Tax Reform: Modifications to the Conference Committee’s Bill

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On Dec. 19, the Senate parliamentarian ruled that three provisions in the Tax Cuts and Jobs Act violated Senate procedure. These provisions, which were subsequently removed, related to the use of 529 savings accounts for home-schooling expenses, the short title “The Tax Cuts and Jobs Act,” and the criteria for imposing a new excise tax on endowments of private colleges and universities. The Senate revised the bill and approved it early this morning, and the House approved the revised bill, which was sent to President Trump for signature.

Broadening Recipients for 529 Accounts

The revised bill continues to allow payments of up to $10,000 per student per year from 529 college savings plans for tuition at public, private, or religious elementary and secondary schools, but it no longer allows such funds to pay expenses of home-schooling.

Colleges and Universities

The revised bill continues to impose a 1.4 percent excise tax on the endowments of private colleges and universities that have at least 500 students (more than 50 percent within the United States) and have investment assets valued at $500,000 or more per full-time student.

The revised bill counts all students, not just “tuition-paying” students, in determining whether the tax applies to a particular institution. As in prior versions of the bill, investments of any organization related to the college or university, including supporting organizations, would count toward the asset threshold. The tax would not apply to public colleges and universities.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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