Ron Wyden proposes stripping tax benefits for college donations in wake of bribery scandal

Personal Finance

Anna Moneymaker | Bloomberg | Getty Images

Senator Ron Wyden, a Democrat from Oregon and ranking member of the Senate Finance Committee, speaks during a hearing with Robert Lighthizer, U.S. trade representative, not pictured, in Washington, D.C., U.S., on Tuesday, March 12, 2019.

The alleged college admissions cheating scam unveiled earlier this week has already triggered at least one call to change the law regarding some donations.

Sen. Ron Wyden, D-Ore., said Wednesday that he will introduce a bill stripping tax benefits for donations made to universities and colleges before or during the enrollment of children of the donor’s family.

The announcement comes after federal prosecutors in Boston charged 50 people in an alleged $25 million scam in which wealthy parents allegedly paid bribes to get their children into elite U.S. colleges.

Wyden’s measure, however, would target legal donations for buildings or scholarships on campus, and purchases of sports tickets. The Democrat, the ranking member on the Senate Finance Committee, said the federal government is perpetuating an unfair admissions system by awarding tax benefits to wealthy American donors.

“Yesterday’s headlines about the wealthiest Americans buying access to our elite colleges and universities is just a new version of an old story,” he said in a Wednesday statement that referred to Tuesday’s news. “While the prosecutor attempted to distinguish these crimes from payoffs in the form of buildings or stadiums to secure access for the undeserving, it is all part of the same corrupt system.”

He added: “Middle-class families don’t have access to this back door for their children. If the wealthy want to grease the skids, they shouldn’t be able to do so at the expense of American taxpayers.”

The IRS allows people to claim tax deductions when donating to nonprofit colleges and universities.

Wealthy parents charged in Tuesday’s indictment allegedly made bribe payments under the guise of charitable donations by wiring money to William “Rick” Singer’s nonprofit the Key Worldwide Foundation. Federal prosecutors allege parents filed personal tax returns that reported the payments as donations to KWF, which would allow them to receive tax deductions.

According to the indictment, a senior official at the University of Southern California allegedly funneled bribe money directly into a university account, while some payments allegedly were made toward hired test proctors that corrected students’ exam answers and coaches of colleges and universities.

Wyden’s spokesperson told CNBC that the senator has no more details to disclose until the bill is introduced.

The Trump administration also condemned the scam.

“Every student deserves to be considered on their individual merits when applying to college and it’s disgraceful to see anyone breaking the law to give their children an advantage over others,” Education Secretary Betsy DeVos said. “The department is looking closely at this issue and working to determine if any of our regulations have been violated.”

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