Financial Management |
Experts believe the final version of the federal tax bill that reconciles the House and Senate versions will likely pass by year's end. Details are uncertain, but it is likely that tax-exempt lending will take a hit.
School Groups Outline 5 Key Issues Involving Tax Overhaul
Tax Overhaul's Impact on Independent Schools Still Uncertain
Tax Bills Extend 529-Type Plans to K-12
Schools Encouraged to Speak Out on Tax ProposalsGOP House and Senate Tax Plans Worry Independent Schools
GOP Tax Reform Jeopardizes Tax-Exempt Financing for Independent School
Connect discussion on tuition remission
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"Schools with tax-exempt debt that was purchased by a commercial bank or that is considered a tax-exempt loan from a commercial bank – each is often referred to as a 'direct purchase' – can expect the interest rate on their debt to significantly increase in 2018," said Chuck Procknow, executive vice president at the investment banking firm George K. Baum & Company, in an advisory email last week.
Why the increase? Most schools' direct purchase agreements allow banks to increase interest rates if the corporate tax rate changes, and one element of the tax bill unlikely to change is a drop in the corporate tax rate, from 35 to 20 percent. Procknow gave an example of how the rate hike would work:
This provision will negatively impact other not-for-profit organizations, such as hospitals and universities. NBOA and NAIS have sent letters to Congress opposing measures that would hurt the financial health of independent schools, and continue to urge schools to contact their senators and representatives to discuss their concerns.
For further questions or comments, NBOA members are encouraged to contact Jennifer Osland Hillen, NBOA's director, accounting and tax programs, and interim director, professional development, at firstname.lastname@example.org. #Debt#Financing
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