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Central Hall | Col­legian

 

A pro­posed tax could force Hillsdale College to pay up to $700,000 a year to the federal gov­ernment.

As part of the Repub­licans’ $1.5 trillion tax package, a new endowment tax would make private, non­profit col­leges and uni­ver­sities pay 1.4 percent on their yearly endowment income if the endowment is equal to $250,000 or more per student. It would affect nearly 70 insti­tu­tions nationwide, including Hillsdale College and much of the Ivy League. The House passed the bill on Nov. 16, and the Senate voted Wednesday along party lines to open debate on the tax plan. A vote on the bill could occur by the end of the week.

Hillsdale’s current endowment is $548 million, which breaks down to approx­i­mately $364,000 for each of the college’s 1,507 stu­dents — sur­passing the $250,000 minimum.

Based on how the law defines an endowment’s income, Patrick Flannery, vice pres­ident for finance and college trea­surer, esti­mated Hillsdale could pay as much as $700,000 a year if the leg­is­lation passes. The college operates on a $121 million annual budget.

“Even a half million dollars per year, that’s enough to have an impact on how much money you can get dis­tributed to general oper­a­tions for the college,” Flannery said. “It’s some­thing that we will have to think about: How are we going to make up for that?”

For now, Flannery said the college is waiting to see what Con­gress decides.

Matthew Spalding, asso­ciate vice pres­ident and dean of edu­ca­tional pro­grams for the Allan P. Kirby Jr. Center for Con­sti­tu­tional Studies and Cit­i­zenship in Wash­ington, D.C., said the tax comes in response to a general outrage among members of Con­gress that schools with large endow­ments are using much of them, not to benefit stu­dents, but more like investment funds.

“At that point, that endowment becomes some­thing dif­ferent,” he said. “If there is to be an endowment tax, it should only apply if the amount in the endowment fund exceeds that which is needed to support exempt pur­poses, such as direct asset use or pro­viding financial support for stu­dents.”

Spalding added that a broad per­ception that much of academia support a liberal agenda may also con­tribute to the support behind the pro­posal. An over­whelming majority of Hillsdale’s endowment sup­ports schol­ar­ships, aca­demic pro­grams, and faculty, Flannery said.

He became aware of the intended tax days prior to the plan being intro­duced in the House on Nov. 2, and he has been in dis­cussion with members of Con­gress since then. College Pres­ident Larry Arnn joined him in some high-level meetings prior to Thanks­giving break.

Spalding said he opposes the tax in general on prin­ciple. He said the tax­ation of endow­ments to influence uni­ver­sities sets a dan­gerous precedent that threatens their inde­pen­dence.

“In general, there should be an area of activity outside of gov­ernment reach that serves higher pur­poses of society beyond that reach, and private edu­cation has long been one of those,” Spalding said. “If the federal gov­ernment estab­lishes a tax on endow­ments for col­leges, I fear there are other activ­ities that under another Con­gresses and other admin­is­tra­tions gov­ernment will tax and by doing so reg­ulate, and that could be more threat­ening to Hillsdale.”

Adding to that, the leg­is­lation does not exempt non-Title IV insti­tu­tions, such as Hillsdale, that do not receive gov­ernment money. A majority of the uni­ver­sities and col­leges affected by the tax, however, do take federal sub­sidies. At some of these private, non­profit schools, they account for up to 70 percent of their income, according to Spalding.

Princeton Uni­versity, whose $23.8 billion endowment is one of the largest in the country (Harvard Uni­versity has the largest with $37.1 billion), received $420 million in tax breaks on its endowment income, federal research grants, and capital-gains exemp­tions in 2011, according to The Atlantic. That year, its endowment was $17 billion and accounted for almost half its nearly $1.4 billion oper­ating budget.

“Since Hillsdale receives no federal funds or grants what­soever, Hillsdale’s position is dis­tin­guishable on policy grounds,” Spalding said. “Hillsdale and other col­leges that are not taking the federal government’s money should not be subject to a tax on an endowment that was raised from private sources

Spalding said he has made several sug­ges­tions to pol­i­cy­makers, including removing the tax entirely, rewording it, or inserting an exemption for schools that refuse gov­ernment sub­sidies. He also said an alter­native to the tax is to cut the number of gov­ernment sub­sidies going to these insti­tu­tions.

