Sen. Ron Wyden, D-Ore. (Photo: AP)

Sen. Ron Wyden, D-Oregon, the ranking member on the SenateFinance Committee, has introduced legislation to limit tax breaks for donations to colleges thatare made to influence admission decisions.

The College Admissions Fairness Act would requirecolleges and universities to establish a policy thatbars consideration of a family's donation or its abilityto donate as a factor in the admissions process in order for thosedonations to be fully tax-deductible.

If the university failed to implement such a policy, deductionswould be limited to $100,000 of donations over a six-year periodprior to or during the child's university attendance.

The bill would also amend the Higher Education Act to requirethat any institution receiving federal financial aid implement therequired policy and report the number of applicants, admittedstudents and enrolled students who are the children of donors. TheDepartment of Education would make that data publicly available,and institutions would include the information on their annual IRSfilings.

“It's absurd that the tax code subsidizes the top 1% buyingtheir way into school,” Wyden said in astatement. “Colleges and universities would be able topreserve the tax deductibility of all donations if they simply bartheir consideration in admissions decisions. It's 'one anddone'—implement a policy and you're in compliance.”

Wealthy families have historically had an advantage in thecollege admissions process, especially for nonprofit privateinstitutions due to family donations, legacy applications and otherfactors, but the subject didn't attract broad attention until therecent college admissions scandal in the U.S.

More than 30 parents were charged with paying a consultant tobribe coaches or other college officials or to facilitate cheatingon admissions tests in order to get their children admitted to anumber of prestigious universities including Stanford, Georgetown,UCLA and USC. Those payments were illegal, unlike family donationsto colleges.

Mark Kantrowitz, publisher and vice president of research atSavingforcollege.com, says  Wyden's bill“makes sense” because “if a donor receives a benefit from making adonation, the donation should not be tax deductible,” buthe didn't think the legislation would eliminate the advantages thatmany wealthy families have.

Parents could still make donations to a school even though theywould lose some or most of the tax deduction, and colleges couldstill solicit their donations and admit the students, noting thatthe donors have the responsibility to properly claim income taxbenefits, says Kantrowitz.

Also, so-called “developmental admits” — students who areadmitted because of the ability of the student's parents to donatea building or endow a faculty chair — would not be eliminatedbecause colleges could still expect that a student's family willeventually make a donation, says Kantrowitz.

Bob Shireman, director of higher education excellence and seniorfellow at The Century Foundation, said colleges will argue that “alarge donation can finance several low-income students' tuition, soselling a seat to a rich person can have an upside. In that case,there should be some minimum expectation for the socioeconomicdiversity of the college.”

But even that argument “prompts the right discussion,” Shiremansays.