Higher Education

Article Autumn Hines

On May 12, 2025, the House Ways and Means Committee released its long-awaited draft of proposed tax legislation. If enacted, this could have the most significant impact on tax-exempt organizations since the Tax Cuts and Jobs Act. Below is a summary of highlights in the proposed legislation.

Increase in Rate of Tax on Net Investment Income of Certain Private Foundations

The draft bill proposes an increased excise tax on private foundations’ net investment income, which could impact grantmaking and the execution of exempt purpose activities.

  • 1.39% in the case of a private foundation with assets of less than $50,000,000
  • 2.78% in the case of a private foundation with assets of at least $50,000,000 and less than $250,000,000
  • 5% in the case of a private foundation with assets of at least $250,000,000 and less than $5,000,000,000, and
  • 10% in the case of a private foundation with assets of at least $5,000,000,000

Modification of Excise Tax on Investment Income of Certain Private Colleges and Universities

A tax would be imposed on the net investment income of an “applicable educational institution”:

  • 1.4% in the case of an institution with a student endowment in excess of $500,000 and less than $750,000
  • 7% in the case of an institution with a student endowment in excess of $750,000 and less than $1,250,000
  • 14% in the case of an institution with a student endowment in excess of $1,250,000 and less than $2,000,000, and
  • 21% in the case of an institution with a student endowment in excess of $2,000,000

See our article on how this proposed tax bill could impact colleges and universities for a more in-depth explanation of terms.

Unrelated Business Income Increased by the Amount of Certain Fringe Benefit Expenses for Which Deduction is Disallowed

The proposed bill would include qualified transportation fringe benefits and parking facilities disallowed under IRC section 274 in an organization’s unrelated business income for the year. This provision was initially included in the Tax Cuts and Jobs Act and was subsequently repealed.

Name and Logo Royalties Treated as Unrelated Business Taxable Income

The proposed bill would include the sale or licensing of an organization’s name or logo as an unrelated trade or business regularly carried on by the organization.

1% Floor on Deduction of Charitable Contributions Made by Corporations

The proposed bill would include a 1% floor on corporate charitable deductions and allow corporations to carry the unused tax benefit forward 5 years, which could help increase charitable giving.

Reinstatement of Partial Deduction for Charitable Contributions of Individuals Who Do Not Elect to Itemize

While the standard deduction was increased, which could impact individuals’ ability to deduct charitable contributions, the proposed bill reinstates the deduction for those who do not itemize. The deduction would be reduced from $600 to $300 ($150 for married filing separate and single filers).

Termination of Tax-Exempt Status of Terrorist-Supporting Organizations

This provision would allow the Treasury to revoke the exempt status of organizations deemed to provide “material support or resources” that support terrorist activities.

While the above provisions are just some highlights, there is other proposed legislation that may impact tax-exempt organizations, such as an extension of excise tax on executive compensation for employees earning over $1 million, changes to the excess business holdings rule for private foundations, updates to the exclusion for publicly available research income, termination of certain energy credits, and other individual and business income tax provisions.

Although the bill is in draft format, we will watch closely as it moves through Congress. If you have any questions about how the proposed legislation may impact your organization, please contact your trusted Dean Dorton advisor.

Article Autumn Hines

The recently released draft of the House Ways and Means Committee’s proposed tax bill included a significant impact on colleges and universities. The 2017 Tax Cuts and Jobs Act imposed a 1.4% excise tax on the investment income of an “applicable educational institution.” The proposed bill expands the excise tax, as detailed below.

  • 1.4% in the case of an institution with a student endowment in excess of $500,000 and less than $750,000
  • 7% in the case of an institution with a student endowment in excess of $750,000 and less than $1,250,000
  • 14% in the case of an institution with a student endowment in excess of $1,250,000 and less than $2,000,000, and
  • 21% in the case of an institution with a student endowment in excess of $2,000,000

Applicable Educational Institution

An “applicable educational institution” is described as an eligible educational institution (as defined in IRC section 25A(f)(2)):

  • Which had at least 500 tuition-paying students during the preceding tax year,
  • More than 50% of the tuition-paying students of which are located in the U.S.,
  • Which is not a state college or university or a qualified religious institution, and
  • The “student adjusted endowment” of which is at least $500,000.

Student Adjusted Endowment

“Student adjusted endowment” means the aggregate fair market value of the institution’s assets (determined as of the end of the preceding tax year, other than those assets used directly in carrying out the institution’s exempt purpose) divided by the number of eligible students of the institution. An eligible student meets the requirements under Section 484(a)(5) of the Higher Education Act of 1965.

The institution’s net investment income is determined under rules similar to the rules of IRC section 4940(c).

