New bill would end tax breaks for college admission donations

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Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, has introduced legislation in response to the recent college admissions scandal that would end tax breaks for large donations to colleges and universities by wealthy families if they’re made to influence an admissions decision.

The College Admissions Fairness Act would expand the Tax Code’s charitable quid pro quo rules to cover situations where a child’s family makes large donations to the university attended by the student. For donations to a university to be fully tax-deductible, the institution would need to establish a policy that bars consideration of family members’ donations or the ability to donate as a factor in admissions.

Wyden’s bill would also amend the Higher Education Act to require any educational institution that receives federal financial aid to implement such a policy and report the number of applicants, admitted students and enrolled students who are children of donors. The Department of Education would be required to make the data publicly available, and institutions of higher learning would include the information on their annual IRS filings.

If a university declined to implement a policy barring consideration of donations in admissions, deductions would be limited to $100,000 of donations over a six-year period prior to or during the child’s university attendance. Deductions taken for donations above $100,000 during the six-year period prior to a child’s attendance would be recaptured.

“While middle-class families are pinching pennies to pay tuition and graduates are buried under tens of thousands of dollars in student debt, wealthy families are greasing the skids to get their children into elite schools on the backs of those same families and graduates,” Wyden said in a statement. “It’s absurd that the Tax Code subsidizes the top 1 percent buying their way into school. Colleges and universities would be able to preserve the tax deductibility of all donations if they simply bar their consideration in admissions decisions. It’s ‘one and done ’— implement a policy and you’re in compliance.”

In April, Wyden and Senate Finance Committee Chairman Chuck Grassley, R-Iowa, sent a letter to the IRS asking it to crack down on the people involved in the college admissions scandal (see Senators want IRS to enforce tax laws against college admissions cheats). In the case, the parents of prospective college students purported to make tax-deductible donations to a sham charity set up by the scheme’s organizer, William Singer, He created a tax-exempt organization known as the Key Worldwide Foundation to funnel illicit payments to him and to college officials as bribes. Singer eventually agreed to help government investigators implicate the parents and university officials who were charged in the case.

Officials at prestigious schools such as Yale University, Georgetown University, the University of Southern California, UCLA, the University of San Diego, the University of Texas, Austin, Wake Forest University and Stanford University were implicated, along with prominent actresses like Felicity Huffman and Lori Loughlin.

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Finance, investment and tax-related legislation Tax deductions College planning Tax breaks Ron Wyden