A top Democrat in the Senate hopes to stop parents from making donations that could increase the chances their children get in to certain colleges.
The bill would require any institution that receives federal financial aid to not consider donations as a factor in the admissions process. If a university doesn’t put in place such a policy, parents would be able to claim a tax deduction only for $100,000 of donations over a six-year period during which their child attends the school, under the bill introduced June 5 by Senate Finance Committee ranking member Ron Wyden (D-Ore.).
The measure follows fallout from the recent college admissions scandal, in which wealthy parents paid bribes disguised as charitable donations in order to get their children into elite schools.
“It’s absurd that the tax code subsidizes the top 1% buying their way into school,” Wyden said in a statement.
Donations to colleges and universities are tax-exempt under tax code Section 170. The bill would expand the section’s “quid pro quo” rules,” which govern how much of a tax deduction taxpayers can take when they make a charitable contribution and receive a benefit in return.
Deductions taken for donations in excess of $100,000 during the six-year period preceding their child’s attendance would be recaptured, according to the bill.
The bill would amend the Higher Education Act to include the donation policy requirement. Colleges and universities would also have to report the number of applicants, admitted students, and enrolled students who are children of donors, and include the information in IRS filings.
To read more from Daily Tax Report ® pleaseOR Request Trial