Federal tax bill has mixed news for Stanford

The new tax reform bill passed by both houses of Congress has mixed news for Stanford, according to university leaders.

In a blog post Wednesday, President Marc Tessier-Lavigne and Provost Persis Drell said they were relieved that the final tax bill passed by the House and Senate did not include several provisions of an earlier House bill. Those provisions would have treated the tuition associated with graduate assistantships, along with employee tuition benefits, as taxable income and also would have repealed the student loan interest deduction.

The final bill does not include those provisions – a credit, Tessier-Lavigne and Drell said, to “energetic advocacy efforts” that graduate students and other members of the Stanford community joined.

“Those advocacy efforts clearly made a difference,” they wrote.

Regrettably, they said, the bill does include a 1.4 percent excise tax on the investment earnings of certain university endowments, including Stanford’s.

“The endowment at Stanford provides essential support for our core academic mission, including research, education and student financial aid,” Tessier-Lavigne and Drell wrote. “Those things, in turn, provide immeasurable benefits to the economy, health and culture of our country. Though the advocacy efforts of the higher education community reduced the number of institutions to which this new endowment tax applies, these efforts unfortunately did not succeed in preventing its adoption entirely.”

The excise tax is estimated to apply to the endowments of fewer than three dozen universities.

As the tax legislation awaits President Trump’s signature, Tessier-Lavigne and Drell said Stanford’s efforts now turn to assessing the implications for the university’s finances.

“Our next steps will be to analyze the effects of the final bill on Stanford and factor those effects into our budget planning process for the 2018-19 year,” the president and provost wrote. “The budget process will take place through the spring and culminate in the adoption of a budget by the Board of Trustees in June.

“In the budget process we will work to minimize the damage to our academic mission and to our community from the new endowment tax. We remain committed to providing the resources that preserve a strong financial aid program for our students, and that allow our community to make its best possible contribution to our world.”

The proposal in the earlier House bill to treat the tuition associated with graduate assistantships as taxable income created wide concern in the higher education community. At Stanford, both the university and graduate student leaders worked to share information with graduate students about the proposal and communicate with elected officials about its negative effects.

At a town hall for graduate students earlier this month, university leaders estimated that some graduate students – those with research or teaching assistantships who take 8 to 10 units – could have seen their federal taxes increase by several thousand dollars per year under the provision.

In an email to graduate students on Wednesday, Patricia Gumport, vice provost for graduate education, noted the community’s “active engagement and thoughtful collaboration.”

“The Graduate Student Council, Stanford Solidarity Network, university leadership and many of you worked strategically to convey information about the significant negative impacts of those proposals, had they been adopted,” Gumport wrote. “The voices of our graduate students clearly were heard in the legislative process. I thank you for your initiative and for working in partnership on these matters of great concern for our students, for the university and for higher education nationally.”