On Thursday, November 16, the U.S. House approved a tax reform bill (H.R. 1) that will have an impact on individuals’ ability to make tax-deductible charitable contributions—which are essential for arts organizations. The bill will also seriously affect Penn State as a whole, especially graduate students, and University employees who want to take advantage of the tuition discount. President Barron recently released a statement about the possible serious and long-term consequences of the proposed reforms.
The Senate is currently working on a separate bill, anticipated to be passed by early December, which will set up a negotiation between the House and Senate. If you have an opinion about these changes to the tax code, Congress needs to hear from you. Read on for more details, or visit the Amercian Council on Education Action Center and Americans for the Arts websites to contact your legislators, if you wish to do so. If you are a University employee, it’s important that you provide private e-mail and home addresses, rather than a University business address.
Impact on charitable giving, including arts and education
According to Americans for the Arts (ACA), H.R. 1 contains the following provisions:
- Overwhelming majority of taxpayers would no longer have access to make tax-deductible charitable contributions. That charitable tax deduction would be limited to the wealthiest 5 percent of taxpayers.
- Entertainment, amusement, recreation, and membership dues expenses related to a business purpose or meeting would be repealed.
- Doubling exemptions and ultimate full repeal of the estate tax, which has historically generated major gifts to charities.
- Elimination of the teacher supplies and instructional materials deduction.
- Repeal of options to treat musical compositions and copyrights in musical works as capital assets.
- Repeal of the historic tax credit.
Americans for the Arts notes that the latest analysis of the House bill by the nonpartisan Tax Policy Center estimates that charities, including nonprofit arts organizations, could see a staggering loss of up to $20 billion annually.
Tax reform happens once in a generation. For more than 100 years, the U.S. tax code has encouraged charity, benefiting the millions of Americans who access services provided by nonprofit organizations. If you want to speak out against this bill, visit the Americans for the Arts website, where you will find information on how to contact your legislators.
Impact on higher education
According to the American Council on Education (ACE), the bill will:
- Substantially reduce tax benefits and increase costs for college students by $65 billion over the next decade by repealing the Lifetime Learning Credit (LLC).
- Repeal the student loan interest deduction that provides a tax credit of up to $2,500, helping to reduce student debt levels and making a college education more affordable.
- Repeal Sec. 117 (d)(5), which provides graduate student teaching and research assistants a tax exemption for tuition waivers.
In addition, this bill would tax the Penn State tuition discount for faculty, staff, and their dependents. The dollar amount of the 75 percent discount would be taxed as income, in effect almost doubling the cost in tuition for a freshman enrolled this year.
The ACE’s Action Center webpage allows individuals to reach out to their members of Congress specifically regarding the education tax benefits. The site will automatically direct the user to the appropriate members of the House and Senate based upon the user’s zip code, and there is a drafted message already included, but it can be modified or a unique message substituted.