Tag: Tax

South Dakota Opts Into Trump’s Education Tax Credit Program – The 74

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South Dakota is the fourth state in the country to commit to President Donald Trump’s federal education tax credit program, Republican Gov. Larry Rhoden announced Friday in Sioux Falls.

Under the program, South Dakotans who owe federal income taxes can either send up to $1,700 to the federal government, or they can donate that $1,700 to a government-recognized scholarship granting organization to public, private or homeschool entities in the state. The program starts in 2027.

Nebraska’s Republican Gov. Jim Pillen announced the state’s commitment in September. Republican governors for North Carolina and Tennessee announced their commitment this summer. Oregon, New Mexico and Wisconsin officials said they do not intend to opt into the program. Some critics nationally have questioned whether there will be proper guardrails, accountability and “quality control” in place.

Rhoden called the imminent program a “winning situation” for South Dakota taxpayers.

“I’d just as soon give those dollars to a private school than Uncle Sam,” Rhoden said at the announcement, standing in front of a row of students attending the St. Joseph Academy. “I think they know how to spend it a little wiser than the federal government.”

Rhoden added that the federal tax credit will “pair well” with South Dakota’s existing tax credit program, which allows insurance companies to donate up to a total of $5 million to a private school scholarship program for students whose families have low incomes.

South Dakota Gov. Larry Rhoden (left) and First Lady Sandy Rhoden (right) speak to St. Joseph Academy students in Sioux Falls on Nov. 11, 2025. (Photo by Makenzie Huber/South Dakota Searchlight)

The program will further support the state’s growing alternative instruction movement, Rhoden said, including homeschooling and microschools popping up throughout the state. Alternative instruction enrollment has nearly tripled in South Dakota in the last decade, making up about 7% of school-age children in the state.

Sara Hofflander, founder of St. Joseph Academy, said the school is “grateful” for the potential extra funding, though she plans to “approach everything cautiously.”

“Running an independent school obviously requires a heavy commitment from families,” Hoffman said, adding that the extra funding would “lift some of that burden, so we can focus more on the needs of our students.”

Historically, “school choice” efforts in the state have met resistance from the public school industry.

Advocates vehemently fought former Gov. Kristi Noem’s effort to introduce Education Savings Accounts, which would have provided public funding for private education and homeschool options during the last legislative session, calling the failed effort an attack on public education. Those same advocates referred to the state’s education tax credit program as “backdoor school voucher program.”

But Rob Monson, executive director for the School Administrators of South Dakota, said the program will benefit public and private education. South Dakotans can direct their tax credit dollars to organizations representing public schools in the state. The funding could be spent on not only tuition and fees for private schools, but tutoring, special needs services for students with disabilities, transportation (such as busing), afterschool care and computers.

“That’s a huge win for taxpayers of South Dakota, but also every form of education across the state,” Monson said.

South Dakota Education Secretary Joe Graves said the program will support education innovations and a “robust competitive system.”

Graves told lawmakers on Thursday, while presenting lackluster test scores to a committee, that “innovation” would be key to improving student outcomes, especially for Native American students and children living in “education deserts.”

“We’re not doing well enough, and we need to do better,” Graves said at Friday’s announcement.

If more students attend private or alternative schooling options, that would mean less state funding for public schools because of decreased student enrollment. Monson told South Dakota Searchlight that state revenues could be impacted by participation in the tax credit program, since it would remove federal tax dollars used to support other programs or go toward states. The federal government would still be obligated to fund some federal education programs, Monson added.

The scholarship funds would be available to families whose household incomes do not exceed 300% of their area’s median gross income. The U.S. Department of Treasury is expected to issue proposed rules detailing the program’s operation.

Graves said he assumes there will be reporting “at some level” of how the funds are spent.

South Dakota Searchlight is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. South Dakota Searchlight maintains editorial independence. Contact Editor Seth Tupper for questions: [email protected].

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November 23, 2025
LAWSUIT: New Jersey school board member silenced for asking constituents about a proposed tax increase

ALLOWAY TOWNSHIP, N.J., Nov. 20, 2025 — A local school board member’s Facebook post to community members about a tax hike should have started a conversation — instead, it led to censorship.

