The Build Back Better Act (Act) introduced in late October included a $1.75 trillion spending package. The bill has seen multiple iterations and to date has not been signed into law, but as we have seen historically, often portions of bills are picked up in future legislation.
One of the more interesting features included in the Higher Education section of the Act is the Public University Research Infrastructure Credit (Sec. 137501).
The Public University Research Infrastructure Credit (Sec. 137501) provides a 40 percent general business credit for cash contributions made by a taxpayer to a public college or university (or a nonprofit organization to which authority has been delegated by the institution to apply for administering credit amounts on behalf of the institution[i]) in connection with a qualifying research infrastructure program[ii].
Taxpayers may elect to claim this credit with respect to a qualifying cash contribution in lieu of treating such contributions as a charitable deduction. The amount of cash contributions an institution may designate as qualified cash contributions may not exceed 250% of the credit amount allocated to it under this provision. The provision provides $500 million of credits for calendar years 2022-26 to be awarded by the Treasury Department on a project[iii] application basis.
The intent would be to spur an influx of funding to smaller universities that need the money due to their general lack of resources when compared to their larger counterparts. The ability to create a tax credit (to directly reduce the amount of tax owed) versus a tax deduction (which just reduces the amount of income is subject to tax) would be significant to any taxpayer.
Schneider Downs will continue to monitor the Act and future legislation that may pick up this credit and will share additional information as it becomes available. If you have additional questions, please reach out to us.
[i] An eligible institution includes an institution of higher education that is a state college or university described in section 511(a)(2)(B) that is an agency or instrumentality of any government or political subdivision. An eligible institution could also be an organization that provides support for a state college or university described in 170(b)(1)(A)(iv) or section 509(a)(3) that has been delegated authority for applying for or administering credit amounts on behalf of the institution, which is an organization that receives a substantial part of its support from the United States of any state or political subdivision.
[ii] A project to purchase, construct or improve research infrastructure property.
[iii] A portion of a property, building or structure of an eligible educational institution or any land associated with such property that is used for research.
