Religious school tax carveouts

School choice, religious school tax carveouts run afoul of Senate’s Byrd rule

The Senate parliamentarian also determined that shielding religious schools — including Hillsdale College in Michigan — from federal college endowment taxes needs 60 votes.

Juan Perez Jr.

A Republican proposal to enact a multibillion-dollar private school tax credit program would be subject to a 60-vote threshold if it is included in conservatives’ domestic policy megabill, the Senate parliamentarian advised early Friday in a significant challenge to what would be a sweeping federal school choice program.

Senate Parliamentarian Elizabeth MacDonough also determined that an effort to carve religious schools — including Hillsdale College in Michigan — out of a planned expansion of the federal college endowment tax does not meet the Senate Byrd rule’s criteria for the filibuster-skirting reconciliation process, according to Senate Budget Democrats.

Republicans on the Senate Finance Committee had proposed a permanent, $4 billion annual tax credit for individuals who donate to organizations that support educational expenses including private-school tuition, which was projected to cost $26.046 billion between 2025 and 2034, according to estimates from the Joint Committee on Taxation.

The tax credit scholarship plan, which is based on the Educational Choice for Children Act, would allow scholarships to students whose families make up to 300 percent of the area median gross income.

The committee also aimed to soften the blow of expanded taxes on private college and university endowments compared to a House-passed tax bill, though many qualifying private schools would still be in line to pay a tax rate of up to 8 percent of their net annual investment income.

It’s not yet clear if Republicans would try to rework some of the tax provisions that MacDonough found violated the Byrd rule, effectively blocking their inclusion in a GOP-only reconciliation measure. Republicans have successfully tweaked other proposals to the parliamentarian’s liking, but her rulings this week certainly helped upend GOP senators’ efforts to bring their fiscal package up for a vote.