College Admissions Fairness Act

II 116TH CONGRESS 1ST SESSION S. 1732 To amend the Internal Revenue Code of 1986 to provide rules for the disallowance and recapture of certain charitable contributions to colleges and universities, and for other purposes. IN THE SENATE OF THE UNITED STATES JUNE 5, 2019 Mr. WYDEN introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to provide rules for the disallowance and recapture of certain chari- table contributions to colleges and universities, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘College Admissions 4 Fairness Act’’. 5 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 2 •S 1732 IS SEC. 2. TREATMENT OF CERTAIN CHARITABLE CONTRIBU- 1 TIONS TO COLLEGES AND UNIVERSITIES. 2 (a) IN GENERAL.—Section 170(f) of the Internal 3 Revenue Code of 1986 is amended by adding at the end 4 the following new paragraph: 5 ‘‘(19) DENIAL OF DEDUCTION AND RECAPTURE 6 FOR CERTAIN CHARITABLE CONTRIBUTIONS TO COL- 7 LEGES AND UNIVERSITIES.— 8 ‘‘(A) IN GENERAL.—In any taxable year in 9 which the taxpayer is a restricted contributor— 10 ‘‘(i) the deduction under subsection 11 (a) shall be reduced (but not below zero) 12 by the disallowed amount, and 13 ‘‘(ii) any disallowed amount that ex- 14 ceeds the amount of the reduction under 15 clause (i) shall be included in the income 16 of such restricted contributor in such tax- 17 able year. 18 ‘‘(B) RESTRICTED CONTRIBUTOR.—For 19 purposes of this paragraph, the term ‘restricted 20 contributor’ means, with respect to any taxable 21 year, any individual— 22 ‘‘(i) who made any specified contribu- 23 tion to a specified college or university or 24 to any related organization of such speci- 25 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 3 •S 1732 IS fied college or university during the appli- 1 cable period, and 2 ‘‘(ii) who has an applicable child who 3 is enrolled at such specified college or uni- 4 versity during such taxable year. 5 ‘‘(C) DISALLOWED AMOUNT.—For pur- 6 poses of this paragraph, with respect to any 7 specified college or university for any taxable 8 year, the disallowed amount is the amount 9 equal to the excess (if any) of— 10 ‘‘(i) the amount of specified contribu- 11 tions of the taxpayer to such specified col- 12 lege or university during the applicable pe- 13 riod, over 14 ‘‘(ii) the sum of— 15 ‘‘(I) $100,000, plus 16 ‘‘(II) the aggregate amount of 17 the reductions under subparagraph 18 (A)(i) and inclusions under subpara- 19 graph (A)(ii) for all taxable years in 20 the applicable period preceding the 21 taxable year for which the determina- 22 tion is being made. 23 ‘‘(D) SPECIFIED CONTRIBUTION.—For 24 purposes of this paragraph, the term ‘specified 25 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 4 •S 1732 IS contribution’ means, with respect to any speci- 1 fied college or university at which an applicable 2 child of a restricted contributor is enrolled dur- 3 ing the taxable year— 4 ‘‘(i) any contribution for which a de- 5 duction is allowed under this section (or 6 would have been allowed but for this para- 7 graph or subsection (b)) and which is 8 made, directly or indirectly, during the ap- 9 plicable period to such specified college or 10 university or to any related organization 11 by— 12 ‘‘(I) the restricted contributor, or 13 ‘‘(II) a partnership, corporation, 14 trust, or other entity for the benefit of 15 or at the direction of the restricted 16 contributor, 17 ‘‘(ii) any contribution which is made 18 during the applicable period to such speci- 19 fied college or university or to any related 20 organization by— 21 ‘‘(I) a donor advised fund (as de- 22 fined in section 4966(d)(2)) with re- 23 spect to which the restricted contrib- 24 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 5 •S 1732 IS utor is a person described in section 1 4966(d)(2)(A)(iii), or 2 ‘‘(II) a private foundation with 3 respect to which the restricted con- 4 tributor is a disqualified person (as 5 defined in section 4946(a)), and 6 ‘‘(iii) any legally binding pledge which 7 is made during the applicable period to 8 such specified college or university or to 9 any related organization by a person de- 10 scribed in clause (i) or (ii). 