Tax Cut and Jobs Act Conference Report
Summary of Provisions Affecting Educational Advancement
On Dec. 15, the House-Senate Conference Committee released the text of the final, negotiated version of the Tax Cuts and Jobs Act. Here is a summary of the final bill's provisions that affect educational advancement.
Current Status: President Trump signed the conference report into law on Dec. 22, 2017.
I. Charitable Giving and the Charitable Deduction
- Retains seven tax brackets but lowers top individual rate - Retains seven tax brackets - 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. The 37 percent top bracket (lower than the current 39.6 percent top bracket) would apply to individuals with incomes over $500,000 for individuals, $600,000 for married couples. This provision sunsets on Dec. 31, 2025.
- 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 less than 10 percent of American taxpayers (those projected to itemize under the plan) will benefit from the charitable deduction.This provision sunsets on Dec. 31, 2025.
- 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. This provision sunsets on Dec. 31, 2025.
- Repeal of the Pease Limitation - Repeals the overall limitation on itemized deductions (Pease limitation). This provision sunsets on Dec. 31, 2025.
- 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.
- Excise Tax - applies a 1.4 percent excise tax on net investment income for private colleges and universities with: The Secretary of the Treasury promulgate regulations to carry out the intent of the provision, including regulations that describe: (1) assets that are used directly in carrying out the educational institution's exempt purpose; (2) the computation of net investment income; and (3) assets that are intended or available for the use or benefit of the educational institution.
- over 500 students (FTE),
- where more than 50 percent of the tuition paying students are located in the United States, 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 $500,000 per student of the institution.
III. Estate Tax
- Preserves, but Doubles Exemption Level - Exemption level doubled to $10 million, indexed for inflation. This provision sunsets on Dec. 31, 2025.
IV. Private Activity Bonds
- Preserves Private Activity Bonds - The House bill would have made the interest paid on private activity bonds includable in the gross income of the taxpayer, essentially eliminating private activity bond financing. The Senate bill did not include this provision. The final bill preserves the current treatment of interest paid on private activity bonds.
- Repeal of Advance Refunding Bonds - Repeals the exclusion from a taxpayer's gross income for interest on a bond issued to advance refund another bond. This provision was included in both the House and Senate bills.
V. Executive Compensation
- Excise Tax - For tax-exempt organizations, applies a 21 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.
VI. Unrelated Business Income Tax
- Compute UBTI separately for each trade or business activity - Currently, tax-exempt organizations calculate aggregate gross income to determine unrelated business taxable income. The bill would require organizations to calculate separately the net unrelated taxable income for each unrelated trade or business activity and only apply a loss to the activity that generated the loss.