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Tax Law's Effects on Colleges Unfolding
January 2019

By Rick Seltzer

When President Trump at the end of 2017 signed a Republican-backed tax-reform package into law that included significant changes for colleges and universities, higher ed leaders were left waiting for answers.

They wondered about rules for calculating a new tax on endowments. They sought guidance regarding a tax on parking and transportation benefits for employees. Questions circulated about a new tax on highly compensated nonprofit employees that had drawn criticism while the tax law was still being drafted.

And leaders also wondered about the tax law’s effects on human behavior. For instance, how would an increase in the standard deduction affect donor behavior? Would alumni newly covered by the larger standard deduction be less likely to give to colleges and universities because they wouldn’t be itemizing their taxes?

Below are brief discussions about some of the major tax reform issues and how they have changed over the last year.

On human behavior:

“The psychological impact of what is turning out to be extreme market volatility in the month of December, when people have their checkbooks out — at the margin, it’s going to have an effect,” said Debashis Chowdhury, president of Canterbury Consulting, an investment advising firm for endowments, foundations, health care organizations and families. “If one is not feeling as wealthy as one did in, say, September, it’s likely to have a negative impact. So there’s a lot of small cuts.”

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