The Foundation for Individual Rights and Expression is suing the commissioner of New Jersey’s Department of Education and members of the state’s School Ethics Commission to stop them from abusing a law to chill the speech of an elected school board member who used social media to seek her constituents’ input.

“I didn’t join the school board to be told to shut up,” said Gail Nazarene, an elected school board member, Navy veteran, and grandma in Alloway Township. “New Jersey officials claim the authority to punish me simply for asking folks questions about important issues, particularly when it affects their wallets. I should be free to communicate with constituents and get their views without being censored by state officials.”

COURTESY PHOTOS OF GAIL NAZARENE

In April, Gail used Facebook to discuss tax increases and other school issues with constituents. In one post, she asked, “As a resident of Alloway, I am wondering what other residents think about a 9-15% school tax increase?” She clarified in her later posts that she was asking in her personal capacity. But another school board member saw the posts and filed a complaint against her, claiming Gail had violated New Jersey’s School Ethics Act because she allegedly had spoken on the board’s behalf. The complaint is pending before the state’s School Ethics Commission.

“Americans deserve to know what their elected officials think about important issues,” said FIRE attorney Daniel Zahn. “New Jersey is muzzling elected officials and preventing them from talking with their community, the very people they were elected to represent.”

The state broadly interprets the School Ethics Act to bar elected officials from discussing issues relating to schools on social media. And this isn’t the first time it’s done so. The School Ethics Commission has previously warned elected officials against engaging with constituents on social media and previously interpreted the act to prevent elected school board members from discussing matters of public concern on social media and in op-eds.

But the First Amendment protects Gail’s right to speak freely on such issues.

Gail has stopped soliciting constituent feedback online. She fears any posts about school board issues will lead to punishment, including reprimand, censure, suspension, or removal. But she also is concerned about the loss of First Amendment freedoms for her and her constituents.

“When the state silences school board members, parents and taxpayers are kept in the dark,” said FIRE attorney Greg Greubel. “The School Ethics Act can’t be turned into an unconstitutional gag rule.”

Today’s federal lawsuit asks the court to declare New Jersey’s School Ethics Act unconstitutional as interpreted by the state and stop its use against elected officials speaking out about public issues.

The Foundation for Individual Rights and Expression (FIRE) is a nonpartisan, nonprofit organization dedicated to defending and sustaining the individual rights of all Americans to free speech and free thought — the most essential qualities of liberty. FIRE educates Americans about the importance of these inalienable rights, promotes a culture of respect for these rights, and provides the means to preserve them.

CONTACT
Katie Stalcup, Communications Campaign Manager, FIRE: 215-717-3473; [email protected]

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November 20, 2025
Tax Policy Belongs in Liberal Arts Curriculum (opinion)

As congressional Republicans scratched and clawed to pass President Trump’s signature policy effort, the One Big Beautiful Bill Act—a sprawling, tax-heavy package celebrated as much for its branding as for its contents—it is notable how few people could explain what exactly was in it. Tax cuts for some, probably. A Social Security bonus, maybe. A gutting of public benefits, almost certainly. What is clear, though, is that the bill’s complexity was always in service of its politics: When no one understands tax policy, it’s much easier to sell whatever story you want.

That confusion is exactly why we should be teaching tax policy more broadly—not just in sparsely attended law school classes and accounting departments, but in general education curricula and first-year seminars. Tax isn’t just a technical rule-following subject; it’s a civic one. Tax policy shapes everything from fairness and inequality to the functional shape of the state itself. Yet, most students will graduate college without ever being asked to consider what tax is for—much less whom it helps, whom it harms and why it remains so easy to obscure.

That is precisely the starting point for the course I designed at Drexel University, Introduction to Tax Theory and Policy, which I teach in our innovative undergraduate law major, housed at the Thomas R. Kline School of Law. It’s not a course for aspiring tax attorneys, prospective C.P.A.s or Excel mavens—few of my students intend to practice tax law. They’re interested in criminal or family law, or they’re business majors, future social workers, engineers or undecided second-years. But they’re all taxpayers—and that’s the relevant bit.

