For those of you wondering how the recently passed tax law will be felt at Deep Springs, the answer is…we don’t really know yet, but it is the impact on charitable donations that remains unknown.
Charitable Donations: Philanthropic professionals agree that the new law will reduce charitable giving by increasing the number of people who do not itemize donations, and therefore lose access to the tax advantages of their donations. But there is disagreement about the net effect of the reduction—I have seen a range of predictions, from 15% to 40%. Only time will tell.
Endowment Tax: The original bill imposed a 1.4% excise tax on the investment income of private colleges with investments of over $500,000 per student, but exempted colleges with “less than 500 tuition-paying students.” With this language Deep Springs would have been doubly protected from the tax; we have fewer than 500 students, and none of our students are tuition-paying. The final version, however, removed the term “tuition-paying,” but left intact the exemption for colleges like ours with less than 500 students. Since there are few colleges with fewer than 500 students and investments of the requisite size, (ours are nearly $800,000 per student at the present time), and the writers of the legislation did not compose the exemption with Deep Springs in mind, we have taken steps to alert our congressman in case further changes are considered.
Unrelated Business Income: The changes in the new law to the way colleges are taxed for unrelated business income do not apply to Deep Springs, because our agricultural operations are educational enterprises, not businesses.
Taxes on Interest Paid by Certain Bonds: Deep Springs does not use bond financing, so this provision does not impact the college.
Coincidence? We don’t know how those who drafted the tax bill felt about their time in higher education. But we note on reading the bill that immediately following the section increasing taxes on colleges (Part VIII) comes a section reducing taxes on beer (Part IX). Here again, because of our ground rules, Deep Springs is not impacted by this change in the law.
Further Information: We will share more information with the Deep Springs community as it becomes available to us.
Best wishes for the holiday season,
David Neidorf