Senator Ron Wyden, a Democrat from Oregon, recently announced that he intends to draft legislation that will propose to remove the tax breaks that certain college donors receive for gifting to their alma maters. Specifically, Senator Wyden’s legislation would be aimed at curbing tax deductions for parents whose gifts are bequeathed right before or after their children apply for admission. As our regular readers know well, we at Ivy Coach have been calling for an end to the practice of legacy admission for many years. In fact, we have argued that offering preferential treatment to the children of donors should be a violation of tax law since people are not supposed to receive anything in return for their tax deductible donations — as per 26 U.S. Code § 170. It seems Senator Wyden gets it. Oh boy, oh boy, oh boy!
Proposed Legislation to Eliminate Tax Incentives for College Donors Should Include Fewer Qualifiers
As Senator Wyden drafts this legislation, we would encourage him to remove the qualifiers that eliminate tax breaks only for people who donate right before or right after their children apply for admission. If parents (and grandparents for that matter) know that such legislation is on the horizon, they could start gifting colleges buildings and fields well before their progeny apply. Heck, they could start donating major sums to these schools while their children and grandchildren are in pre-school and still ultimately receive the same quid pro quo in admissions a little more than a decade later. That said, we understand that perfect bills don’t pass and if a bill passes with the qualifiers it seems Senator Wyden intends to include, it’s still a step forward.
Opposition to Proposed Legislation to Eliminate Tax Incentives for College Donors
Senator Wyden will — naturally — not be without opposition. As reports Scott Jaschik for “Inside Higher Ed” in a piece entitled “Just Because It’s Legal Doesn’t Make It Right,” ” The National Association of College and University Business Officers released a statement that said in part, ‘Wyden’s proposal misses the mark: This scandal is about individual entitlement and greed — the Department of Justice indictments were not a condemnation of the tax-exempt status of America’s esteemed colleges and universities. Wyden’s approach is impulsive and misguided, ultimately penalizing students, researchers and other beneficiaries of higher education by drastically diminishing the ability of colleges and universities to receive tax-deductible charitable contributions.'”
Does it come as any surprise whatsoever that the National Association of College and University Business Officers — the folks whose job it is to increase school endowments — would oppose this legislation? It’s like a fisherman opposing legislation that outlaws fishing. Fishermen love fish! So look for the world of higher education — the fishermen — to come down hard in lobbying against Senator Wyden’s anti-fishing legislation. Ok, we’ve gone too far with the fish. Deal with it.