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From the Provost: Update on Federal Tax Bill

December 8, 2017

Members of the Brown Community,

We began the year recognizing that there were a number of policy issues at the federal level central to our mission and values that would require time, attention and strong advocacy to address. Over the last 12 months, we´ve signed on to amici briefs to challenge the federal travel ban that restricts travel for individuals from eight countries, including six Muslim-majority countries; pushed for the continuation of the Deferred Action for Childhood Arrivals program (DACA) and comprehensive immigration reform; and urged legislative and regulatory action to sustain robust investments in federally-funded university-based research.

In addition to these continued priorities, which remain fluid and uncertain, over the last few weeks the University has been actively working to address a number of provisions in the comprehensive tax legislation that Congress is deliberating. I write to offer updated information about the status of the tax legislation, and to report on the steps we´re taking to advocate for legislative modifications. We´re preparing for any range of scenarios that may arise should any or all onerous provisions become law. It is our hope that students, faculty and staff will weigh in on the matter with their representatives in Congress.

Last week, President Paxson wrote to campus to highlight a number of grave concerns that the University has with several provisions of H.R. 1, The Tax Cuts and Jobs Act, which passed the U.S. House of Representatives on November 16. You can read that letter here:

Of particular concern is the overall effect that the proposals would have on the capacity of colleges and universities like Brown to ensure access to affordable undergraduate and graduate education, and to invest in research and discovery that spurs innovation, economic growth and solutions to pressing global problems.

The U.S. Senate passed its own version of the tax bill last Saturday, December 2, by a vote of 51 to 49. The bill contains some, but not all, of the proposals of greatest concern included in the House version. For example, while details differ slightly, the Senate tax bill, like the House companion, includes a 1.4 percent excise tax on endowments held by private colleges and universities. Private colleges and universities like Brown depend heavily on endowment income to support critical budget priorities, including institutional scholarship aid, educational programs and faculty and staff salaries and benefits. The Senate bill also has provisions that would affect charitable giving, which private, non-profit institutions depend on for fiscal sustainability and to advance their missions.

It´s somewhat encouraging that the Senate bill maintains the current tax-free treatment of tuition remission for graduate students, and excludes the provision included in the House bill that would treat this as taxable income. The Senate bill also maintains the current student loan interest deduction, the tax-free treatment of qualified employer-provided undergraduate tuition coverage, like the Tuition Assistance Program (TAP), and up to $5,250 in employer provided education assistance, all of which are eliminated in the House bill.

With both the House and Senate having passed legislation, the House and Senate leadership have appointed representatives from their respective bodies to a Conference Committee charged with reconciling the differences in the legislation and crafting a final bill for action by both chambers. The Conference Committee is expected to move quickly to have a final tax bill voted on by the full House and Senate to send to President Trump for approval by the end of the calendar year, if not sooner.

The implications of many of the tax bill´s provisions are far-reaching. They represent an assault of the role and significance of higher education in service to society as a pathway for opportunity, human development and career preparation. They also adversely affect the role of institutions of higher education as engines for innovation, economic leadership and growth. We continue to work assiduously to effect changes to the tax bill, engaging colleges and universities across the country, as well as alumni, industry partners and members of Congress.

We´re also planning for the possibility of passage of some or all of the bill´s provisions. The University Resources Committee, which I chair, is developing a range of scenarios for addressing potential budgetary impacts that may affect the Fiscal Year 2018 budget that is under development. We´re also conducting longer-term financial planning to consider options for responding to any actions that would significantly reduce revenues. Our primary goal is to identify options for mitigating and distributing any losses. We are committed to safeguarding our capacity to continue to advance our mission of teaching, research and service, as well as support for the success and aspirations of our students, faculty and staff.

We will continue to offer updates on the trajectory of this legislation and the other key priorities for which we are advocating at the federal level.


Richard M. Locke