Courses like mine aim to democratize access to legal and policy tools so that all students, irrespective of their major, can become more informed and empowered participants in civic life. In class, we don’t parse tax rates or calculate deductions. No calculators are required, and at no point is anyone expected to consider the straight-line depreciation of an apartment complex. We ask why the system is built the way it is, and we talk about the power that it reflects and protects. We talk about values: what kinds of behavior the tax code encourages or punishes. We talk about trust and legitimacy: What happens when people believe the system is rigged, and what if they’re right? In short, we treat tax not as a set of arcane rules and rates to memorize, but as a lens through which we can better understand the power structures we live under.

The surprising part (at least to me, when I first taught it and admittedly just hoped I wouldn’t be lecturing to an empty room) is how much students connect with this approach. More than connect with it—they often enjoy it. I’ve received feedback from students that describes the class as life-changing and course reviews that have noted how it changed assumptions regarding what tax even is. High praise from 19- and 20-year-olds.

The course itself draws on philosophy, political theory, economics and law—but what it really cultivates is a kind of civic literacy. It asks students to think about who they are in relation to the state and how much of their future may be shaped by the tax policy they’ve never been taught to see. For many, it is the first time they’ve encountered taxation not as something to dodge, but as something to question, debate and reimagine in furtherance of their own values.

In one session, we explore how the tax code is employed as a kind of soft steering wheel in the economy—how it at turns encourages homeownership, subsidizes sports stadiums, directs corporate research and development, and shapes (or even outright creates) the market for electric vehicles. Another week, we explore estate taxes and inheritance: not just who pays, but what it means to redistribute wealth across generations and what happens when we don’t. We read Garrett Hardin’s “The Tragedy of the Commons,” engage in spirited debates about the potential for tax to solve the artificial intelligence copyright debate, and unpack why TurboTax spent two decades fighting free filing.

Over the course of the class, the question shifts away from what is a tax and toward whose values does this system reflect? That shift—from mere definitional awareness to focused critical engagement—is when I know the class is working. Students cease to see tax as someone else’s problem and begin seeing it as a potent tool of and for democracy.

In their final papers, students have proposed remarkably forward-looking and sophisticated tax policy reforms—reflecting both creativity and civic seriousness. One student argued that companies receiving public subsidies through tax credits, like chemical and drug manufacturers, should be barred from claiming additional credits to remediate harms their products create. Another proposed a data-collection “sin tax” aimed at discouraging exploitative surveillance practices by tech companies. These aren’t rote academic exercises. They’re thoughtful intervention proposals that treat tax as a lever for shaping society.

If tax policy determines who gets what, who pays for it and how the government keeps a hand in the marketplace, then it belongs squarely at the heart of a liberal arts education. We don’t cabin discussions of justice in law schools, and we don’t isolate questions of the public good in policy programs—why do we treat taxation, which intersects with both and innumerable other facets of modern life, as off-limits or too technical for undergraduates?

This isn’t a plea to teach undergraduates to file their own taxes—though there is probably a case to be made for that, too. It’s about ensuring curricula help them understand how the world works and how it’s been designed to work for some more than others. That means tackling the politics of Internal Revenue Service funding, exploring how “tax relief” often functions as an upstream transfer of wealth and how a positively sprawling bill like the one recently passed through Congress can obscure much more than it reveals.

If no one understands how tax policy works, how can anyone meaningfully weigh in on whether they support one revenue bill or another? On issues like immigration, abortion or education funding, many people bring at least some passing knowledge or lived experience to the conversation. Tax remains, for most, a black box. The more opaque it becomes, the more tempting it is for lawmakers to retreat into it—tucking major redistributive choices into the shadows of the tax code, where they can be shielded from public scrutiny.

On the other hand, when students come to see tax as a form of the civic superstructure—something they live within and not just under—they are empowered to not only understand tax policy but to shape it. That should be one of the goals of any serious undergraduate education.

