Hillsdale College still may avoid the Republican revenue package’s endowment tax, despite removal of a provision that would have exempted any college that refuses federal funds, such as Hillsdale, from the proposed tax.
Senate Republicans had amended the bill last week to increase the endowment size qualification for the 1.4 percent excise tax on private, nonprofit colleges and universities from the $250,000 per student threshold set by the House of Representatives to $500,000 per student. Hillsdale’s endowment is about $364,000 per student, making it too small to be taxed under the Senate’s revisions.
College President Larry Arnn said he had hoped to see the complete removal of the endowment tax from the bill.
“It does not make sense to me for the Congress to add a tax on to something that it is subsidizing so heavily,” Arnn said in an email. “If it does not like the way the colleges are using their endowments, it should reduce the subsidy to them.”
The Senate passed its tax bill early Saturday morning and, on Wednesday, sent it to a conference committee where members of both chambers will meet to reconcile the differences in their two bills.
If the committee includes the endowment tax with a threshold lower than $364,000 per student, Hillsdale could have to pay up to $700,000 in taxes on its $548-million endowment’s income, according to Patrick Flannery, vice president of finance and college treasurer.
When asked how soon Hillsdale could grow its endowment to $500,000 per student, Flannery said he is waiting for the bill’s final language to comment further.
An amendment written by Sens. Pat Toomey, R‑Pennsylvania, and Ted Cruz, R‑Texas, however, would have exempted any college that refuses federal money from the tax.
“The idea here,” Toomey said early Saturday morning on the Senate floor, “is that any college that chooses to forego federal funding for its students chooses not to be a burden on taxpayers that way, it is reasonable for us to respond by sparing that college of the tax on the endowment fund.”
Upon noticing the provision, Democrats latched onto it, making it a “metaphor” for the special-interest favors throughout the tax package, Senate Minority Leader Chuck Schumer of New York said Friday night.
As a result, “Hillsdale College” was trending early Saturday morning in the United States on Twitter, while inaccurate statements about the school were made on the Senate floor and on social media.
Sen. Ron Wyden, D‑Oregon, was the first to bring up on the chamber floor that Hillsdale College would be the only school benefitting from the amendment. The allegation earned the provision nicknames on social media, including the “Hillsdale handout,” “hustle,” “earmark,” and “carve-out.”
Toomey agreed that he believed Hillsdale would be exempt but added that other schools in America do not accept federal money and any institution could choose to do so and still receive the exemption. There are at least nine schools other than Hillsdale that do not receive federal funds right now, including Grove City College in Toomey’s home state, which the senator mentioned on the floor prior to the vote on the amendment’s repeal.
By the time of the debate, however, the Republicans had already amended the bill to increase the endowment tax threshold from $250,000 to $500,000 per student. The exemption, then, would not have covered Hillsdale nor any other school that refuses federal money right now, because their endowments currently are too small to qualify to be taxed.
Sen. Claire McCaskill, D‑Missouri, then proceeded to ask Toomey if he knew whether or not Education Department Secretary Betsy DeVos has donated to Hillsdale College.
“Do you know who the biggest donor was to the Hillsdale College endowment?” McCaskill asked Toomey. “Would that be the DeVos family, by any chance? …It feels like this is a very limited provision written for a very special person.”
Sen. Jeff Merkley, D‑Oregon, made similar remarks later, stating Hillsdale may be receiving the exemption because it “happens to be funded by one of the wealthiest families in America because they happen to be a Republican donor.”
Toomey said he did not know if the DeVoses donated to Hillsdale College. Although the DeVos family does have connections to Hillsdale, there appears to be no public proof that the Grand Rapids-based billionaires Dick and Betsy DeVos have donated to the school in recent years.
John Cervini, vice president for institutional advancement, told The Collegian that the college does not name donors without their express permission.
