Public Policy
Tax Cut and Jobs Act of 2017: Summary of Provisions Affecting Educational Advancement

On Nov. 2, House Ways and Means Committee Chairman Kevin Brady (R-TX) introduced the Tax Cuts and Jobs Act (H.R. 1). Here is a summary of the bill's provisions that affect the advancement profession. Note that this summary will be updated as the bill works its way through the legislative process. 

Current Status: On Nov. 16, the U.S. House of Representatives approved H.R. 1 by a vote of 227-205. 

I. Charitable Giving and the Charitable Deduction

    • Preservation of top individual tax bracket - Consolidates the existing seven tax brackets into four main brackets - 12 percent, 25 percent, 35 percent and 39.6 percent. The 39.6 percent bracket would apply to individuals with incomes over $500,000/$1 million for married couples.  
    • Doubling Standard Deduction - Doubles the standard deduction threshold to $12,000 for individuals and $24,000 for married couples. While the charitable deduction is preserved, the bill does not include a universal charitable deduction proposal. This means that only 5 percent of American taxpayers (those projected to itemize under the plan) will benefit from the charitable deduction.
    • Increase in AGI Limitations for Cash Gifts - Allows taxpayers to deduct cash contributed to public charities like colleges, universities and independent schools up to 60 percent of his or her Adjusted Gross Income per tax year, up from 50 percent under current law. The current limit of 30 percent of AGI for capital gain property remains unchanged. 
    • Repeal of the Pease Limitation - Repeals the overall limitation on itemized deductions (Pease limitation). 
    • Repeal of College Athletic Seating Deduction - Repeals the special rule that allows taxpayers to deduct 80 percent of a charitable gift made for the right to purchase tickets for college and university athletic events. 

II. Endowments

    • Excise Tax - applies a 1.4 percent excise tax on net investment income for private colleges and universities with over 500 students and with an aggregate fair market value of assets of which at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institution's exempt purpose) is at least $250,000 per student of the institution.*

III. Estate Tax

    • Phase Out and Repeal - Exemption level doubled to $10 million, indexed for inflation, with the estate tax fully repealed in 2025.** A beneficiary's stepped-up basis in estate property is maintained. 

IV. Executive Compensation

      • Excise Tax - For tax-exempt organizations, applies a 20 percent excise tax on compensation above $1 million paid to any of its five highest paid employees. Also applies to excess parachute payments paid to these individuals.

V. Private Activity Bonds

      • Repeal - interest on newly issued Private Activity Bonds would be included in income and subject to tax.

*On Nov. 6, House Ways and Means Committee approved an amendment that changed the excise tax threshold from $100,000 per student to $250,000 per student. 

**On Nov. 9, the House Ways and Means Committee approved an amendment that delayed the full repeal of the estate tax by one year, to 2025.

^On Nov. 9, the House Ways and Means Committee approved an amendment that added language to state that the assets and net investment income of any related organization are treated as the assets and net investment income of the private college or university for purposes of the excise tax.