11 ‘‘(E) APPLICABLE PERIOD.—For purposes 12 of this subsection, the term ‘applicable period’ 13 means, with respect to any taxable year, the 6- 14 year period ending with the last day of the tax- 15 able year. 16 ‘‘(F) APPLICABLE CHILD.—For purposes 17 of this subsection, the term ‘applicable child’ 18 means, with respect to any restricted contrib- 19 utor, any individual who bears a relationship to 20 such restricted contributor that is described in 21 section 152(c)(2)(A). 22 ‘‘(G) SPECIFIED COLLEGE OR UNIVERSITY; 23 RELATED ORGANIZATION.—For purposes of this 24 section— 25 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 6 •S 1732 IS ‘‘(i) SPECIFIED COLLEGE OR UNIVER- 1 SITY.—The term ‘specified college or uni- 2 versity’ means any institution of higher 3 education (as defined in section 101 of the 4 Higher Education Act of 1965) other than 5 an institution which— 6 ‘‘(I) has a written policy that 7 prohibits as a factor in admissions de- 8 cisions the consideration of— 9 ‘‘(aa) direct or indirect do- 10 nations from an applicant or 11 family member of an applicant, 12 and 13 ‘‘(bb) the financial ability of 14 an applicant or family member of 15 an applicant to make a donation, 16 and 17 ‘‘(II) demonstrates to the satis- 18 faction of the Secretary that such pol- 19 icy is properly enforced. 20 ‘‘(ii) RELATED ORGANIZATION.—The 21 term ‘related organization’ means, with re- 22 spect to any specified college or university, 23 an organization which— 24 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 7 •S 1732 IS ‘‘(I) controls, or is controlled by, 1 such specified college or university, 2 ‘‘(II) is controlled by one or more 3 persons which also control such speci- 4 fied college or university, or 5 ‘‘(III) is a supported organization 6 (as defined in section 509(f)(3)), or 7 an organization described in section 8 509(a)(3), during the taxable year 9 with respect to such specified college 10 or university. 11 ‘‘(H) NO DOUBLE TAXATION.—Any speci- 12 fied contribution which is taken into account 13 under subsection (a) with respect to an applica- 14 ble child for any taxable year shall not be taken 15 into account with respect to another applicable 16 child in any subsequent year. 17 ‘‘(I) REGULATIONS.—The Secretary shall 18 prescribe such regulations as may be necessary 19 or appropriate to carry out the purposes of this 20 paragraph, including regulations that provide 21 for the proper treatment of legally binding 22 pledges and other types of specified contribu- 23 tions.’’. 24 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 8 •S 1732 IS (b) EFFECTIVE DATE.—The amendment made by 1 this section shall apply to taxable years beginning 1 year 2 or more after the date of the enactment of this Act. 3 SEC. 3. INFORMATION TO BE COLLECTED. 4 (a) PROGRAM PARTICIPATION AGREEMENTS.—Sec- 5 tion 487(a) of the Higher Education Act of 1965 (20 6 U.S.C. 1094(a)) is amended by adding at the end the fol- 7 lowing: 8 ‘‘(30) The institution has a written policy that 9 prohibits as a factor in admissions decisions the con- 10 sideration of— 11 ‘‘(A) direct or indirect donations from an 12 applicant or family member of an applicant; 13 and 14 ‘‘(B) the financial ability of an applicant or 15 a family member of an applicant to make a do- 16 nation.’’. 17 (b) TITLE IV AUDITS.—Section 487(c) of the Higher 18 Education Act of 1965 (20 U.S.C. 1094(c)) is amended 19 by adding at the end the following: 20 ‘‘(8) Notwithstanding any other provisions of this 21 title, the Secretary shall prescribe such regulations as may 22 be necessary to provide for a requirement that an eligible 23 institution, in completing the compliance audit in accord- 24 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 9 •S 1732 IS ance with paragraph (1)(A), shall submit a copy of the 1 written policy described in subsection (a)(30).’’. 2 (c) DUTIES OF EDUCATION STATISTICS CENTER.— 3 (1) HIGHER EDUCATION ACT OF 1965.