Proposed Bill Would End Tax Deductibility of College Donations Used to Influence Admissions

Chris Gaetano
Published Date:
Jun 7, 2019

While today nearly all kinds of donations to colleges and universities are considered tax deductible, proposed legislation drafted in the wake of the college admissions scandal would significantly narrow the criteria, according to Accounting Today. Generally, a donation's tax deductible status is severely restricted if there is a quid pro quo exchange in the process. This is why the IRS took a dim view on state governments establishing their own nonprofits as a way for those affected by the TCJA's $10,000  limitation on deductions for state and local taxes. 

The bill, introduced by Sen. Ron Wyden (D-Ore.), would consider a large donation to an educational institution that is made in order to influence the school's admissions process (such as by enrolling the donor's child) a quid pro quo. In order for a donation to be fully tax deductible, the institution would be required to have a policy banning consideration of such donations as a factor in admissions. Any educational institution that received federal financial aid would have to implement such a policy, as well as report the number of applicants, admitted students and enrolled students who are children of donors. The Department of Education would be also have to make the data publicly available, and institutions of higher learning would include the information on their annual IRS filings.

If a university refused to implement such a policy, 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.

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