,i #aaeth ,,congress #b;d ,session ,h4 ,r4 #eiaf ,,in ,,the ,,house ,,of ,,representatives ,may #bb1 #bjah,mr4 ,reed introduced the following bill2 which was referred to the ,committee on ,ways and ,means1 and in addition to the ,committee on ,education and the ,workforce1 for a period to be subsequently determined by the ,speaker1 in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to impose a tax on institutions of higher education that fail to use #be percent of the growth in endowment value for grants for working-family students each year1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,reducing ,excessive ,debt and ,unfair ,costs of ,education ,act of #bjah or the ,,reduce ,act of #bjah4 #b4 ,excise tax on undistributed required payouts from endowments of certain institutions of higher education 7a7 ,in general ,subchapter ,h of chapter #db of the ,internal ,revenue ,code of #aihf is amended to read as follows3 ,h ,failure by certain institutions of higher education to make certain payouts ,sec4 #difh4 ,excise tax on undistributed required payouts from endowments of certain institutions of higher education4 #difh4 ,excise tax on undistributed required payouts from endowments of certain institutions of higher education 7a7 ,initial tax ,there is hereby imposed1 on an undistributed required payout of a qualified institution of higher education for a taxable year1 on the first day of the first academic period beginning after the close of such taxable year1 a tax equal to #a4d percent of such undistributed required payout as of such day4 7b7 ,additional tax ,in any case in which an initial tax is imposed under subsection 7a7 on an undistributed required payout1 if any portion of such undistributed required payout exists-- 7#a7 on the date which is #a year after the date on which the initial tax was imposed1 there is hereby imposed an additional tax equal to #cj percent of such undistributed required payout as of the date such tax is imposed1 and 7#b7 on the date which is #b years after the date on which the initial tax was imposed1 there is hereby imposed an additional tax equal to #ajj percent of such undistributed required payout as of the date such tax is imposed4 7c7 ,suspension of deductible contributions 7#a7 ,in general ,no deduction shall be allowed under any provision of this title 7including sections #agj1 #ede7;b77#b71 #eef7;b77#b71 #fdb7;c71 #bjee1 #bajf7;a77#b71 and #bebb7 with respect to any contribution to an organization during a contribution suspension period4 7#b7 ,contribution suspension period ,for purposes of ths subsection1 the term contribution suspension period means1 with respect to any qualified institution of higher education1 the period beginning on the day after a return under section #fjcc is filed for a taxable year for which there is an undistributed required payout1 and ending on the first day no portion of such undistributed required payout exists4 7#c7 ,notice of suspension ,if the deductibility of contributions is suspended under this subsection1 the ,internal ,revenue ,service shall update the listings of tax-exempt organizations1 and the ,internal ,revenue ,service and such organization shall publish appropriate notice to the public of such suspension and of the fact that contributions to such organization are not deductible during the period of such suspension4 7d7 ,special rule for complete payment for working-,family students ,with respect to a qualified institution of higher education for a taxable year1 if1 during the one-year period preceding the date on which an initial tax under subsection 7a7 would 7but for this subsection7 be imposed on the undistributed required payout for such taxable year1 each degree-seeking working-family student receives an amount of grants for such period that is not less than the cost of attendance for such student at such institution during such period1 no tax shall be imposed under this section on the undistributed required payout for such taxable year4 7e7 ,definitions and special rule ,for purposes of this section-- 7#a7 ,qualified institution of higher education 7,a7 ,in general ,the term qualified institution of higher education means an eligible educational institution 7as defined in section #be;,a7f77#b77-- 7i7 which had at least #ejj tuition-paying students during the preceding taxable year1 7ii7 more than #ej percent of the tuition-paying students of which are located in the ,united ,states1 7iii7 the aggregate fair market value of the assets of which at the end of the preceding taxable year 7other than those assets which are used directly in carrying out the institution's exempt purpose7 is at least #ejj1jjj per student of the institution1 and 7iv7 of which less than the applicable percentage of undergraduates enrolled during the taxable year receive ,federal ,pell ,grants under section #dja of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajgj;a74 7,b7 ,students ,for purposes of subparagraph 7,a71 the number of students of an institution 7including for purposes of determining the number of students at a particular location7 shall be based on the daily average number of full-time students attending such institution 7with part-time students