Kentucky College Gets Exemption From Endowment Tax

02/08/18 01:28 PM EST
By Michelle Hackman 

WASHINGTON -- Berea College, the small tuition-free school embroiled in a partisan fight over Republicans' tax law, will be exempted from a new levy on large university endowments under the budget deal reached by congressional leaders Wednesday night.

The college, located in Senate Majority Leader Mitch McConnell's home state of Kentucky, boasts a $1 billion endowment and educates about 1,700 students per year. That ratio means the college qualifies as one of roughly 30 schools required to pay the new tax, which Republican lawmakers had aimed at wealthy universities like Harvard and Stanford.

Mr. McConnell and other Republicans argued that Berea would be uniquely harmed by the tax because of its unusual set-up: It accepts only low-income students and fully covers their tuition costs, while they work to pay for living expenses.

A spokeswoman for Sen. McConnell declined to comment.

Berea's president, Lyle Roelofs, estimated in a January interview the school would owe a little more than $1 million in taxes this year on earnings from its endowment. That could pay for about 30 students at $35,000 a head, he added.

Republican leaders hoped to exempt the college under their tax bill, passed in December, but the Senate parliamentarian ruled shortly before its passage that such a carve-out didn't comply with the arcane rules lawmakers were using to pass the legislation by a simple majority vote.

Sen. Bernie Sanders (I., Vt.) pushed for the exemption to be removed from the tax bill, arguing that Mr. McConnell was showing favoritism for a home-state college while ignoring the tax bill's impact on other schools that subsidize poor students.

The exemption has now been included in a budget package announced by congressional leaders, which will raise federal spending by almost $300 billion over two years. Lawmakers are expected to vote Thursday on the package.

Mr. Roelofs held several meetings on Capitol Hill this week with Kentucky lawmakers, but he said in an interview Thursday that he had no indication the tax exemption would be included in the spending deal. He first learned of the news in media reports Thursday, he said.

"I was as surprised as anyone else this morning," he said. "But I'm hopeful that the good work of our legislators can get this done."

Write to Michelle Hackman at


(END) Dow Jones Newswires

February 08, 2018 13:28 ET (18:28 GMT)

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