We don’t have to, and should not, keep treating tax as one professional niche within other professional niches. If we want students to understand how tax relates to power, fairness and democratic participation, we should give them the tools to talk about it. This needn’t focus on the rates and rules but should illustrate the values taxes reflect and trade-offs they embed.

Courses like mine don’t require a background in economics, accounting or law. They require a willingness to take seriously the idea that how we tax equates to how we govern. If we can help students see tax not as a source of dread or line item on their paycheck, but as the site of collective economic decision-making, we don’t just produce better-informed graduates—we’ll also produce more engaged citizens.

Andrew Leahey is a practice professor of law at Drexel University’s Thomas R. Kline School of Law.

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July 16, 2025
House Minority Leader Jeffries giving marathon speech criticizing GOP tax cut bill (PBS News Hour)

US House Minority Leader Hakeem Jeffries (D-NY) gives a marathon speech, calling out the destructive path that House Republicans are going down. This is a Bill that undermines the United States of America and its national security. It is also a threat to democracy. Folks should listen to every minute of this historical speech.

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July 3, 2025
House Passes Reconciliation Bill With “No Tax on Overtime” Proposal – CUPA-HR
by CUPA-HR | June 17, 2025

On May 22, the U.S. House of Representatives passed H.R. 1, titled the “One Big Beautiful Bill Act.” Notably, the reconciliation “megabill” includes a provision to implement President Trump’s campaign pledge on “no tax on overtime,” among various legislative priorities for Republicans.

The “No Tax on Overtime” Proposal

The overtime proposal creates a temporary above-the-line deduction from gross income for overtime pay required under the Fair labor Standards Act (FLSA). The bill does not set a cap on the amount of overtime pay that can be deducted, but it limits the application of the provision to employees who earn less than $160,000 per year, and it does not extend the deduction to independent contractors. If signed into law, the deduction will be available for tax years 2025 through 2028, and employers would be required to report overtime compensation on workers’ W-2 forms during this time.

The proposed deduction only applies to workers’ federal income taxes and overtime pay as required by the FLSA, raising some compliance concerns for employers in states with different overtime pay requirements than those required under the FLSA and for employers whose overtime pay requirements are set by a collective bargaining agreement (CBA) with overtime pay that differs from the FLSA requirements. These employers will likely need to track both the FLSA-mandated overtime hours and pay to ensure workers’ W-2s are accurate and in compliance with the law while also ensuring they are tracking the overtime hours and pay in a manner that also complies with the more stringent state or CBA obligations.

While CBA requirements vary case-by-case, there are five states with overtime pay requirements under their state wage and hour laws that differ from the requirements under the FLSA:

Alaska requires 1.5 times workers’ regular rate of pay for hours worked beyond 8 in a day or 40 in a workweek;

California requires 1.5 times an employee’s regular rate of pay for hours worked more than 8 in a day, 40 in a workweek, or the first 8 hours on a seventh consecutive day of work in a workweek. The state also requires double an employee’s regular rate of pay for any hours worked over 12 in a day or for all hours worked over 8 on a seventh consecutive day of work in a workweek;

Colorado requires overtime pay after 12 hours worked in a day or 40 hours in a workweek;

Nevada requires overtime pay for any hours worked beyond 8 in a day if the employee earns less than 1.5 times the state minimum wage; and

Oregon has industry-specific daily overtime rules that apply to hospitals, canneries and manufacturers.

Looking Ahead

The reconciliation bill is still early in the legislative process. For now, the “no tax on overtime” provision is only included in the House version of the bill. The Senate is currently drafting its version of the reconciliation bill, and they may choose to alter the no tax on overtime proposal — possibly including language of the Overtime Wages Tax Relief Act that was introduced earlier this year by Senator Roger Marshall (R-KS). CUPA-HR will continue to monitor for further developments on this issue.

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June 17, 2025
Senate Outlines Plans for Endowment Tax Hike

The Senate Committee on Finance is proposing to raise the endowment tax on private colleges and universities, but not to the extent the recently passed bill in the House calls for, according to a draft plan released Monday.

The less dramatic excise tax tops out at 8 percent for the wealthiest institutions, compared to 21 percent in the House plan, but the Senate’s proposal keeps the House’s tiered rate structure, with some colleges paying more depending on the value of their endowment per student. The current rate for affected institutions is 1.4 percent.