taken into account on a full-time student equivalent basis74 7,c7 ,applicable percentage ,for purposes of subparagraph 7,a71 the applicable percentage is-- 7i7 in the case of taxable years beginning in #bjah1 #bh percent1 7ii7 in the case of taxable years beginning in #bjai1 #bi percent1 7iii7 in the case of taxable years beginning in #bjbj1 #cj percent1 7iv7 in the case of taxable years beginning in #bjba1 #ca percent1 7v7 in the case of taxable years beginning in #bjbb1 #cb percent1 and 7vi7 in the case of taxable years beginning after #bjbb1 #cc percent4 7#b7 ,undistributed required payout ,with respect to a qualified institution of higher education for a taxable year-- 7,a7 ,in general ,the term undistributed required payout means1 as of a date on which a tax is imposed under subsection 7a7 or 7b71 the amount by which-- 7i7 the required payout for such taxable year1 exceeds 7ii7 the grants to working-family students made by such institution before such date out of such required payout4 7,b7 ,de minimis exception ,if an undistributed required payout with respect to a qualified institution of higher education for a taxable year is not more than #a percent of the required payout with respect to such institution for such taxable year 7or1 if less1 #bej1jjj71 subsections 7a71 7b71 and 7c7 shall not apply with respect to such undistributed required payout4 7,c7 ,progressive grant requirement ,a grant out of a required payout for a working-family student for an academic period shall only qualify for the purposes of subparagraph 7,a77ii7 to the extent that the amount of grants by such institution for such student for such academic period is not more than the least amount of grants given by such institution out of such required payout for such academic period to any degree-seeking working-family student with a lower household income than such student4 ,for purposes of the preceding sentence1 grant amounts shall be determined on a per credit basis4 7#c7 ,required payout ,the term required payout means1 with respect to any qualified institution of higher education for any taxable year1 an amount equal to #be percent of the average net investment income with respect to such institution for such taxable year and the preceding #f taxable years4 7#d7 ,net investment income ,the term net investment income means1 with respect to any qualified institution of higher education for any taxable year1 the excess 7if any7 of-- 7,a7 the aggregate fair market value of all endowments of such institution 7determined as of the close of the preceding taxable year71 minus any contributions to such endowments received during such preceding taxable year1 plus any spending from such endowments during such preceding taxable year1 over 7,b7 the aggregate fair market value of all endowments of such institution 7determined as of the close of the second preceding taxable year74 7#e7 ,grant for a working-family student 7,a7 ,in general ,the term grant for a working-family student means1 with respect to a qualified institution of higher education1 a grant by such institution for all or a portion of the cost of attendance to a working-family student attending such institution4 7,b7 ,working-family student ,the term working-family student means1 with respect to a qualified institution of higher education for a taxable year1 an individual-- 7i7 who is enrolled 7part-time or full-time7 as an undergraduate student in such institution during an academic period beginning in such taxable year2 and 7ii7 whose household income for the taxable year does not exceed #fjj percent of an amount equal to the poverty line for a family of the size involved4 7#f7 ,cost of attendance ,the term cost of attendance1 with respect to a student attending a qualified institution of higher education for an academic period1 has the meaning given such term in section #dgb of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhgll71 less any grants for cost of attendance 7as defined in such section7 received by such student from any person other than such institution during such academic period4 7#g7 ,,fafsa safe harbor ,for purposes of this section1 a qualified institution of higher education may rely on data from ,free ,applications for ,federal ,student ,aid authorized under section #dhc7;a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajib7;a774 7#h7 ,family size2 household income2 poverty line ,the terms family size1 household income1 and poverty line have the respective meanings given such terms in section #cf;,b7d74 ,in the case of any student with respect to whom a deduction is allowable under section #aea to another taxpayer1 the terms family size and household income shall be determined with respect to such other taxpayer4 7#i7 ,assets and ,net ,investment ,income of ,related ,organizations 7,a7 ,in general ,for purposes of paragraphs 7#a77;,a77iii7 and 7#d71 assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income1 respectively1 of the educational institution1 except that-- 7i7 no such amount shall be taken into account with respect to more than #a educational institution1 and 7ii7 unless such organization is controlled by such institution or is described in section #eji7;a77#c7 with