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Taxation & Finance

The FY22 budget resolution passed by the House and Senate included instructions for congressional committees to craft sections of a $3.5 trillion budget reconciliation measure based on President Biden’s Build Back Better agenda and the American Families Plan and American Jobs Plan he released earlier this year to effectuate that agenda. The following is an analysis of the budget reconciliation provisions affecting research and higher education. This document will continue to be updated as the legislation moves forward.
On September 3, AAU joined nine other higher-education associations in sending a letter to House and Senate appropriators to urge them to repeal the taxability of Pell grants by incorporating the “Tax-Free Pell Grant Act” as part of their final FY2022 reconciliation agreement.
The vast majority of public and private universities and colleges are tax-exempt entities as defined by IRC Section 501(c)(3) because of their educational purposes—purposes that the federal government has long recognized as fundamental to fostering the productive and civic capacity of its citizens—and/or the fact that they are state governmental entities.
Employer-provided educational assistance benefits (Section 127) allows employers to offer their employees up to $5,250 annually in tax-free educational assistance for undergraduate or graduate-level courses.
The Lifetime Learning Credit (LLC) is one of two income tax credits to help offset the costs of higher education.

91 percent of undergraduates or their parents who have out-of-pocket tuition and fee expenses – including tuition and fees financed with student loans – and also file taxes are eligible for a tax credit or deduction.

Unrelated business taxable income (UBIT) is income from a trade or business that is regularly carried on by a tax-exempt organization and is not substantially related to the organization's exempt purpose.
Learn more about the student loan interest deduction (SLID) and why it's important.
Learn about why tax-exempt financing is critical for universities to advance their mission of educating and innovating for the public good.

AAU President Barbara R. Snyder sent a letter urging Senate and House budget committee leaders to make bold investments in the health, security, prosperity, and future of our nation as they craft the FY22 budget.