To: The Caltech Community
From: Thomas F. Rosenbaum, President
David A. Tirrell, Provost
Date: November 21, 2017
Re: 2017 Federal Tax Bill
Some members of our community have expressed concern about provisions in the 2017 federal tax reform proposals that are likely to have negative effects on the educational and research programs of the nation's colleges and universities. Several of these provisions are included in the bill that was passed by the House of Representatives; some appear in a related proposal that awaits action by the Senate. All provisions approved in either chamber will be on the table for conference consideration if the Senate passes a tax bill.
Of special concern are proposed changes that are directed specifically at students and at institutions of higher education, or that would affect our staff:
- The House version of tax reform would subject some tuition reduction programs to taxation; tuition waivers that have been tax free would now be taxed. This provision, which does not appear in the Senate proposal, would substantially increase the costs associated with graduate education and research. Graduate tuition scholarships are not proposed for taxation.
- Both the House and the Senate have proposed a 1.4% excise tax on the investment income of certain private university endowments. If enacted, this tax will have a direct, harmful impact on Caltech's ability—and on that of other colleges and universities—to provide undergraduate scholarships, graduate and postdoctoral fellowships, and funds to support high-risk, innovative research. Financial aid accounts for the largest single use of endowment funds at Caltech and at many other universities.
- Both bills contain provisions that would eliminate tax exemptions for tuition assistance programs that Caltech offers to faculty and staff.
Detailed information about the tax proposals and their implications for higher education has been assembled by the American Council on Education.
Through its trustees, staff, and partner institutions, Caltech has been working to communicate to key decision-makers in Congress and in the executive branch the impact that these provisions—and others, such as incentives for charitable giving—would have on the nation's higher education enterprise, on the preparation of the technically-educated workforce, and on U.S. economic competitiveness. We will continue to do so.