respect to such institution for the taxable year1 assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account4 7,b7 ,related organization ,for purposes of this subsection1 the term related organization means1 with respect to an educational institution1 any organization which-- 7i7 controls1 or is controlled by1 such institution1 7ii7 is controlled by one or more persons which also control such institution1 or 7iii7 is a supported organization 7as defined in section #eji7;f77#c771 or an organization described in section #eji7;a77#c71 during the taxable year with respect to such institution4 4 7b7 ,special rules relating to deduction of restricted and unrestricted gifts ,section #agj of such ,code is amended-- 7#a7 by redesignating subsection 7p7 as subsection 7q72 and 7#b7 by inserting after subsection 7o7 the following new subsection3 7p7 ,special rule for gifts to institutions of higher education 7#a7 ,in general ,in the case of contributions by an individual to a institution of higher education 7as defined in subsection section #difh7;e77-- 7,a7 if the use of any such amounts are restricted by the taxpayer to a use other than scholarships1 no deduction shall be allowed for so much of the aggregate of such restricted contributions for the taxable year as exceeds #e1jjj1 7,b7 if the use of such amounts are unrestricted1 the amount taken into account under this section for the taxable year shall include an allowance equal to #be percent of the aggregate amount of such unrestricted contributions1 and 7,c7 if the use of any such amounts are restricted by the taxpayer to scholarships for working-family students 7as defined in section #difh7;e77#e77;,b771 the amount taken into account under this section for the taxable year shall include an allowance equal to #ej percent of the aggregate amount of such scholarship restricted contributions4 ,any such allowance shall be taken into account under this section in the same manner as the contribution with respect to which such allowance was determined1 except that the limitation with respect to an individual for any taxable year under subsection 7b77#a77;,a7 shall be increased by the amount of any allowances allowed under paragraphs 7,b7 or 7,c7 for such taxable year4 7#b7 ,institution of higher education ,for purposes of this subsection1 the term educational institution means an institution that is described in section #aja of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajja74 4 7c7 ,requirements for tax exempt status of qualified institutions of higher education ,section #eja of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7s7 ,additional requirements for institutions of higher education 7#a7 ,five-year plan ,an institution of higher education 7as defined in section #agj7p77#b77 shall not be treated as described in subsection 7c77#c7 unless the institution submits to the ,secretary 7at such time and in such manner as the ,secretary shall prescribe7 #e-year plans which-- 7,a7 are designed to ensure the percentage increase in the cost of education for any academic year at such institution 7as compared to the preceding academic year7 will not exceed the percentage increase in the ,consumer ,price ,index for all-urban consumers published by the ,department of ,labor 7for the same periods71 7,b7 in the case of any plan after the first #e-year plan submitted under this paragraph1 describe any failure to achieve the goals of the preceding #e-year plan and any steps being taken to address such failures1 7,c7 identify areas in which costs are projected to increase the most and the measures being taken to address such cost increases1 and 7,d7 contain such other information as the ,secretary determines is necessary for carrying out the purposes of this subsection4 7#b7 ,report ,the plan shall include a report which includes information detailing salaries paid by the institution1 any certified audited financial statement1 any fees paid by the institution for investment management services1 the institutions's long-term spending plan1 the institution's investments 7including the risk profile and expected rate of return of such investments71 and the institution's #e largest spending categories1 the amounts spent within those categories1 and the #e items within each category on which the most is spent4 ,the institution shall make such plan publicly available and include such plan on the institution's website4 7#c7 ,educational guarantee ,a qualified institution of higher education 7as defined in section #difh7;e77#a77 shall not be treated as described in subsection 7c77#c7 unless-- 7,a7 at least #bj percent of the students of such institution are eligible to receive a ,federal ,pell ,grant under section #dja of the ,higher ,education ,act of #aife for the academic year beginning in the taxable year1 and 7,b7 at least #ej percent of the students of such institution have household income for the taxable year that does not exceed #fjj percent of an amount equal to the poverty line for a family of the size involved 7determined under rules similar to the rules of section #difh7;e77#h774 4 7d7 ,clerical amendment ,the table of subchapters for chapter #db of such ,code is amended by adding at the end