Budget Bill Exempts Berea College From Endowment Tax

Feb 9, 2018

Credit bcnow.berea.edu

  The bill U.S. lawmakers passed to keep the government open exempts a small Appalachian college in Sen. Mitch McConnell's home state from a costly tax on its endowment.

 

Berea College does not charge tuition and only accepts students who cannot afford to pay. The school relies mostly on its $1 billion endowment. But the Republican tax plan that passed last year included a tax on the school's endowment that would have cost it $1 million a year and forced it to accept fewer students.

The college was a casualty of partisan rancor in Washington and held up as a symbol of the unintended consequences of quickly enacting sweeping tax law changes. The tax bill originally included an exemption for Berea College. But the exemption did not comply with Senate rules and had to be removed. Republicans blamed Democrats, who refused to vote to suspend the rules that would have kept the exemption in place. Democrats blamed Republicans for rushing through a bill that did not adhere to the Senate's rules.

 

Early Friday morning, the U.S. House and Senate approved a budget bill to keep the government open through March 23. Tucked inside the $400 billion measure was an exemption for Berea College. The language was included at the insistence of McConnell, according to his aides.

 

"After Senate Democrats' removed Berea's protection, I made a promise to help the students and the school," McConnell said in a news release. "I am proud to have worked with my colleagues, especially Congressman Andy Barr, to fulfill my commitment to these students."

 

McConnell's mention of Barr is significant. Berea College is in Barr's central Kentucky congressional district, and the three-term GOP congressman is up for re-election in 2018. Democrats are targeting his district, which includes the state's second-largest city and has flipped between Democrats and Republicans five times since 1979. Barr is facing a Republican primary in May, plus six Democrats have filed to challenge him in the general election.

 

"I secured a public commitment from House leadership to amend the law to prevent application of a tax on Berea College," Barr said in a news release. "Today, I am proud that the House and Senate have delivered on that promise."

 

Founded in 1855 by an abolitionist ex-Presbyterian minister, Berea College distinguished itself as the first interracial, coeducational college in the South. Its students mainly come from the eastern Kentucky, which have been economically devastated by the decline of the coal industry. About 64 percent of its students have parents who don't have four-year degrees.

 

Berea College President Lyle Roelofs traveled to Washington earlier this week to meet with McConnell. "At Berea, none of our 1600 students pay tuition, and we are grateful for Senator McConnell and Congressman Barr's work to address this new tax liability, which would have forced us to scale back our mission of educating students who would not otherwise be able to attain a college degree," he said.