According to forms submitted to the Internal Revenue Services, the Dick and Betsy DeVos Family Foundation have given to numerous colleges, including Calvin College, Cornell University, Davenport University, Ferris State University, Rollins College, the University of Michigan, and Wake Forest University. The foundation, however, did not list Hillsdale as a recipient in recent submissions and did not respond to requests for comment in time for print.
Betsy DeVos’ brother Erik Prince — the founder of the controversial private security firm Blackwater Worldwide, now named Academi — graduated from Hillsdale in 1992 and spoke on campus in October.
Additionally, Richard DeVos, Betsy DeVos’ father-in-law, co-founded Amway Corp. with Jay Van Andel. Van Andel’s son, Steve, was a 1978 graduate of Hillsdale and serves as Amway’s chairman with plans to retire at the end of 2018.
In 2013, Hillsdale named its graduate school of statesmanship in his honor, after Steve Van Andel donated toward its operations and scholarships.
College President Larry Arnn said he knew DeVos before she became education secretary and had at least one meeting with her in June since she filled the role.
Although there is no recent evidence to show the DeVoses have donated to Hillsdale, according to the Federal Election Commission, Betsy DeVos gave to Toomey’s campaign in 2010 and 2015, totaling $7,800 in donations. The records showed her husband had donated several times, as well.
Toomey spokesman Steve Kelly told The Collegian that the senator received outside consultation from official representatives from relevant schools, including Grove City.
“Sen. Toomey has not heard from Secretary DeVos, her family, or her office on the broad issue of tax reform, let alone this tiny provision in the tax bill,” Kelly said in an email. “Assertions to the contrary are complete fabrications.”
Later on the floor, Sen. Merkley also asked Toomey if he knew why Hillsdale does not accept government money.
“Is this Hillsdale College the same one that was sued for discrimination in the 1980s?” he asked Toomey, who said he was unfamiliar with Hillsdale’s litigation history. “Is it the reason this college has not taken federal funds is because they were sued for discrimination?”
Later, Merkley posted a video on Twitter, saying Hillsdale refuses federal funds “because it wanted to have permission to discriminate in selecting students,” that it “specializes in discrimination,” and that it has a “license to discriminate.”
Hillsdale, however, was never sued for discrimination. In 1975, the Department of Health, Education, and Welfare changed its rule to make independent institutions that refused federal grants and subsidies, such as Hillsdale, subject to its regulations, including the anti-sexual discrimination law Title IX, because its students took federal loans to attend.
Hillsdale’s board of trustees resolved to fight the change, believing it to be an unconstitutional government overreach because the students were the recipients of the loans and not the college. After nearly a decade of litigation, the Supreme Court decided against Grove City College, which fought the change for similar reasons, and Hillsdale stopped taking student federal loans in 1984 to preserve its independence.
Although Hillsdale is not required to adhere to Title IX, its founding document from 1844 was the first in the country to include a nondiscriminatory clause. The school’s mission promised “to furnish all persons who wish, irrespective of nation, color, or sex, a literary, scientific, [and] theological education.”
Toomey noted this several hours later on the floor of the Senate before a vote to repeal the amendment, saying Hillsdale had been “unfairly maligned.”
Merkley’s office did not respond to numerous requests for comment.
Early Saturday morning, the Senate voted 52 – 48 to remove Cruz and Toomey’s provision with the Democrats being joined by four Republicans: Susan Collins of Maine, Deb Fischer of Nebraska, John Kennedy of Louisiana, and Lisa Murkowski of Alaska.
Immediately following, the Senate voted to pass the tax bill 51 – 49. The House of Representatives voted on Monday to send its version of the bill to a conference committee, and the Senate did so on Wednesday.
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, previously told The Collegian that he had hoped to see the endowment tax removed, or consideration of an exemption given to schools that refuse federal funds during the conference committee.
Arnn said he was “appalled” by the misinformation spread about Hillsdale College on Friday night and grateful to Toomey and Cruz for their service.
“Hillsdale has an old, treasured, and still practiced tradition of service to human equality,” he said. “Any other claim is a slander.”