Arnn agreed in an email: “The gov­ernment sub­si­dizes a thing with one hand and then taxes it with the other. Why did they not simply decrease the sub­sidies? What they do carries the impli­cation that only the gov­ernment can get bigger.”

An over­whelming majority of the endowment is to support aca­d­emics, Flannery said. Half is for schol­ar­ships, a quarter is for aca­demic pro­grams, and 15 percent is for faculty chairs.

Flannery added that only about 0.2 percent of Hillsdale’s endowment goes toward “nonaca­demic” pur­poses. This piece is for awards for stu­dents and faculty such as Pro­fessor of the Year and the Emily Daughtery Award for Teaching Excel­lence, which are pre­sented at spring and fall con­vo­ca­tions respec­tively.

“But I could argue that 0.2 percent is aca­demic in nature,” Flannery said. “It helps people.”

Every year, Hillsdale spends about 5 percent from its endowment, slightly above the more popular 3 – 4 percent, Flannery said.

“The main reason for that is that we want stu­dents going here today to benefit as well as be able to save enough for the stu­dents down the road to benefit,” he said.

With the endowment tax, however, the college could pay the equiv­alent of 27 full-tuition schol­ar­ships in taxes each year.

Spalding said that would be harmful, though the college could manage it. Its cre­ation, however, opens up the oppor­tunity for future Con­gresses to change the tax amount and threshold, which could cause problems in the future. He added that it may also deter other insti­tu­tions from growing and enlarging their endow­ments, as well.

If it comes to removing the endowment tax or passing the tax-cutting bill, however, Arnn said he does favor the plan.

“I hope they pass the bill, even with that stuff in it,” he said. “It is a still step in the right direction.”

Flannery said the idea of an endowment tax has been floated for several years, and he said he thinks now that it is in the tax plan, it is unlikely to dis­appear.

Spalding, however, is hopeful for its removal if the bill goes to a con­ference com­mittee between the House and Senate. He said many con­gressmen were unaware that the tax would affect insti­tu­tions such as Hillsdale before he spoke to them.

“I am cau­tiously opti­mistic that this will get cor­rected in con­ference, if it gets to con­ference,” Spalding said, “but they are all very aware that Hillsdale is harmed by it.”

 

  • Sheldon Katz

    First, let’s have everyone pray that this atrocity is removed in con­ference. Second, in case the creator and ruler of the uni­versity has better things to do, please everyone contact your R reps and sen­ators. Let’s get this done!

    • Alexan­derYp­si­lantis

      Contact your Congressmen/women to promote Hillsdale’s unique sit­u­ation as a college which refuses to accept state and federal money. As for the Sen­ators, our two (2) Democrat Sen­ators have taken their marching orders for Senate Democrat minority leader Chuck Schumer to refuse to par­tic­ipate in the debate of this Bill, essen­tially ren­dering them useless to advance any revi­sions to the Bill which benefit Michigan busi­nesses, schools or indi­viduals. Like tru­culent children the Senate Dems are refusing to par­tic­ipate in Debate and rep­re­senting the voters of Michigan. They should return their salaries, since they are not earning them-but I doubt we’ll see that happen.

      • Living­In­Hells­dale­County

        Do you people LIVE in Hillsdale? The college offi­cials RAID this area, their friggen trea­surer Patrick Flannery was a city coun­cilman for years, their “eco­nomic expert” pro­fessor Gary Wolfram has run Eco­nomic Devel­opment in the city since 2010, yet the city is looking at bank­ruptcy now! http://hillsdalecollegian.com/2017/01/34547/

        • Ellsworth_Toohey

          Alexander doesn’t. He’s foundered on a variety of local topics when pressed.

          Just look the other way and ignore the man behind the current.

          • Alexan­derYp­si­lantis

            I presume you meant ‘curtain’? I spend half my time cleaning up your errors. A Hillsdale College writing pro­fessor would run out of red pens cor­recting your com­ments. You may live near Hillsdale, but it’s probably under an overpass.