—Section 4 132(i)(1) of the Higher Education Act of 1965 (20 5 U.S.C. 1015a(i)(1)) is amended by adding at the 6 end the following: 7 ‘‘(AA) With respect to students who are 8 applicable children (as described in section 9 170(f)(19)(F) of the Internal Revenue Code) of 10 any person who has made a direct or indirect 11 donation to the institution or a related organi- 12 zation (as defined in section 170(f)(19)(G)(ii) 13 of such Code) during the 6-year period ending 14 with the calendar year in which the student ap- 15 plied— 16 ‘‘(i) the total number of such students 17 who applied to the institution; 18 ‘‘(ii) the total number of such stu- 19 dents who were admitted by the institu- 20 tion; and 21 ‘‘(iii) the total number of such stu- 22 dents who enrolled at the institution.’’. 23 (2) EDUCATION SCIENCES REFORM ACT OF 24 2002.—Section 153(a)(1) of the Education Sciences 25 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 10 •S 1732 IS Reform Act of 2002 (20 U.S.C. 9543(a)(1)) is 1 amended— 2 (A) in subparagraph (N), by striking 3 ‘‘and’’ after the semicolon; 4 (B) in subparagraph (O), by inserting 5 ‘‘and’’ after the semicolon; and 6 (C) by adding at the end the following: 7 ‘‘(P) with respect to students who are ap- 8 plicable children (as described in section 9 170(f)(19)(F) of the Internal Revenue Code) of 10 any person who has made a direct or indirect 11 donation to the institution or a related organi- 12 zation (as defined in section 170(f)(19)(G)(ii) 13 of such Code) during the 6-year period ending 14 with the calendar year in which the student ap- 15 plied— 16 ‘‘(i) the total number of such students 17 who applied to the institution; 18 ‘‘(ii) the total number of such stu- 19 dents who were admitted by the institu- 20 tion; and 21 ‘‘(iii) the total number of such stu- 22 dents who enrolled at the institution;’’. 23 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 11 •S 1732 IS (d) INSTITUTIONAL DISSEMINATION ACTIVITIES.— 1 Section 485(a) of the Higher Education Act of 1965 (20 2 U.S.C. 1092(a)) is amended— 3 (1) in subparagraph (U), by striking ‘‘and’’ 4 after the semicolon; 5 (2) in subparagraph (V), by striking the period 6 and inserting a semicolon; and 7 (3) by adding at the end the following: 8 ‘‘(W) the institution’s written policy that pro- 9 hibits as a factor in admissions decisions the consid- 10 eration of— 11 ‘‘(i) direct or indirect donations from an 12 applicant or family member of an applicant; 13 and 14 ‘‘(ii) the financial ability of an applicant or 15 a family member of an applicant to make a do- 16 nation; and 17 ‘‘(X) with respect to students who are applica- 18 ble children (as described in section 170(f)(19)(F) of 19 the Internal Revenue Code) of any person who has 20 made a direct or indirect donation to the institution 21 or a related organization (as defined in section 22 170(f)(19)(G)(ii) of such Code) during the 6-year 23 period ending with the calendar year in which the 24 student applied— 25 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 12 •S 1732 IS ‘‘(i) the total number of such students who 1 applied to the institution; 2 ‘‘(ii) the total number of such students 3 who were admitted by the institution; and 4 ‘‘(iii) the total number of such students 5 who enrolled at the institution.’’. 6 (e) INFORMATION INCLUDED ON TAX INFORMATION 7 RETURNS.— 8 (1) IN GENERAL.—Section 6033 of the Internal 9 Revenue Code of 1986 is amended by redesignating 10 subsection (n) as subsection (o) and by inserting 11 after subsection (m) the following new subsection: 12 ‘‘(n) ADDITIONAL INFORMATION REQUIRED FOR IN- 13 STITUTIONS OF HIGHER EDUCATION.—Every organiza- 14 tion which is an institution of higher education (as defined 15 in section 101 of the Higher Education Act of 1965) and 16 required to file a return under subsection (a) shall include 17 with such return— 18 ‘‘(1) a copy of the written policy described in 19 section 487(a)(30) of Higher Education Act of 20 1965, and 21 ‘‘(2) the information described in section 22 132(i)(1)(AA) of such Act.’’. 23 (2) EFFECTIVE DATE.—The amendments made 24 by paragraph (1) shall apply to returns filed for tax- 25 VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS 13 •S 1732 IS able years beginning 1 year or more after the date 1 of the enactment of this Act. 2 Æ VerDate Sep 11 2014 01:20 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6301 E:\BILLS\S1732.IS S1732 lotter on DSKBCFDHB2PROD with BILLS