Institutional lobbyists and college presidents have warned that the sharp increase in the House plan would hurt their ability to provide need-based aid and be debilitating for some low-income students. Although the Senate’s iteration offers some relief, it’s not as much as they hoped for.

“The Senate version of the so-called endowment tax is better, but it’s still bad and harmful tax policy,” said Steven Bloom, assistant vice president of government relations at the American Council on Education. “They’re going to take money that would likely have been devoted to financial aid and research and other academic purposes on campus, and they’re going to send it to Washington, where it’s used largely for purposes unrelated to higher education.”

The Senate committee’s plan, like the House proposal, also still exempts religious colleges and requires colleges to take international students out of the total roll call when calculating the endowment’s value per student. If passed, this stipulation would increase the tax rate significantly for institutions like Columbia University that have 20 percent or more foreign students.

The finance committee legislation, which also includes cuts to Medicaid that could put pressure on states’ budgets, is part of a broader package of bills that would make significant changes to higher education policy and cut spending and taxes in order to pay for President Donald Trump’s priorities, which include increased deportations and tax cuts for the wealthy. The House version of the reconciliation bill known as the One Big Beautiful Bill Act passed by a one-vote margin last month. Senators are aiming to pass their version by July 4 and only need 51 votes thanks to the reconciliation process, as opposed to the traditional 60 votes.

Unlike the House proposal, colleges that don’t accept federal financial aid would be exempt from the tax entirely. Hillsdale College president Larry Arnn blasted the House plan in an op-ed last month as an attack on the institution’s independence. (Hillsdale doesn’t participate in the federal financial aid system.)

“The resources entrusted to Hillsdale College are not drawn from the public treasury,” Arnn wrote. “They are given freely by those who believe in our mission. To tax these gifts is to tax philanthropy itself—to burden those who would lift burdens. It is to weaken those who do good precisely because they are free to do it. It weakens them and strengthens the federal government, reversing the order intended by our Founders.”

Hillsdale wasn’t the only college that pushed back on the rate increase. In recent weeks, private institutions big and small have pitched their own alternatives to Congress.

Some of the largest and wealthiest research institutions that would be affected by the tax—such as Harvard, Stanford and Princeton Universities—pledged to spend 5 percent of their endowment’s value annually in exchange for a much lower 2.4 percent endowment tax rate, The Wall Street Journal reported. Bloom agreed that if the tax is to increase, he would like to see some kind of incentive introduced, like financial aid spending thresholds, to mitigate the tax rate.

“They’ve created no incentive for schools to behave in ways that we believe that they would want schools to behave,” he said.

Other institutions suggested that the tax rate should be based on what percentage of endowment revenue an institution spends each year on student financial aid or how many students enrolled come from a low-income background and receive the federal Pell Grant.

A coalition of 24 smaller institutions, including Grinnell and Davidson Colleges, which would be hit hardest by the House endowment tax, proposed adjusting the excise rate based on the number of students enrolled. Colleges with fewer than 5,000 students have a different economic model than an institution with 30,000, they said.

Grinnell president Anne Harris, who spent part of the last week educating lawmakers about the harm of the increased endowment tax, said Monday evening that the Senate plan still disproportionately burdens smaller institutions. She noted that her institution will likely still face the maximum 8 percent tax.

“I deeply appreciate all the work that’s gone on and clearly all the consideration that has informed what we’re seeing this afternoon, but having said that, the current proposal still disproportionately burdens small colleges,” Harris said. “You’re going to find a school like Grinnell College with 1,700 students, a small college in a rural setting, bearing a much greater burden of this tax than a research institution in a large city.”

She could only speculate that senators stuck with a tiered structure for simplicity, but added that “the simple fix” would be to make a stipulation that places all small private colleges in the lowest bracket and maintain the current 1.4 percent tax rate.

Harris is hopeful that there will still be further opportunities for compromise and said she will continue to advocate for small liberal arts institutions like her own. But in the meantime, her executive team will also continue to plan out all the possible scenarios to figure out the best course of action to protect student aid if the bill passes as it currently stands.

