Small Kentucky college spared crippling tax bill under federal budget outline

Berea College would be spared a crippling tax bill on its endowment under the federal budget agreement being debated in the U.S. Senate Thursday night.

Late last year, the tiny Appalachian school got caught up in the Republican tax bill, which placed a 1.4 percent excise tax on large endowments at private colleges, such as Harvard, Yale and Princeton.

Berea has a $1 billion endowment because it’s one of the last tuition-free colleges serving low-income students in the nation. A tax bill of more than $1 million would have limited the number of students Berea could accommodate, school officials said at the time.

U.S. Rep. Andy Barr, R-Ky, tried to get an exemption for Berea in the House version of the tax bill, but it was dropped in the Senate version.

On Thursday, Senate Majority Leader Mitch McConnell’s office said he and Barr “insisted” that a provision protecting Berea be included in the Bipartisan Budget Act.

Berea President Lyle Roelofs said Thursday he first learned about the fix in a Politico story. He has not yet spoken with McConnell or Barr.

“We found out this morning that language is included in the bipartisan budget bill that would provide an exemption for schools that educate fewer than 500 tuition-paying students,” he said. “We are very excited because this will enable us to carry out our mission without the burden of the excise tax. We are hopeful the bill passes with the language included.”

Berea was founded in 1855 as a co-educational and racially integrated school, and it’s one of just a few tuition-free schools left in the country. Most of the 1,552 students work part-time on campus. It is dedicated to educating low-income Appalachian students. Between 80 percent and 90 percent of Berea’s students are on federal Pell grants, which defines them as coming from low-income families.

It was recently ranked number one in the country for how well it educates low-income and first-generation students.

This story was originally published February 8, 2018 at 4:44 PM with the headline "Small Kentucky college spared crippling tax bill under federal budget outline."