The proposed bill also includes the aggregation of related organizations. A related organization is defined as any organization that:

  • Controls, or is controlled by, such institution,
  • Is controlled by one or more persons who also control such institution, or
  • A supported organization (as defined in IRC section 509(f)(3)) or an organization described under IRC section 509(a)(3).

Although the bill is in draft format, we will watch closely as it moves through Congress. If you have any questions about how the proposed legislation may impact your organization, please contact your trusted Dean Dorton advisor.

Article Autumn Hines

On February 14, 2025, the U.S. Department of Education Office for Civil Rights (the Department) released a Dear Colleague Letter (DCL) notifying institutions that they should stop using race preferences and stereotypes as factors in admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life. The letter also advised that institutions should:  

“(1) ensure that their policies and actions comply with existing civil rights law; (2) cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends; and (3) cease all reliance on third-party contractors, clearinghouses, or aggregators that are being used by institutions in an effort to circumvent prohibited uses of race.”  

If institutions do not comply, they risk losing federal funding. Read the full letter here. 

On February 28, 2025, the Department released a Frequently Asked Questions (FAQ) as a follow-up to the DCL. The FAQ is meant to provide more detail about how the “Students for Fair Admissions, Inc. v. President & Fellows of Harvard College, 600 U.S. 181 (2023) (“Students v. Harvard” or “SFFA”) decision applies to applies to racial classifications, racial preferences, and racial stereotypes as well as how the Department will interpret the ruling in its enforcement of Title VI of the Civil Rights Act of 1964 and its implementing regulations.”

The FAQ covers questions from the admissions process to investigation and non-compliance with regulations. The FAQ will continue to be updated as questions arise.  

As the Department continues to provide updates and clarification on these policies, it is important for institutions to stay informed and ensure compliance with evolving regulations. The team at Dean Dorton will continue to monitor the situation and share relevant updates as they become available. If you have any questions or need guidance on how these changes may impact your institution, please don’t hesitate to contact Megan Crane. 

Read the FAQ here. 

Article Autumn Hines

On February 12, 2025, the U.S. Department of Education’s Office for Civil Rights (OCR) announced the rescission of guidance issued in the final days of the Biden administration concerning Name, Image, and Likeness (NIL) compensation for student-athletes. The Biden administration guidance had interpreted NIL agreements between schools and student-athletes as a form of financial aid, necessitating proportional distribution between male and female athletes under Title IX.  

We previously covered the Biden administration guidance here.  

This policy reversal has significant implications for collegiate athletics: 

  • Potential for Increased Gender Disparities: Without the requirement for proportional distribution, there is concern that NIL compensation may become concentrated in male-dominated sports, such as football and men’s basketball.  
  • Impact on Revenue-Sharing Models: The rescission may influence how institutions design their revenue-sharing frameworks, possibly leading to models that favor revenue-generating sports without mandated considerations for gender equity.  
  • Legal and Compliance Considerations: Institutions may need to reassess their Title IX compliance strategies, as the rescission alters the regulatory landscape regarding NIL compensation and its distribution. 

For questions or further inquiries, please contact Megan Crane.  

Article Autumn Hines

The U.S. Department of Education’s Office for Civil Rights (OCR) has released a comprehensive fact sheet titled “Ensuring Equal Opportunity Based on Sex in School Athletic Programs in the Context of Name, Image, and Likeness (NIL) Activities.” This document provides crucial guidance on how schools can comply with Title IX requirements while navigating the evolving landscape of NIL activities. Title IX, a landmark civil rights law enacted in 1972, prohibits sex-based discrimination in any school receiving federal financial assistance, extending to all school programs, including athletics. 

This latest guidance is particularly significant as NIL activities have become a key component of collegiate sports. This fact sheet highlights two main updates regarding Title IX compliance in the context of NIL: 

  • Athletic Financial Assistance  
  • Third-Party Compensation  

Athletic Financial Assistance 

OCR has clarified that any compensation from schools for using student-athletes’ NIL is considered a form of athletic financial assistance under Title IX. Consequently, schools must ensure that athletic financial assistance made available by the school is substantially proportionate to the number of students of each sex participating. 

This underscores the importance of equitable funding allocation across men’s and women’s sports programs. Disparities in financial assistance could lead to violations of Title IX, prompting potential investigations or sanctions. Schools must diligently assess how NIL opportunities are structured and ensure they align with the broader goals of gender equity in athletics. 

Third-Party Compensation  

While OCR does not consider compensation from third parties for NIL to be athletic financial assistance under Title IX, it still emphasizes the responsibility to treat all its student-athletes fairly and equitably.  