“All responsible options that provide the most money for financial aid and mission fulfillment are on the table as part of our scenario planning with the board,” she said.

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June 16, 2025
Sen. Marshall Proposes Legislation to Fulfill Trump Campaign Pledge on “No Tax on Overtime” – CUPA-HR

by CUPA-HR | May 12, 2025

On May 6, Senator Roger Marshall (R-KS), along with Sens. Tommy Tuberville (R-AL), Jim Justice (R-WV), and Pete Ricketts (R-NE), introduced the Overtime Wages Tax Relief Act, which is intended to fulfill President Trump’s campaign promise to eliminate taxes on overtime pay. The proposal provides an income tax deduction for overtime pay up to a certain threshold. Marshall explained that his goal with the legislation was to target the benefit to lower- and middle-income workers in industries and occupations that traditionally pay overtime.

Under the proposal, individuals would be able to deduct up to $10,000 of overtime pay from their income taxes. For married couples, the cap would be set at $20,000. This is an “above-the-line” income tax deduction, so workers would have the ability to claim the deduction whether they itemize their deductions or take the standard deduction.

Additionally, the proposal phases out the benefit for top earners, identified as individuals earning $100,000 or more and married couples earning $200,000 or more. The deduction is reduced by $50 for every $1,000 in income the individual or married couple earns above their respective threshold.

The legislation also includes reporting obligations for employers “to ensure transparency and accuracy in claiming the deduction.” Employers will be required to report overtime earnings to employees in their annual wage and tax statements.

Marshall is hoping to have the legislation included in the Republican’s fiscal year 2025 budget reconciliation bill, which is expected to cover everything from border security to extensions for the expiring 2017 tax cuts President Trump signed into law during his first term.

CUPA-HR will keep members apprised of additional updates on this bill and others related to overtime laws and regulations.

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May 12, 2025
House Republicans Propose Significant Endowment Tax Increase

Efforts to raise endowment taxes are in motion as the House Ways and Means Committee reportedly plans to unveil changes next week that will increase rates and include more colleges.

Education leaders have worried about such a rate increase for months. Now the GOP-led committee is expected to propose raising endowment excise taxes from 1.4 percent to up to 21 percent, depending on endowment value per student, Punchbowl News, Politico and other outlets reported.

The proposed endowment tax would only apply to private institutions, as it does currently.

Under the proposed formula, institutions with endowments of $750,000 to $1.25 million per student would reportedly be hit with 7 percent excise tax. That number would climb to a 14 percent tax for colleges with endowments valued at $1.25 to $2 million per student. Colleges at the highest level with endowments of $2 million or more per student would pay 21 percent. (Currently, colleges with endowments worth $500,000 per student or more pay the 1.4 percent tax.)

The specifics of the tax increase aren’t final and could shift before the committee’s hearing Tuesday.

Republicans are preparing to move forward with endowment tax increases as part of a broader effort known as reconciliation to cut billions in federal spending and pay for President Donald Trump’s priorities. Other House committees have unveiled their proposed cuts for reconciliation, including a sweeping plan to upend the student loan system, but the Ways and Means bill is crucial to this process.

GOP motivations for the tax increase appear to be twofold in that it would help fund tax cuts and serve as a punitive measure for colleges they believe have gone “woke.” In 2023, a total of 56 universities paid roughly $380 million in endowment excise taxes.

“Seven years ago, the Trump tax cuts sparked an economic boom and provided needed relief to working families,” committee chairman Rep. Jason Smith, a Missouri Republican, said in a Friday statement. “Pro-family, pro-worker tax provisions are the heart of President Trump’s economic agenda that puts working families ahead of Washington and will create jobs, grow wages and investment, and help usher in a new golden age of prosperity. Ways and Means Republicans have spent two years preparing for this moment, and we will deliver for the American people.”

The proposal comes amid the president’s full blown attack on higher education, which has seen the federal government clamp down on research funding, go after colleges for alleged antisemitism, take aim at diversity, equity, and inclusion programs, and attempt to deport international students.

