The following is a statement from the Association of American Universities regarding the House Ways and Means Committee’s proposed tax provisions for inclusion in the FY25 budget reconciliation package:
AAU has significant concerns about several provisions of this legislation which would effectively amount to massive tax hikes, hampering universities’ ability to provide essential financial aid making college more affordable for students; educate the workforce America needs to maintain its global economic leadership and national security; and conduct the groundbreaking research required to create new cures, save American lives, and make our country stronger, safer, healthier, and more prosperous in the future.
Specifically, AAU opposes these specific provisions:
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Significant Endowment Tax Expansion: Endowment taxes are, quite simply, taxes on student aid, taxes on student access to a college education, and taxes on life-saving research. AAU opposes any increases to the university endowment excise tax or bracketing of institutions into separate categories for purposes of increased excise tax assessment. AAU also opposes the effective expansion of this burdensome and counterproductive tax to even more universities by shifting the per-capita formula to exclude certain categories of students. University endowments fund vital sources of student financial aid and research. AAU opposes any efforts to expand the number of colleges and universities that would be forced to pay the tax or increase the rate of tax they are required to pay.
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Taxing Intellectual Property: AAU also opposes the bill’s addition of royalties from universities’ intellectual property, including both patents and copyrights, into the calculation of net investment income for the purposes of endowment taxes. These provisions would discourage the innovation and resulting economic growth and new American businesses that currently stem from the remarkable commercialization of university research discoveries as they transfer new scientific breakthroughs to the private sector.
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Taxing Non-Profit Leaders Like Corporate CEOs: AAU opposes the bill’s effort to effectively raise income taxes on any employee in a tax-exempt organization receiving remuneration above $1 million annually – which would punish, among others, a number of highly skilled leaders as well as select in-demand researchers and critical entrepreneurial innovators who teach and conduct research on campuses across the country.
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Taxing Other Forms of Nonprofit Income: AAU opposes the bill’s effort to do away with several longstanding tax exemptions for all non-profit organizations under the Unrelated Business Income Tax (UBIT) portion of the Internal Revenue Code. These include: removing the exemption from royalty income stemming from licensed uses of non-profit organizations’ names and logos; removing an exemption on taxes for non-publicly funded research income; and removing employer exemptions for taxes on transportation benefits that are frequently included as part of the compensation packages of employees at universities and other non-profit organizations.
Removing these traditional exemptions from tax – which have been in place for decades to help non-profits achieve their charitable mission — would have a negative impact on universities’ ability to support student success, research, and academic programming.
AAU supports the following provisions of the bill:
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SECTION 174 R&D CREDIT: AAU supports provisions under Section 174 that reinstate the deduction of domestic research and development expenses during the year incurred, instead of required amortization. This change will promote the ability of small businesses, often with university affiliations, to perform vital research towards the commercialization of discoveries to the American market.
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SECTION 127 EMPLOYER TUITION ASSISTANCE TAX CREDIT: AAU supports the provisions to make this employer-provided educational assistance program permanent as well as indexing the exclusion cap to inflation in 2026. This provision ensures access to higher education for working adults with participating employers.
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UNIVERSAL CHARITABLE GIVING CREDIT: AAU supports the reintroduction of the charitable giving credit. The proposal would increase the credit and restore it to pre-2017 levels, which helped incentivize middle-class Americans to donate to charities.
Founded in 1900, the Association of American Universities is composed of America’s leading research universities. AAU’s 71 research universities transform lives through education, research, and innovation.
Our member universities earn the majority of competitively awarded federal funding for research that improves public health, seeks to address national challenges, and contributes significantly to our economic strength, while educating and training tomorrow’s visionary leaders and innovators.
AAU member universities collectively help shape policy for higher education, science, and innovation; promote best practices in undergraduate and graduate education; and strengthen the contributions of leading research universities to American society.
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