Senate Continues to Construct Alternative to House Budget Reconciliation Bill As Impacted Communities Call for Changes to Key Provisions
(Note: CSPEN will not be hosting a webinar today as we continue to work with the higher education community on revisions to the Senate alternative to H.R. 1 – The One Big Beautiful Bill in advance of Senate floor consideration of their comprehensive final bill. We will continue to provide updates and support efforts to seek Senate revisions prior to floor debate in the days, and likely week(s) ahead.)
Overview
While the higher education community continues to pursue changes to specific portions of the Senate Health, Education, Labor & Pension Committee’s package of Budget Reconciliation proposals (Title VIII of Senate bill), other Senate Committees are releasing their portions of the Senate alternative to H.R. 1 – The One Big Beautiful Bill Act of importance to students and institutions of higher education. Here is a summary of both the latest on proposal and negotiations surrounding the HELP Committee’s proposals and also details on Senate Finance Committee proposals released on Monday as well.
Title VIII – Committee on Health, Education, Labor, and Pensions
While the Senate HELP Committee’s proposals have removed a number of provisions that the higher education community sought to oppose (e.g. Federal Pell Grant revisions, institutional risk-sharing, cap on loan eligibility based upon the median of college cost of all similar programs, and other student loan changes), the higher education community is now focused on concerns with the Senate proposal. Garnering the most attention in the broader higher education community are the new institutional accountability regime (Ineligibility for Low Outcomes ) which would codify in law a substantially different form of current “earnings premium” regulations and targeted graduate and professional program provisions including the elimination of GRAD PLUS loans and revisions to annual and aggregate loan limits.
In addition to these two key areas, many within the for-profit community are urging the Senate to restore two key House passed provisions included under the “Regulatory Reform” portion of the Houe bill. The two provisions are the repeal of both the Financial Value Transparency and Gainful Employment regulations and the 90/10 Rule regulations. The impacted communities are requesting that both of these two provisions be incorporated into the Senate proposal, along with the rollback of the Borrower Defense to Repayment and Closed School Discharge proposals included in the Senate draft bill.
Title VII – Finance
Included within the five hundred and forty-nine pages of the Senate Finance Committee’s proposals are noteworthy revisions labeled as “Additional Tax Relief to Working Families and Main Street” in the Committee’s bill overview. (www.finance.senate.gov/imo/media/doc/finance_committee_summary1.pdf) CSPEN has pulled the section references and descriptions from the side-by-side provided by the Finance Committee and included them here as a source reference for your convenience.
Sec. 70110. Termination of miscellaneous itemized deductions other than educator expenses
This provision makes permanent the temporary suspension of miscellaneous itemized deductions and removes unreimbursed employee expenses for eligible educators from the list of miscellaneous itemized deductions.
Sec. 70117. Extension of rollovers from qualified tuition programs to ABLE accounts permitted
This provision permanently allows tax-free rollovers of amounts in Section 529 qualified tuition programs to qualified Achieving a Better Life Experience programs of individuals with a disability who are employed.
Sec. 70119. Extension and modification of exclusion from gross income of student loans discharged on account of death or disability
This provision permanently extends the exclusion from a taxpayer’s income any income resulting from the discharge of student debt on account of death or total disability of the student. This provision also adds a requirement that the taxpayer provides a work-eligible Social Security number in order to claim such an exclusion. This provision applies to discharges after December 31, 2025.
Sec. 70201. No tax on tips
This provision provides a deduction of up to $25,000 for qualified tips received by an individual in an occupation which customarily and regularly receives tips during a given taxable year. The deduction is allowed for both employees receiving a W-2 and independent contractors receiving a 1099-K, 1099-NEC or reported by the taxpayer on Form 4317. The deduction is allowed for both itemizers and non-itemizers. The deduction
begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). Qualified tips are defined as any cash tip received by an individual in an occupation which customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary of the Treasury. The list of those occupations is to be published by the Secretary of the Treasury within 90 days of enactment. To be considered a qualified tip, the tip amount must be paid voluntarily, is not subject to negotiation and is determined by the payor. Furthermore, qualified tips do not include any amount received in the course of a specified service trade or business. No tip deduction is allowed unless the individual receiving the tips includes his or her SSN on the tax return for the tax year (and if the individual is married, such tax return must also include the SSN of such an individual’s spouse). The deduction is allowed from taxable years 2025 through
2028.