Since the 1.4 percent endowment excise tax was passed in 2017 during the first Trump administration higher education leaders have long worried that the president would raise it in his second term.

As universities increased their lobbying efforts in the early days of Trump 2.0, the potential increase to the endowment tax has been a key concern. Recent lobbying reports show that Harvard University, which has the largest endowment, recently valued at more than $53 billion, Princeton University, Northwestern University, and multiple others, have pressed Congress on the issue. (Northwestern’s chief investment officer said last week that the potential increase would be “destructive.”)

Smaller institutions, some of which had never hired federal lobbyists before 2025, have also raised concerns about how expanding the endowment tax would harm their educational mission.

According to an analysis from James Murphy, director of career pathways and post-secondary policy at Education Reform Now, only three universities would pay the highest rate at 21 percent – Princeton, Yale University and the Massachusetts Institute of Technology. Another 10 universities, including Harvard, would get hit with the 14 percent rate.

An analysis published last month by the investment firm Hirtle Callaghan noted that recently proposed changes to the endowment excise tax would “significantly broaden the universe of colleges and universities that pay the tax from large, wealthy institutions to smaller, regional ones.” That analysis warned that such increases “threaten to do irreparable damage to many schools which are significantly weaker financially than the schools paying the current tax.”

Multiple higher education associations have previously expressed opposition to the increase.

Last fall, American Council on Education president Ted Mitchell sent a letter to Congress, co-signed by 19 other associations, calling for the repeal of the existing endowment tax, arguing that “this tax undermines the teaching and research missions of the affected institutions without doing anything to lower the cost of college, enhance access, or address student indebtedness.”

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May 10, 2025
Three Easy Tax Fixes That Would Help Students Succeed

As Congress works on a sweeping rewrite of the tax code, students and families across the country are watching—and hoping this moment leads to real change that will increase access to higher education. The conversation in Washington will likely center on what to keep, what to cut, and how to fit higher education into the massive, complex puzzle that is the U.S. tax code. But lawmakers have a chance to do something simple but powerful: pass three bipartisan tax fixes that would make a big difference for low- and middle-income students.

These fixes may not grab national headlines, but for those trying to pay tuition, cover everyday expenses, return to school to finish a degree, or chip away at their student loan debt, they could make a meaningful difference. In a time of deep partisan divides, Congress should focus on policies with broad, bipartisan support—especially those that are low-cost and already proven to help students succeed.

Here are three commonsense ideas that would do just that:

1. End the Tax on Pell Grants—So Students Can Keep the Aid They Deserve

For over 6 million low-income students, the Pell Grant is a lifeline—essential financial aid to help cover the cost of college. But under current tax law, Pell Grants used for some non-tuition expenses like housing or childcare can be taxed as income. That means students from families earning less than $60,000 a year could end up with a tax bill just for trying to make ends meet while earning their degrees.

Even worse, a complicated interaction issue between Pell Grants and the American Opportunity Tax Credit (AOTC) means many students at lower-cost schools—especially community colleges—lose access to the up to $2,500 of aid available under the AOTC entirely. Under current law, students can’t apply both Pell Grants and the AOTC to the same tuition costs. If a Pell Grant covers most or all of a student’s tuition, as can be true for community college students, there may be nothing left to claim the credit on. The only workaround is to apply the Pell Grant to other expenses—like housing or childcare—which then makes it taxable. It’s a frustrating and unfair setup that affects an estimated 550,000 Pell-eligible students every year.

Repealing the taxability of Pell Grants and fixing this interaction issue would allow students to keep more of the financial aid they’ve earned and simplify their tax filing process. Bipartisan legislation—the Tax-Free Pell Grant Act—would make this change, and it’s time for Congress to act.

2. Modernize Section 127—So More Working Students and Families Can Access Education

Today’s students aren’t just full-time undergraduates living in dorms. They’re parents, veterans, career changers, and working professionals going back to school to earn a degree or build new skills. One of the best tools to help them is employer-provided education assistance under Section 127 of the tax code, which lets employers provide up to $5,250 per year in tax-free educational assistance and student loan repayment.

