Tax Arbitrage by Colleges and Universities

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Tax Arbitrage by Colleges and Universities
by Douglas Elmendorf
Colleges and universities enjoy a variety of federal tax preferences that are designed to support a broader public purpose—the advancement of higher education and research. Not only are institutions of higher learning exempt from paying federal income taxes, they also are eligible to receive tax-deductible charitable contributions and allowed to use tax-exempt debt to finance capital expenditures. According to the staff of the Joint Committee on Taxation, the cost of allowing institutions of higher learning to borrow using such debt—measured in terms of the revenues that could have been collected if those institutions had borrowed using taxable debt—will be about $5.5 billion in 2010.

http://cboblog.cbo.gov/?p=759