a legislative package that increases domestic spending, reauthorizes the Children’s Health Insurance Program and the DACA immigration issue.  While House Republicans can pass the CR with their majority in the House, the CR will need 60 votes to pass in the Senate.  Whether a sufficient number of Senate Democrats would support the CR, and thus provide the necessary 60 votes, remains to be seen.

Senate Commerce Committee Holds Confirmation Hearing for Barry Myers to be Next NOAA Administrator – On November 29, the Senate Commerce, Science, and Transportation Committee held a confirmation hearing for Mr. Barry Lee Myers to be the next NOAA Administrator.  Mr. Myers, in his opening statement and in subsequent exchanges with Senators on the Committee, affirmed his strong support for NOAA and its missions in weather, climate, research, fisheries, the oceans, coasts and Great Lakes, and satellites.  Going into the hearing, there were a number of concerns about Mr. Myers and his views on climate change, scientific research, potential conflicts of interests, and his past support for a controversial bill sponsored by former Senator Santorum from Pennsylvania that sought to limit certain forecasting activities of the National Weather Service.  

Mr. Myers gave strong assurances to the Committee that: he would divest completely his financial relationships with Accuweather and related businesses; climate change was in fact real and he agreed with Senator Markey when asked if such change is precipitated by human actions; he appreciates and supports the conduct of scientific research and the use of the peer review process by the scientific community to validate science; he supports NOAA’s scientific integrity policy developed by the prior Administration and would not limit agency scientists from communicating the results of their research in accord with established scientific review practices.  Sen. Tammy Duckworth (D-Ill.) pressed Mr. Myers on whether or not he agrees that climate change presents a serious challenge for the military, and that the data gathered by NOAA signal that preparation is necessary. Mr. Myers agreed that climate data suggest that the military should prepare for climate change. He cited the work of Defense Secretary James Mattis to address climate change risks.

When asked if he supported the budget reductions proposed by the Administration in NOAA climate research and ocean and coastal programs, Mr. Myers referred to the testimony of Secretary of Commerce Wilbur Ross in which the Secretary acknowledged the value of these and other programs but that with limited funds, difficult choices had to be made.  Mr. Myers did pledge to manage the agency and its budget consistent with the resources and direction provided by the Congress.  Mr. Myers’ testimony and an archived video recording of the hearing can be found here

DOE Invites Proposals for new Energy Frontier Research Centers – DOE has released a new funding opportunity for Energy Frontier Research Centers (EFRCs) to accelerate transformative scientific advances for the most challenging topics in materials sciences, chemical sciences, geosciences, and biosciences. Research supported by this initiative will provide fundamental understanding to enable future advances in energy production and use.  The EFRC program began in 2009.  DOE currently funds 36 EFRCs, 32 of which were selected for four-year funding in 2014. With support for those centers set to expire in July 2018, DOE has announced a competition for another round of funding. The competition will be open to proposals both from existing EFRCs seeking renewal of support and from institutions seeking to establish new EFRCs under the program. Universities, national laboratories, nonprofit organizations, and private firms are eligible to compete and are encouraged to form multi-disciplinary research teams that may include partnerships with other institutions. DOE will emphasize emerging science priorities that have been highlighted in recent workshops, including quantum materials, catalysis science, synthesis science, instrumentation science, next-generation energy storage, future nuclear energy, and energy-water issues. Awards for each selected center are expected to range from $2 million to $4 million per year for a total of four fiscal years. Total funding for the EFRC program, pending Congressional appropriations, is expected to be about $99 million per year for the four-year awards. The full Funding Opportunity Announcement (FOA) is available here. Additional information about the EFRCs can be found here.

Universities Report Increased Federal R&D Funding after 4-year Decline -- Federal funding of higher education research and development increased in both current and constant dollars for the first time in 5 years, according to data from the Higher Education Research and Development (HERD) Survey by the National Center for Science and Engineering Statistics (NCSES) within the National Science Foundation (NSF). When adjusted for inflation, federal funding for higher education R&D increased by 1.4% between FY 2015 and FY 2016.  Overall, universities reported current dollar R&D expenditures of $72.0 billion in FY 2016, a 4.8% increase from the FY 2015 total of $68.6 billion.  Download the NSF’s new report here.