University Accountability Act

Bill Number

H.R. 2686

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-04-07: Referred to the House Committee on Ways and Means.

Last Updated

2025-05-09T16:46:02Z

AI-Generated Summary

Purpose of the Legislation

The University Accountability Act (H.R. 2686) aims to hold tax-exempt educational institutions accountable for civil rights violations by imposing financial penalties through the tax code and requiring reviews of their tax-exempt status. It specifically targets violations of Title VI of the Civil Rights Act of 1964, which prohibits discrimination based on race, color, or national origin in programs receiving federal financial assistance.

Key Provisions

• Penalties for Violations:
• A penalty is imposed on "specified tax-exempt educational institutions" (eligible colleges and universities exempt from federal income tax under sections 501(c) or 511(a)(2)(B) of the Internal Revenue Code) for each court-determined violation of Title VI.
• The penalty amount is the greater of $100,000 or 5% of the institution's total administrative compensation (e.g., salaries and payments to executives and administrators) for the year the violation occurred.
• Liability arises on the date of a federal court judgment; penalties are refunded if the judgment is later reversed, but reapplied if reinstated.
• Multiple judgments based on the same facts are treated as a single violation to avoid duplicate penalties.

• Review of Tax-Exempt Status:
• After the second such violation (post-enactment), the IRS Secretary must review whether the institution still qualifies for tax-exempt status.
• Reversed judgments do not count toward this threshold unless reinstated.

• Reporting Requirements:
• Affected institutions must report details of violations (including descriptions, dates, and prior counts) and any reversals on their annual tax returns.
• State colleges and universities (even if not required to file standard returns) must file special returns with this information if a violation occurs.
• Failure to report triggers standard tax return penalties.

• Procedural Rules:
• No time limits apply to assessing penalties or issuing refunds, allowing flexibility in enforcement.

• Effective Date:
• Applies to civil rights violation determinations made after the bill's enactment.

Significant Changes to Existing Law

• Adds a new section (6720D) to the Internal Revenue Code's penalty provisions, introducing tax-based financial consequences for Title VI violations—previously, such violations were handled mainly through civil lawsuits or loss of federal funding, without direct IRS penalties.
• Amends section 501 to require mandatory IRS reviews of tax-exempt status after repeated violations, shifting from voluntary oversight to automatic scrutiny.
• Modifies section 6033 to mandate detailed reporting of violations on tax forms, increasing transparency and IRS monitoring of exempt organizations.
• These changes integrate civil rights enforcement with tax administration, waiving usual statute of limitations for penalties and refunds to ensure timely but indefinite accountability.

Potential Impacts

• On Government Agencies: The IRS gains new enforcement responsibilities, including penalty assessments, status reviews, and processing additional reports, potentially increasing administrative workload and budget needs.
• On Citizens: Students and others affected by discrimination in federally funded education programs may see stronger deterrence against violations, leading to fairer access to education; however, it does not directly provide new remedies for individuals.
• On Educational Institutions: Could result in significant financial hits (e.g., penalties tied to executive pay), prompting better compliance efforts; repeated violations risk losing tax-exempt status, affecting operations and donations.
• On International Relations: No direct impacts, as the bill focuses on domestic tax-exempt U.S. educational institutions.

Main Stakeholders Affected

• Tax-Exempt Educational Institutions: Primarily private and public colleges/universities receiving federal aid, facing penalties, reviews, and reporting burdens.
• IRS and U.S. Treasury Department: Responsible for implementing penalties, reviews, and refunds, with expanded oversight role.
• Students and Civil Rights Advocates: Beneficiaries through potential reduction in discrimination; Title VI covers programs with federal funding, affecting diverse student populations.
• Federal Courts: Their judgments trigger penalties, indirectly influencing enforcement.

Notable Legal, Constitutional, or Political Implications

• Legal Implications: Strengthens Title VI enforcement by linking it to the tax code, creating a financial incentive for compliance beyond existing remedies like funding cuts or lawsuits; the waiver of assessment limitations could extend IRS actions indefinitely, raising questions about due process in tax matters.
• Constitutional Implications: Aligns with the Constitution's equal protection principles by promoting nondiscrimination in federally supported education, but may face challenges if seen as overreach into private institutions' operations or if penalties are viewed as punitive without full hearings.
• Political Implications: Enhances accountability for educational institutions amid debates on campus discrimination, potentially influencing how tax benefits are conditioned on civil rights adherence; as a bipartisan tool for oversight, it could set precedents for tying tax status to other regulatory compliance areas.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Malliotakis, Nicole [R-NY-11]

Cosponsors (2)

Rep. Stefanik, Elise M. [R-NY-21], Rep. Tenney, Claudia [R-NY-24]

Recent Actions

• 2025-04-07: Referred to the House Committee on Ways and Means.
• 2025-04-07: Introduced in House
• 2025-04-07: Introduced in House

Bill Versions

• University Accountability Act — issued 2025-04-07 — PDF (8 pages)