Representative Tom Reed (R-NY) introduced the Reducing Excessive Debt and Unfair Costs of Education (REDUCE) Act (H.R. 5916), a bill would create a mandatory spending requirement for certain private college and university endowments.

The Tax Cuts and Jobs Act, signed into law last December by U.S. President Donald Trump, included a 1.4 percent excise tax on private colleges and universities with:

• More than 500 tuition-paying students, and
• An endowment per student ratio of $500,000 or more.

If enacted, H.R. 5916 would replace the excise tax with a requirement that these same private institutions make grants to working-family students (defined as undergraduates with household incomes at or below 600 percent of the federal poverty level) in an amount equal to 25 percent of the average net investment income earned in a particular year. Institutions that failed to meet this requirement would be subject to penalty excise taxes. In addition to the spending requirement, H.R. 5966 would:

• limit the charitable deduction to $5,000 for any gift from an individual that is restricted to any purpose other than scholarships,
• provide an enhanced deduction for unrestricted gifts and gifts restricted for scholarships, and
• require additional reporting on costs and spending related to variety of activities.

CASE strongly opposes H.R. 5916. The bill currently has no cosponsors. We will continue to monitor the bill and provide updates on any developments. CASE continues to support H.R. 5220, the Don't Tax Higher Education Act, a bill that would repeal the current 1.4 percent endowment excise tax.

For a complete summary of the REDUCE Act, visit the CASE Advocacy Action Center and join the CASE Advocacy Network.

This article is from the June 2018 BriefCASE issue.