          • Ellsworth_Toohey

            The closest overpass to Hillsdale is in Cold­water, about 30 miles away. That you could have gotten from a map.

          • Alexan­derYp­si­lantis

            So you can live over the underpass. Do I have to do all the thinking for you?

          • Ellsworth_Toohey

            Except you’re not. Over or under, no over­passes in Hillsdale.

            Perhaps you’d be willing to share a train bridge?

          • Living­In­Hells­dale­County

            There’s that one hor­rible one out by Hidden Meadows that they say they’re going to tear down, it’s hideous. However, if everyone the college raids had to live under there, we all wouldn’t fit! 46,000 people, plus anyone who buys stamps, since the college sends that political pro­pa­ganda monthly, costing our US postal service mil­lions a year in reduced “non profit” rates, etc.

          • Alexan­derYp­si­lantis

            Don’t toss a ‘teaser’ out there for some postal employee, they’re already on edge from deliv­ering the Holiday mail.

          • Ellsworth_Toohey

            I think Alex may have dibs on that one.

          • Alexan­derYp­si­lantis

            No, but I suggest you may want to inves­tigate drainage tunnels under the roads. It’s not Holiday Inn Express, but you can eat the snapping turtles and crayfish.

          • Ellsworth_Toohey

            Sadly, your lack of local knowledge still is hurting you. It’s a good thought, but decent drainage tunnels are hard to find, with the over $30million in unfunded road and sewer main­te­nance.

            Let me invite you to come visit Hillsdale. I think it would be a learning expe­rience for you.

          • Living­In­Hells­dale­County

            The bizarre thing is? When people defend the college with insults to those who bring facts to be dis­cussed, it speaks to the college’s char­acter. If that’s the kind of trash they’re teaching, then their entire 501©3 should be yanked. Somehow, I would have to wonder if these “orga­nizers” on here are Larry Arnn and Matt Spaulding, who have mil­lions in slush funds they’re trying to protect LOL! Would be funny at least! 😉

          • Ellsworth_Toohey

            You give too much credit to Alex. He just wants to bask in the glow of the College and it’s mar­keting material. I can’t fault him, I fell for it as well. Until I saw how they treated the town they live in.

          • Living­In­Hells­dale­County

            We need a hashtag for that. I was a college devotee as well, it’s really a shame. Hoping that the new mayor will be able to balance things better, he’s young, has strong ideas for building industry, I’m hopeful! Unfor­tu­nately, Hillsdale College lost its soul long ago, the com­munity just needs to keep their paws off the taxes around here, let them go rob other areas. That is the worst: the IRS isn’t checking and bal­ancing them, but forces US to shoulder the burdens for their monopoly game they’re playing with this county’s lands. It’s not just the town they’re harming.

      • Sheldon Katz

        Well said Alexander. My under­standing is the latest is that the threshold was hiked to $500K/student, which would not encompass Hillsdale … for now. While I don’t think this goes in the right direction as a matter of policy, I am grateful it does not cur­rently ensnare Hillsdale for now. We owe Sen. Toomey a big thanks for fighting the good fight.

        • Alexan­derYp­si­lantis

          Great comment, Sheldon. It’s a sad state of affairs when folks in Michigan need to rely on Sen­ators from another state (PA’s Senator Toomey) to advance our interests. By being only obstruc­tionists the Democrat Party is badly serving it’s con­stituents. Trump won, deal with it and par­tic­ipate in the Debates-rep­resent your con­stituents. If you can’t do that, resign from office and be replaced by someone who will. That’s how our system of gov­ernment works.