the following new item3 ,subchapter ,h4 ,failure by certain institutions of higher education to make certain payouts 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of enactment of this ,act4 #c4 ,excise taxes on restricted donations to higher education institutions 7a7 ,donor advised funds ,section #diff of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7e7 ,special rule for unrestricted donations to qualified institutions of higher education 7#a7 ,in general ,in the case of any restricted distribution from a donor advised fund to an institution of higher education 7as defined in section #agj7p77#b77-- 7,a7 such distributions shall be treated as a taxable distribution for purposes of this section1 and 7,b7 subsection 7a7 shall be applied by substituting #ajj percent for #bj percent4 7#b7 ,restricted distribution ,for purposes of this subsection1 the term restricted distribution means a distribution restricted by the fund to a use other than scholarships4 4 7b7 ,private foundations ,section #dide of such ,code is amended by adding at the end the following new subsection3 7j7 ,special rule for unrestricted donations to qualified institutions of higher education 7#a7 ,in general ,in the case of any restricted distribution from a private foundation to an institution of higher education 7as defined in section #agj7p77#b77-- 7,a7 such distribution shall be treated as a taxable expenditure for purposes of this section1 and 7,b7 subsection 7a77#a7 shall be applied by substituting #ajj percent for #bj percent4 7#b7 ,restricted distribution ,for purposes of this subsection1 the term restricted distribution means a distribution restricted by the foundation to a use other than scholarships4 4 7c7 ,effective date ,the amendments made by this section shall apply to distributions after the date of the enactment of this ,act4 #d4 ,report on net tuition for certain institutions of higher education 7a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #fjej,x4 ,disclosures required with respect to net tuition 7a7 ,in general ,each institution of higher education 7as defined in section #agj7p77#b77 shall for the taxable year make a return to the ,secretary which contains-- 7#a7 the amount of the excess 7if any71 for each working-family student 7as defined in such section7 at such institution1 of-- 7,a7 the cost of attendance at such institution 7as defined in section #dgb71 over 7,b7 the grants from such institution received by such student1 and 7#b7 the number of students enrolled at such institution on the first day of the taxable year4 7b7 ,form and manner ,such return shall be made at such time1 and in such form and manner1 as the ,secretary may by regulation prescribe4 4 7b7 ,clerical amendment ,the table of sections for subpart ,b of part ,,iii of subchapter ,a of chapter #fa of such ,code is amended by adding at the end the following new item3 ,sec4 #fjej,x4 ,disclosures required with respect to net tuition4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #e4 ,federal ,pell ,grant ,program funding ,section #dja7;b77#g77;iv7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajgj;a7b77#g77;iv77-- 7#a7 in subclause 7,,xi71 by striking the period at the end and inserting a comma2 and 7#b7 by inserting at the end the following flush left text3 1 which1 beginning with fiscal year #bjai1 for each fiscal year for which amounts made are made available pursuant to subclauses 7,,ix7 through 7,,xi71 the amount made available for the fiscal year shall be increased by an amount equal to the increase in receipts to the ,treasury during the preceding fiscal year attributable to the taxes imposed by section #difh of the ,internal ,revenue ,code of #aihf44 #f4 ,consumer information ,section #acb7;i77#a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajae;a7i77#a77 is amended by adding at the end the following3 7,,aa7 ,total number of employees of the institution in charge of managing or advising the endowment or investments of the institution4 7,,bb7 ,annual salary and performance-based compensation of each individual employed by the institution that is involved in management or advising the endowment4 7,,cc7 ,the total expenses for managing the endowment of the institution1 disaggregated-- 7i7 by office space and equipment1 and any other expenses not described in clause 7ii72 and 7ii7 by outside management and performance fees by category4 7,,dd7 ,total institutional aid provided to students by the institution and the total amount of such aid1 disaggregated-- 7i7 by institutional aid provided using endowment funds2 7ii7 by institutional aid provided using non-endowment funds2 7iii7 by the type of such aid 7such as merit1 need1 or athletic72 and 7iv7 by the income categories described in paragraph 7#f74 7,,ee7 ,the number of students whose parents and grandparents have provided the institution-- 7i7 more than #ajj1jjj during the #d-year period beginning on the day before the student's first date of attendance through the graduation1 transfer1 or expulsion of the student2 or 7ii7 more then #ejj1jjj in the aggregate4 7,,ff7 ,the number of students whose parent or grandparent 7biological1 custodial1 step-parent etc7 graduated from the institution4 4