Northeastern University Statement on Senate Tax Reform Proposal

Although we applaud the Senate for maintaining important tax benefits that help make college more accessible and affordable for our students and alumni, Northeastern University is opposed to the Senate’s Tax Cuts and Jobs Act. In its current form, the Senate tax bill would negatively impact our ability to fulfill our educational and research missions. As an institution, Northeastern supports tax reform that facilitates access to quality higher education, but as drafted, the Senate bill does not achieve that goal. 

In particular, we are deeply concerned about several provisions in the bill that undermine our efforts to make high quality higher education more accessible and affordable:

  1. Taxing Endowments: The proposed tax on endowments is harmful and unworkable. Colleges and universities establish endowments in order to ensure that they can fulfill their missions long into the future, and so that they can continue to provide the services they do—world class teaching and research, critical facilities, and, of course, student aid—in spite of market volatility. These endowments are made up of a complicated combination of assets, investments, and individual gifts—often with specific and legally restricted uses that extend long into the future. In many cases, these restricted gifts are themselves dedicated to student aid, and are instrumental in reducing the net cost of college. For example, Northeastern recently received an endowment gift for our Center for Veterans and Servicemembers. While the specific endowment tax proposal in this bill would not currently affect Northeastern, we oppose taxing the endowment assets of tax-exempt organizations.
  2. Repeal of the deduction for personal exemptions: The Senate bill also eliminates the ability of taxpayers to claim a deduction for college-age dependents. This means taxpayers would no longer be able to claim a deduction ($4,050 in 2017) from income for each dependent. Dependents are typically the taxpayer’s children who are 18 years old or younger. A taxpayer’s dependent children between the ages of 19 and 23 who are full-time college students also qualify for this deduction. This makes college more expensive for families and creates a disincentive for higher education.   
  3. Increasing the Standard Deduction: We applaud the omission of any changes to the charitable tax deduction. However, nearly doubling the standard deduction for individuals and couples is likely to reduce the number of taxpayers who itemize, which would reduce the value of the charitable deduction and lead to a reduction in donations to colleges and universities. Northeastern depends on donations from our alumni and others to enable the education we provide to our students. The Joint Committee on Taxation estimates that the number of charitable donations would decrease from 41 million donors and $241 billion under current rules to 9 million donors and roughly $146 billion. We should not be disincentivizing charitable giving.
  4. Repeal of advance refunding bonds: We are pleased that the Senate bill does not follow the House bill in eliminating private activity bonds, but we are troubled that both bills would eliminate advance refunding bonds. This would reduce Northeastern’s ability to refinance tax-exempt debt if lower interest rates become available. These bonds enable savings over decades, lowering costs for capital projects such as residence halls, classrooms, and research facilities.
  5. Changes to UBIT Rules: The bill also includes a variety of proposals that would negatively impact colleges’ and universities’ Unrelated Business Income Tax liability (UBIT). While we understand our obligations when it comes to taxes unrelated to our tax-exempt mission, changes to this structure, such as treating any income derived from research not made “publically available” as unrelated business income, requiring institutions to compute different categories of unrelated business income separately, and broadening the categories of income subject to UBIT rules, unnecessarily increase our regulatory burden and administrative costs, further drawing resources away from our core educational and research mission.

Because of these provisions that would make it harder for colleges and universities, including Northeastern, to offer high quality, accessible, and affordable higher education, we strongly oppose this bill in its current form.