    • Living­In­Hells­dale­County

      Could you let your R reps and sen­ators know that Hillsdale College employs our pros­e­cutor, that CFO Richard Pewe hired a con­victed armed hostage taking criminal to run our airport and despite all the college offi­cials who took over city council and appointee posi­tions, our once thriving city has crum­bling infra­structure and is pro­jected to go bankrupt in 2020?
      https://www.facebook.com/HillsdaleMunicpalAirportConvicteArmedHostageTaker/photos/a.199853967018151.1073741827.199837823686432/511234829213395/?type=1&theater

      • Living­In­Hells­dale­County

        Oh and PS? Could you pleaseeeeeee let them know that the school is ille­gally donating land and opening non profits for board of TRUSTee members to make money off of? Unless you think donors donated cash to student edu­cation intending for it to be embezzled for the prof­i­teering of board members. Then you can skip that one. Thanks!

        http://www.hillsdale.net/news/20161214/zoning-board-approves-ordinance-variation

  • Marcy Almay

    LOLOLOLOLOL! The odd thing is, the college claims they do ZERO political lob­bying on their 990s (tax returns). Wonder if they’ll report what Spaulding (who runs an illegal political lobby from a rural reli­gious college) and Arnn did on this, unless I’m wrong, and their tes­timony was on record where the people can access the details of who they met with and what was said and if money changed hands.…

  • Marcy Almay

    I am curious about one thing: isn’t being a non profit who ISN’T taxed a federal “subsidy” given the college on every­thing they have? From the IRS that the college is answerable to? And all those tax breaks to the donors, aren’t those sub­sidies? If Arnn is so bothered, why not just go PRIVATE, and not CLAIM the riches he gets from having a tax exempt school, why leech off the public by paying nothing IN for all the political input he’s been getting for quite a few years now? Harvard lost 2 billion dollars a couple years ago from their endowment, for all we know, it was planned insider trading causing those losses, they run the friggen Harvard business school and they LOSE 2 billion? Really? LOL! It’s about time that tax­payers demand account­ability on behalf of the public and on behalf of the stu­dents being exploited for political gain. With the endowment being taxed, hope­fully, now the dona­tions and invest­ments, etc, will be more able to be audited to assure integrity.

    • Alexan­derYp­si­lantis

      We ALL lost money ‘just a few years ago’ on paper with the Great Recession of 2008. The astute ones amongst us just weathered the storm and are recov­ering now just nicely. I don’t know anyone sharp enough to predict every market cor­rection or crash, do you? As for Harvard, they accept plenty of Federal and State money. Hillsdale doesn’t. Their Endow­ments need to be eval­uated on that basis.

      • Living­In­Hells­dale­County

        I’ll one up you, their 2014 990 was filed in 2016 I can’t speak to 2015 or 2016, but even the one from years ago is an inter­esting read:
        http://pdfs.citizenaudit.org/2016_07_EO/38 – 1374230_990_201506.pdf Shall we go line by line? Page 40. What the heck are they paying huge seed funds to public schools outside the city they’re in, the county they’re in even the STATE they’re in? They’re a private school opening public schools around the country!

        https://uploads.disquscdn.com/images/de485b1abdd2764cfc17e5dfa6002134c2aa487132cfc1642198cc332528da24.png

      • Ellsworth_Toohey

        The astute ones made money in 2008. I flipped 2 fore­clo­sures I got in 2008 for 4X what I paid for them a few years later.

        • Alexan­derYp­si­lantis

          You think faster than I do. Not more clearly, but faster. It has it’s advan­tages, but like the tor­toise and the hare I’ll be in the lead at the finish line. Hubba, hubba.

  • Alexan­derYp­si­lantis

    The $ 700,000/year is really a trifle when you con­sider the pos­itive aspects of this Tax Reform Bill-which will surely benefit Hillsdale. Private overseas capital that busi­nesses have been keeping outside the USA due to tax impli­ca­tions will be brought back to our banks to the tune of $ 4 Trillion in some esti­mates. Business will prosper, per­sonal taxes will be lower, unem­ployment will be reduced even more and salaries will increase. All of that makes for a setting to promote more giving by donors-Hillsdale need only be ready to take advantage of that. So, as a business case, there is far more good in this Bill than bad for Hillsdale. Like every­thing else, you need to be nimble and react to the changes.

