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Senate Democrats ‘Slander’ Hillsdale College in Attacking ‘Hillsdale Exemption’ in Tax Reform

An American college in Michigan

The "Tax Cuts and Jobs Act," the Republican tax reform proposal, includes a new tax on the endowments of wealthy private colleges. Democrats have complained about an alleged "Hillsdale exemption" to this tax, but a source in the U.S. Senate involved in amending the legislation explained to PJ Media what really happened and why the term "exemption" is a dangerous misnomer. The college's president also accused Senate Democrats of "slandering" the college, claiming that it refuses government funds in order to discriminate against minorities.

"One college, Hillsdale College, has been exempted from taxes on colleges with large endowments," Senate Minority Leader Chuck Schumer (D-N.Y.) declared. "Hillsdale College is supported by the DeVos family, one of the largest contributors to the Republican Party. A specific provision, just like an earmark, was slipped into the bill."

Schumer argued the provision exempted "a single wealthy college, the pet project of a billionaire campaign contributor to the Republican Party," referencing the family of Betsy DeVos, now secretary of education. He called this a "metaphor for the whole bill."

The Democratic leader's remarks were entirely false. Hillsdale is not a "pet project" of the DeVos family. The "exemption" would have applied to seven colleges, not one. Perhaps most importantly, it was in keeping with the spirit of the new tax, not a special carve-out.

The Republican tax reform bill introduces a new tax into the tax code — a 1.4 percent excise tax on the "net investment income" from private university endowments. Sen. Pat Toomey (R-Pa.) sponsored an amendment which would have removed Hillsdale from the colleges subject to the tax — but not as a carve-out.

"The amendment would provide that colleges that don't receive subsidies would not pay taxes on endowment," Dr. Larry Arnn, president of Hillsdale College, told PJ Media in an interview. Since this was part of "the imposition of a tax that never existed before," it would not be an exemption. An exemption, Arnn clarified, "would be if you had a tax and let somebody out of it."

A background source in a Republican Senate office involved with the "Hillsdale exemption" amendment explained the difference. In laying out the exact type of college or university subject to the new excise tax, the original Senate bill explicitly stipulated that the tax only applies to a private institution eligible for funds under Title IV of the Higher Education Act of 1965, with an endowment of $250,000 or more per student, and with at least 500 students.

The source suggested that whoever drafted the original tax did not consider the fact that some colleges across the country that are eligible for Title IV funding would not actually accept that funding from the government.