One Big, Beautiful Bill Act

Last week, after both houses of Congress very narrowly passed it, President Trump signed the “One, Big, Beautiful Bill Act” (H.R. 1).

The Act is being referred to as “OBBBA” and pronounced like “Abba.”  You know, the band that brought us “Waterloo” back in the 1980’s?

For many of us in the Bible College and Seminary arena, the GREAT NEWS is that the Senate stripped out the much-dreaded PARKING TAX.  Hallelujah!

Generally, the set-to-expire tax cuts from the 2017 “Tax Cuts and Jobs Act” (TCJA) are rolled forward.

Another highlight (previously noted) is IRS Form 1099 reporting: The final bill includes an increase to the annual reporting threshold on payments for goods and services from $600 to $2,000.  This includes Form 1099-NEC (Non-employee Compensation), which is filed by many institutions.

As you may have heard, there is – going forward – no tax on tips or overtime. This is accomplished by “above the line” deductions of up to $25,000 for tips and up to $12,500 for overtime pay (to be adjusted for inflation).  These provisions – like several others – are set to expire at December 31, 2028.

There is also a potential fundraising opportunity for “our-size” schools in the Act: a permanent “above-the-line” deduction for charitable contributions for taxpayers who do not itemize deductions.  The amounts are up to $1,000 for individuals and $2,000 for those who are “married filing jointly.”  Over the past 8 years, fewer and fewer U.S. taxpayers itemized deductions, this has led to a drop off in charitable contributions among that growing group.  Now, your Development Team may have a new plan for attracting “small gifts.”

Another cool item for some students (and others) is that car loan interest (up to $10,000 for taxpayers with income at or under $100,000) is deductible – at least through 2028.  You do not need to itemize deductions to take advantage of this.

Starting with the 2026-2027 award year, the Act excludes certain family-owned assets in the determination of student need for federal student aid, including:

• A family farms on which the family resides

• Family-owned and controlled small businesses with fewer than 100 full-time equivalent (FTE) employees

• Family-owned fishing businesses and related expenses

Pell Grants are expanded for students enrolled in accredited short-term workforce training programs.  As institutions look for alternative revenue sources, this provision could be interesting to consider.  However, the Act has provisions that prevent students who receive scholarships or grants that cover their full cost of attendance from receiving Pell Grants.

Further, undergraduates will continue to have access to subsidized federal loans.  However, the Grad PLUS loans have been eliminated.

For student loan repayments, the current Income-Contingent Repayment Plans are ended at July 1, 2026) and replaced with the new “RAP program” (Repayment Assistance Plan).  “Rap-ping” may result in higher monthly payments for many borrowers. Key features include:

• Monthly payments are based on gross income, rather than adjusted gross income 

• The RAP calculations include spousal income 

• Family size is not a factored with RAP

• Forgiveness occurs after 30 years of repayment 

• Minimum monthly payment of $10 for all - even for lower-income borrowers 

• Interest subsidies will apply when payments do not cover the full amount of interest 

The Act rescinds the Department of Education regulations regarding 1) closed school discharges and 2) borrower defense to repayment.  And the Act ends unemployment and economic hardship deferments for Direct Loans issued after July 1, 2027.

There is an “Institutional Risk-Sharing and Accountability” that has several “interesting” features that institutions should be aware of (more on this in future issues):

• Institutions are barred from awarding federal student aid for programs with "low-earning outcomes."

• These “low-earning outcomes” programs mean the median earnings of a specified graduate cohort are less than the median earnings of a working adult with a lesser credential or no credential for the corresponding year, measured in accordance with the statutory formula.

• Institutions are required to warn students if a program does not satisfy the earning outcomes requirements for one year during the covered period.

• An institution’s programs that lose eligibility under this section may not apply to regain eligibility for two years.

The ”bicycle to work” employee fringe benefit is permanently dismantled.  It was “suspended” through 2025 with the 2017 TCJA.

Written byDavid C. Moja, CPA www.mojacompany.comThe information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.