Sec. 70204. Trump accounts and contribution pilot program
This provision reflects the text included in the House-passed H.R. 1 to establish Trump accounts, a new kind of savings account designed to build financial security for the next generation. The accounts are administered by a bank or similar financial institution and the overall program is overseen by the Department of Treasury.
Starting January 1, 2026, parents of any child under the age of eight years old may open a Trump account for their child. These accounts are eligible to receive contributions from parents, relatives, and other taxable entities as well as non-profit and government entities facilitated by the Treasury Department. To be eligible to open an account, the child must be a U.S. citizen and at least one parent must provide their SSN. The SSN provided must be considered work-eligible to open an account. Trump account funds must be invested in a diversified fund that tracks an established index of U.S. equities.
Sec. 70411. Tax credit for contributions of individuals to scholarship granting organizations
This provision creates a new income tax credit for charitable contributions made to scholarship granting organizations, tax-exempt organizations that provide scholarships to elementary and secondary school students. The credit allowed to a taxpayer for a taxable year may not exceed the greater of 10 percent of the taxpayer’s adjusted gross income or $5,000. An individual is allowed the credit only to the extent that the Secretary of the Treasury, subject to an aggregate volume cap described below, allocates the credit to the individual. Students who benefit from the scholarships must be members of a household with an income not greater than 300 percent of the area median gross income and be eligible to enroll in a public elementary or secondary school.
This provision would establish a permanent program with an aggregate annual volume cap on the total amount of credits at $4 billion. The provision is effective for taxable years beginning after December 31, 2026 in order to allow Treasury sufficient time to establish the program.
Sec. 70412. Exclusion for employer payments of student loans
This provision removes the requirement that a student loan payment must be made before January 1, 2026, to qualify as educational assistance and thus makes the exclusion permanent. This provision would also inflation adjust the maximum exclusion for taxable years beginning after 2026.
Sec. 70413. Additional expenses treated as qualified higher education expenses for purposes of 529 accounts
This provision allows tax-exempt distributions from 529 savings plans to be used for additional educational expenses in connection with enrollment or attendance at an elementary or secondary school, including:
- curriculum and curricular materials;
- books or other instructional materials;
- online educational materials;
- tutoring or educational classes outside the home;
- certain testing fees;
- fees for dual enrollment in an institution of higher education; and
- certain educational therapies for students with disabilities.
The provision applies to distributions made after the date of enactment.
Sec. 70414. Certain postsecondary credentialing expenses treated as qualified higher education expenses for purposes of 529 accounts
This provision allows tax-exempt distributions from 529 savings plans, made after the date of enactment, to be used for additional qualified higher education expenses, including “qualified postsecondary credentialing expenses” in connection with “recognized postsecondary credential programs” and “recognized postsecondary credentials”. The provision applies to distributions made after the date of enactment.
Sec. 70415. Modification of excise tax on investment income of certain private colleges and universities
The proposal amends the current excise tax on net investment income framework for certain private colleges and universities under Section 4968 with a tiered system based on an institution’s student-adjusted endowment (see table below). For purposes of calculating an institution’s student-adjusted endowment, this provision amends such calculation by excluding students who do not meet the requirements under Section 484(a)(5) of the Higher Education Act of 1965. Additionally, the proposal modifies the term “applicable educational institution” to mean an eligible education institution (as defined in Section 25A(f)(2)): (1) that has at least 500 tuition-paying students during the preceding taxable year; (2) more than 50 percent of the tuition paying students of which are located in the United States; (3) that is not described in the first sentence of Section 511(a)(2)(B) (describing State colleges and universities); (4) that is not a qualified religious institution; (5) the student adjusted endowment of which is at least $500,000; and (6) has participated in a program under title IV of the Higher Education Act of 1965. Finally, this provision includes student loan interest income and certain royalty income for the purposes of calculating a school’s net investment income.
Sec. 70416. Expanding application of tax on excess compensation within tax-exempt organizations.
This provision strikes the text following “means any employee (including any former employee) of an applicable tax-exempt organization” from the definition of “Covered Employee” under Section 4960(c)(2). As a result, a covered employee includes any employee of an applicable tax-exempt organization that receives remuneration in excess of $1 million.
What’s Next
The Senate HELP Committee leadership and staff have heard and received multiple proposals to revise, repeal, or add provisions to the 71 page document released on June 10th. CSPEN, as well as many, many others within the higher education community, will continue to promote proposal supportive of our students, your institutions, and the entire higher education community, and share new detail with you as they become available. Likewise, we will work to share similar information in response to the Senate Finance Committee’s proposals as well.
