For many years from atop our soapbox in college admissions, we have argued that legacy admission violates tax law and that the best way to rid the college admissions process of the practice of offering preferential treatment to the progeny of a school’s alumni base is to zero in on the minutiae of our tax code. You see, to suggest that legacy admission is all bad is an invalid argument. After all, legacy admission, in many ways, helps subsidize the educations of low-income students who often happen to be first-generation college students and/or underrepresented minorities. In short, alumni often donate money not just out of the goodness of their hearts but to improve their children’s cases for admission — a quid pro quo arrangement if you will. Of course, it’s quite unfair that the children of the privileged would enjoy a further leg up in the elite college admissions process — and, yes, elite colleges reserve a sizable slice of the slots in each incoming class for legacy applicants. So how exactly does legacy admission, as we’ve long argued, violate our tax code?
Legacy Admission Is Blatant Quid Pro Quo
As Yair Listokin writes for Inside Higher Ed in a piece entitled “It’s Time for the IRS to Question Legacy Admissions,”To encourage giving, the tax code allows donors to deduct charitable gifts from income, reducing income tax obligations. The goal is to encourage charity and good works, not to allow purchases from nonprofits to enjoy tax preferences. Accordingly, the IRS denies tax deductions for donor payments when the donor receives nonreligious goods and services as a quid pro quo for the gift. For example, donors who buy tickets to attend charitable benefit dinners cannot deduct the full price of the tickets. The value of the meal the donors receive is a quid pro quo for the purchased ticket and is not deductible…While the exchange of alumni gifts for preferential admissions access is implicit, there are several pieces of evidence that the implied exchange alters the behavior of both colleges and alumni. Elite colleges explicitly give admissions preferences to legacy applicants. Indeed, empirical evidence indicates that legacy status raises the probability of an applicant’s admission the equivalent of a 160-point increase in SAT score.”
Quid Pro Quo Violates 26 U.S. Code § 170
Mr. Listokin is, of course, spot on. 26 U.S. Code § 170 reads as follows: “There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary.” One part of this code also states, “(C) no part of the net earnings of which inures to the benefit of any private shareholder or individual.” In short, alumni make tax-deductible donations to their alma maters. In return for these donations, alumni should not receive anything in return. But, of course, the children of these alumni are receiving preferential treatment in admissions — which directly contradicts the stipulation in our tax code that “no part of the net earnings…insures to the benefit of any private shareholder or individual.” Legacy admission is wrong. But let’s end the intellectual debate that has gone on for years. Let’s instead look directly at the tax code and abolish the practice once and for all.
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