December 20, 2017
The tax bill and Stanford
The U.S. Senate and House of Representatives have passed tax reform legislation that now awaits the president’s signature. For higher education, the final bill contains mixed news, which we want to share briefly here. At Stanford, our attention now turns to addressing the effects of this legislation on our community.
We are relieved that the final bill does not include several of the concerning provisions of the original House tax bill. That bill would have treated the tuition associated with graduate student assistantships, as well as employee tuition benefits, as taxable income. The House bill also would have repealed the student loan interest deduction.
These provisions are not in the final legislation. Many people across the Stanford community, including our graduate students, participated in energetic advocacy efforts to make clear the damaging effect of these proposals on the research and education that are so crucial to our country’s future. Those advocacy efforts clearly made a difference.
Regrettably, however, the final bill passed by Congress includes a 1.4 percent excise tax on investment earnings of the endowments of a small number of U.S. universities – estimated at fewer than three dozen – including Stanford.
The endowment at Stanford provides essential support for our core academic mission, including research, education and student financial aid. Those things, in turn, provide immeasurable benefits to the economy, health and culture of our country. Though the advocacy efforts of the higher education community reduced the number of institutions to which this new endowment tax applies, these efforts unfortunately did not succeed in preventing its adoption entirely.
The final bill also contains provisions not directed specifically at universities but affecting many members of our community, including limitations on the deductibility of state and local taxes, which are a significant issue for residents of high-cost areas like ours.
Our next steps will be to analyze the effects of the final bill on Stanford and factor those effects into our budget planning process for the 2018-19 year. The budget process will take place through the spring and culminate in the adoption of a budget by the Board of Trustees in June.
In the budget process we will work to minimize the damage to our academic mission and to our community from the new endowment tax. We remain committed to providing the resources that preserve a strong financial aid program for our students, and that allow our community to make its best possible contribution to our world.
Finally, we will continue to monitor developments in Washington. As new issues arise for higher education, we will continue to advocate aggressively for the mission of research and education, and for the vital role of colleges and universities in creating a bright future for our country.