This benefit helps working students cover tuition, buy course materials, and even pay down student loans. But there’s a catch: the $5,250 cap hasn’t changed since 1986, and the provision allowing employers to use the benefit to help with student loan payments is set to expire this year.

Several bipartisan bills—such as the Upskilling and Retraining Assistance Act and the Upward Mobility Enhancement Act—would raise the cap and allow benefits to cover education-related tools and technology. Another bill, the Employer Participation in Repayment Act, would make student loan repayment a permanent option.

Modernizing Section 127 is a smart, low-cost way to expand opportunities for students who are balancing work, life, and learning—and give employers a powerful tool to invest in their workforce.

3. Simplify Higher Ed Tax Credits—So Students Actually Receive Benefits for Which They’re Eligible

In theory, the AOTC and Lifetime Learning Credit (LLC) are designed to make college more affordable. But in practice, the system is so confusing that many students don’t even know they’re eligible—let alone understand how to claim the credits.

Only 60 percent of eligible students claim the AOTC, and take-up rates are even lower for low-income students. That means thousands of dollars in aid per student are going unclaimed, simply because the system is too complex.

Students deserve better. A single, streamlined tax credit would help more people afford college, finish a degree, or return to school for career training. Past bipartisan proposals have called for combining the AOTC and LLC into one simplified, flexible credit. These plans would also expand what counts as eligible expenses—like computer equipment and childcare—so the benefit reflects the real costs students face today.

By making the system simpler and more effective, Congress can ensure that intended benefits actually reach the students who need them most.

A Better Deal for Students

Comprehensive tax reform doesn’t come around often. This year, Congress has a chance to use that opportunity to advance policies that support the millions of students working hard to improve their lives through education.

Fixing the tax treatment of Pell Grants. Modernizing employer-provided educational assistance. Simplifying higher education tax credits. These aren’t controversial ideas—they’re bipartisan, fiscally modest, and widely supported by educators, employers, and students alike.

If Congress wants to demonstrate that tax reform can be fair, effective, and focused on the future, they should start by putting students first.

Students, families, and advocates should urge their representatives to make higher education a priority in this year’s tax reform. They can easily do so using ACE’s Voter Voice feature. For more, visit our Tax Reform resource page.

If you have any questions or comments about this blog post, please contact us.

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April 14, 2025
IRS Issues Employer Guidance on COVID-19 Paid Leave Tax Credits – CUPA-HR

by CUPA-HR | September 22, 2021

On September 7, the U.S. Treasury Department and Internal Revenue Service (IRS) issued Notice 2021-53, which includes guidance to employers on reporting the amount of qualified sick and family leave wages paid to employees for leave taken in 2021 as provided by the Families First Coronavirus Response Act (FFCRA) and as amended by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021.

The FFCRA required private sector employers with 500 or fewer employees to provide emergency paid family and medical leave and emergency paid sick leave to employees who could not work or telework due to certain COVID-19 complications. The FFCRA also established fully refundable tax credits that employers may receive after providing the emergency paid family and sick leave. The tax credits under the FFCRA were set to expire on December 31, 2020, but they were extended to cover wages voluntarily paid through March 31, 2021 under the Consolidated Appropriations Act of 2021 and again through September 30, 2021 under the American Rescue Plan Act of 2021. Employers were no longer required to provide the paid sick and family and medical leave wages to employees after the enactment of the Consolidated Appropriations Act, but employers that voluntarily provided paid leave that would have satisfied the paid family leave and paid sick leave requirements under the FFCRA were eligible for the same fully refundable tax credits.

The new IRS notice states that employers will be required to report the amount of qualified sick and family leave wages paid to employees between January 1 and September 30, 2021 either on the Form W-2, Box 14, or in a separate statement provided with the Form W-2. The notice also includes model language to help employers communicate information about the qualified sick leave and family and medical leave wages to employees, as well as the impact these wages may have on tax credits the employee may be entitled to with respect to self-employment income.

CUPA-HR will keep members apprised of any additional tax-related guidance from the IRS as it relates to COVID-19 policies and guidance.

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September 22, 2021