    • Alexan­derYp­si­lantis

      “the leg­is­lation does not exempt non-Title IV insti­tu­tions, such as Hillsdale, that do not receive gov­ernment money. A majority of the uni­ver­sities and col­leges affected by the tax, however, do take federal subsidies.”.….This is a sig­nif­icant fact that might be used to chal­lenge that part of the bill. Harvard for example has a $ 36 Billion Endowment Fund yet takes a great deal of Federal Funding for research and other activ­ities. That’s really what this measure was intended to address, not schools like Hillsdale that refuse to accept any federal or state money. Our position should be advanced through our Con­gressman-since Democrat Sen­ators Debbie Stabenow and Gary Peters have like all the Senate Dems refused to par­tic­ipate in the Bills debate and made them­selves useless in the nego­ti­ation of this measure.

    • Living­In­Hells­dale­County

      Dude, they’re a NON PROFIT! An IRS licencee! A R E L I G I O U S college! They refuse to build dorms for their stu­dents, pleading poverty while they hoard hun­dreds of mil­lions in cash and pub­licly traded secu­rities! Why is it that you think it to be good public policy to render a full 1/3 of their stu­dents homeless and violate the housing guar­antee they give upon admission just to hoard cash meant for the kids? http://hillsdalecollegian.com/2016/10/students-living-off-campus-ever/
      They built a $28 million dollar church, they should be able to house every one of the 1500 stu­dents off their half a billion endowment! http://hillsdalecollegian.com/2016/10/hillsdale-students-need-new-dorms-not-expensive-chapel/ They’re not a PRIVATE business, they’re a non taxable NON profit who are prof­i­teering off the endowment! All they have to do is start putting those funds INTO the oper­ation, why is that so bad? Build some damned dorms for the kids, why defend them for robbing stu­dents of their guar­anteed housing?

      • Alexan­derYp­si­lantis

        Have you even looked at Hillsdale’s Capital Plan? It cer­tainly does include building new dor­mi­tories, but you can’t do every­thing all at once. If only HC had that kind of money! Yeah, they have an Endowment that stands at around $ 540 Million at the current time. Much of the interest on that Endowment is used for schol­ar­ships and grants for stu­dents. Unlike state sup­ported schools, Hillsdale has to do all the with only their private funds – for reasons everyone knows. I commend Hillsdale for being tight-fisted with their money, if only more Amer­icans were like that we wouldn’t have such massive debt-as a nation and as indi­viduals. I’ve always been frugal with my own money, so I can appre­ciate when somebody else does it. You have great passion in your com­ments, but passion unsup­ported by facts is just noise.

        • Living­In­Hells­dale­County

          FACT: they DO collect civil rights related data in order to par­tic­ipate in the NCAA.
          http://hillsdalecollegian.com/2016/10/college-sent-racial-data-student-athletes-ncaa/

          • Living­In­Hells­dale­County

            FACT: every private school MUST do so if they want tax exempt status from the IRS https://www.irs.gov/publications/p557#en_US_201701_publink1000200076

          • Living­In­Hells­dale­County

            The fact is, they lied all these years about not tracking data related to gender and race and the IRS rules are being broken by Hillsdale College, which doesn’t qualify for tax exempt status via federal admin­is­trative law. Don’t get me started on how reli­gious schools are not allowed to have an endowment at all per IRS rules, only the church the school is under. That’s the facts sir, they cannot have it both ways! Go actually private and don’t get tax free status, (which are sub­sidies, trust me, they’re wrecking the city and county they’re in finan­cially, gob­bling up land they pay no taxes on, causing huge low cost housing issues thanks to tossing a 1/3 of their student body off campus per semester and using the infra­structure they pay NOTHING in to, etc) and claim they’re exempt from adhering to the rights of dis­abled children, which is simply vile, but y’all seem to admire them for kicking dis­abled kids out using “Christ” as their authority to allow them to do so. To each his own sir, but those are F A C T S ! 🙂

          • Alexan­derYp­si­lantis

            When someone refutes your state­ments you change the topic. You have an issue with Hillsdale College, but I’m not really inter­ested in enter­taining any more of your alle­ga­tions. You throw them out like dried peas against an window pane-and with equal effect. All.

          • Ellsworth_Toohey

            It’s a pain when someone refutes your state­ments and the other party changes the topic.

            Now I am upset you used the dried pea analogy with someone else… I thought that was some­thing special between us.

          • Alexan­derYp­si­lantis

            We haven’t been for­mally intro­duced yet.