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The Higher Ed Workplace Blog

Congress Looks to Tackle Tax Reform

The White House and congressional Republicans began the year with an aggressive agenda that included two planned budget reconciliation votes — one involving reform of the Affordable Care Act (ACA) and the other involving reform of the tax code. With ACA reform efforts stalled for now, Congress has pivoted its focus to tax reform.

Tax Plan Iterations and Timing

President Trump initially shared with reporters a high-level overview of his tax plan this past April. From there, rather than working separately as they did with ACA repeal efforts, representatives from the White House, Republican congressional leadership and tax committee chairs (known as the “Big Six”) began working together to hash out a tax reform plan. Specifically, the “Big Six” are House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee Chairman Kevin Brady (R-TX).

In July, the Big Six issued a brief statement on the direction they believe Congress should take with tax reform legislation. Then on September 27, they released their “Unified Framework for Fixing Our Broken Tax Code,” along with a one-page summary. The nine-page document does not give many specifics, but does move the process forward and reveals the common ground that has been found as the House Ways and Means Committee and the Senate Finance Committee craft more of the legislative language.

Republican leaders plan to use the budget reconciliation process for tax reform, as they did with the ACA repeal efforts, in order to circumvent the need for 60 votes in the Senate. Using this process, they only need a simple majority of 51 votes to pass major legislation. In the next couple of weeks, both the House and Senate will vote on differing FY18 budget resolutions that will include instructions to the tax committees to draft tax reform legislation that could potentially pass without any Democratic votes in favor. If Republicans in Congress are able to pass a budget resolution that allows them to proceed in this way, they reportedly hope to wrap up tax reform by the end of the year. However, given the stark differences between the two chambers’ resolutions and the need for a compromise, we think that timeframe is unlikely and that consideration of the bill will extend into 2018.

Key Higher Ed Issues

CUPA-HR has been following the latest tax reform discussions for several Congresses and has worked with the higher education association community on advocacy efforts along the way. Most recently, we have worked closely with ACE, NACUBO, NAICU, APLU, CGS and others to specifically track the threats to higher ed benefits. We have met with key congressional offices to explain the usage of and need for these benefits and the history of why they were instituted. We have also sent letters to targeted members, committees and Congress as a whole on the tax benefits of importance to higher education that we believe could be in jeopardy.

Some of the key issues for higher ed we have been tracking that we believe could be in jeopardy of being eliminated include:

  • Section 117(d) Qualified Tuition Reduction – allows institutions to provide tuition at no or reduced cost to employees, including graduate students, with no tax consequences to the student.
  • Section 127 Employer-Provided Educational Assistance Program – allows employers to provide up to $5,250 per year in assistance tax-free for any type of educational course at the undergraduate or graduate level.
  • Section 3121 (b)(10) Student FICA Exemption – exempts from U.S. Social Security (FICA) and Medicare tax wages for services performed in the employment of a school, college or university by “a student who is enrolled and regularly attending classes” at the institution.

We will continue to advocate for these benefits and will keep you posted on updates in the weeks to come. All that said, tax reform is an even more difficult lift than ACA reform and impacts every person and sector, so this new push for tax reform is far from certain. The final bill, if there is one, could be anything from a broad reworking of the tax code to a targeted tax cut.

CUPA-HR Outreach and Resources on These Tax Issues, This Congress

Letter in Support of the Employer Participation in Student Loan Assistance Act

Higher Ed Community Letter to Senate Finance Committee

Section 127 Coalition Letter to Senate Finance Committee

Letter in Support of Expansion of Section 127 of Internal Revenue Code to Include Loan Repayment Assistance

Letter to House Ways and Means Committee in Support of Strengthening Employer-Provided Education Assistance in Upcoming Tax Package

Letter to Senate Finance Committee in Support of Strengthening Employer-Provided Education Assistance in Upcoming Tax Package

CUPA-HR Issue Brief on 117(d)

117(d) Data Infographic

CUPA-HR Issue Brief on 127

CUPA-HR Issue Brief on the Student FICA Exemption

 

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