Some NIL agreements—especially those negotiated through collectives or sponsorships—could inadvertently result in sex-based disparities. For example, if opportunities disproportionately favor athletes of one sex over another, schools may need to examine whether these disparities stem from institutional practices or policies that could trigger Title IX compliance issues. 

However, due to the complexity and variability of third-party NIL agreements, the fact sheet does not provide specific guidance on their application to Title IX. Instead, it encourages schools to proactively monitor and address any potential disparities that may arise. 

Implications for Schools 

The OCR’s fact sheet is a vital resource for educational institutions striving to uphold Title IX while supporting the expanding opportunities for student-athletes in the NIL era. Schools must carefully evaluate their NIL-related policies, practices, and partnerships to ensure compliance. This includes: 

  • Conducting regular assessments of athletic financial assistance allocation. 
  • Reviewing NIL agreements facilitated by the institution for potential equity issues. 
  • Educating coaches, staff, and student-athletes about Title IX obligations in the context of NIL. 

By prioritizing transparency and fairness, schools can foster an environment where all student-athletes can thrive. 

For additional details, refer to the full OCR fact sheet or contact the Office for Civil Rights. 

For questions or further inquiries, please contact Megan Crane. 

Article Autumn Hines

These days, we seem to be bombarded with data everywhere we look. It can be hard to know what to do with it and how to measure its impact. In a previous post, we discussed using operational and financial data to develop Key Performance Indicators (KPIs) to serve as an operational dashboard for your organization. In this post, we want to introduce a concept that will allow you to use data to track progress made toward large-scale organizational goals. 

Introducing…OKRs! (more acronyms – sorry)

Objectives and Key Results (OKRs) is a goal-setting framework that aims to bridge the gap between performance and future goals. OKRs consist of ambitious, qualitative Objectives paired with specific, measurable Key Results. Unlike KPIs, which are ongoing measurements, OKRs are typically set and evaluated quarterly, encouraging regular reflection and adjustment. Said differently, KPIs are focused on trees, and OKRs are focused on the health of the forest ecosystem. This approach helps organizations align efforts, foster transparency, and push for continuous improvement. While KPIs tell you where you have been, OKRs help chart the course for where you want to go and help ensure alignment across the team. 

The key components of an OKR are as follows: 

  •  Objectives: These are qualitative, inspirational, and time-bound goals. They describe what you want to achieve and should be short, motivating, and easy to memorize. 
  •  Key Results: These quantitative metrics measure progress towards the objective. Typically, an objective has 3-5 key results. 

Consider the following characteristics when designing your OKRs: 

  • Set quarterly or annually 
  • They should be ambitious and slightly out of reach 
  • Transparent and visible to the entire organization 
  • Not tied directly to compensation or performance reviews 
  • Scored on a scale (typically 0-1 or 0-100%) at the end of the cycle 
  • Provide the opportunity for honest assessment at the end of the cycle 

How About Some Examples

OKRs should be developed to reflect your organization’s culture and goals. Here are some examples to help you see the connection between Objectives and Key Results. 

Software Company:
Objective: Launch our new mobile app to disrupt the market. 
Key Results: 
– Achieve 100,000 app downloads in the first month 
– Maintain a 4.5-star rating on app stores 
– Reach a daily active user count of 50,000 		Accounting Team
Objective: Streamline the month-end close process 
Key Results: 
– Reduce month-end close time from 10 days to 5 days 
– Implement automated reconciliation for 80% of high-volume accounts 
– Achieve zero post-close adjustments for two consecutive months 
Sales Team
Objective: Dramatically improve our customer acquisition process 
Key Results: 
– Increase lead-to-customer conversion rate from 10% to 15% 
– Reduce the average sales cycle from 45 days to 30 days 
– Implement and train team on new CRM (Client Relationship Management) system with 100% adoption 		Marketing Department
Objective: Establish our brand as a thought leader in the industry 
Key Results: 
– Publish 12 high-quality blog posts that generate at least 5,000 views each 
– Secure speaking engagements at 3 major industry conferences 
– Increase social media engagement rate by 25% across all platforms 
Human Resources
Objective: Create a more diverse and inclusive workplace 
Key Results: 
– Increase representation of underrepresented groups in leadership positions by 20% 
– Achieve a 90% completion rate for unconscious bias training among all employees 
– Improve employee satisfaction scores related to inclusion by 15 points 		Product Team
Objective: Significantly enhance the user experience of our core product 
Key Results: 
– Reduce customer-reported bugs by 50% 
– Improve app load time by 30% 
– Increase Net Promoter Score (NPS) from 30 to 50 

In future posts, we will continue to explore how you can implement OKRs within your organization. However, if you think implementing a system of KPIs and/or OKRs into your organizations would be beneficial and would like to brainstorm what that looks like, please contact Justin Hubbard.