WASHINGTON — At nearly 500 pages, the emerging Senate tax bill provides breaks for industries small and large, but one particular provision sparked a heated exchange Friday night, something Democrats calling it the “Hillsdale carveout”.

That’s for Hillsdale College, the small school in Michigan that has a large endowment funded by the DeVos family and other wealthy conservatives.

A last-minute inclusion in the legislation, authored by Sen. Patrick Toomey, R-Pa., would have exempted any college that does not accept federal funding from a 1.4 percent tax on investment income from university endowments.

 

Early Saturday morning, the Senate voted to eliminate the tax break.

Democratic Sen. Jeff Merkley of Oregon proposed the amendment to eliminate the tax break for Hillsdale, noting that it has connections to powerful Republicans, including Education Secretary Betsy DeVos.

Merkley said, “Isn’t that just the type of insider deal for the wealthy and well-connected that we should oppose?”

The Senate Republicans’ sweeping tax package would impose a new tax on investment income earned by some private universities and colleges.

Republican Sen. Pat Toomey of Pennsylvania added the provision exempting certain colleges that don’t receive federal funds. Democrats said Hillsdale was the only college that would benefit.

Merkley’s amendment was adopted by a 52-48 vote.

A dozen or so colleges do not accept federal funding, but Democrats believed that Hillsdale might be the only one to qualify for the new benefit under the language proposed.

“Would the senator answer a question about the provision” Sen. Clair McCaskill, D-Mo., asked Toomey, highlighting the college’s connection to Education Secretary Betsy DeVos. “Do you know who the biggest donor was to the Hillsdale College endowment? Would that be the DeVos family?”

“It would be available to any college that made that choice,” Toomey responded, defending Hillsdale for saving taxpayers “many millions altogether” for choosing not to accept federal funds. He said such colleges should not pay higher federal taxes on capital gains from their endowments, putting that onus on massive private university endowments such as Harvard and Yale.

“Any others that chose to (reject federal funding) would be able to participate,” Toomey said.

 

Erik Prince, DeVos’ brother and founder of the private security company Blackwater USA, sits on the Hilldale board, as does Jeffrey Coors, a descendant of that family’s beer dynasty.

Hillsdale definitely benefits from Toomey’s provision. The school’s endowment cleared more than $500 million earlier this year, according to the student newspaper. It had fewer than 1,500 students last year, giving it a student-to-endowment ratio of more than $300,000.

That means it would have to pay the 1.4 percent tax on its investments made in the endowment every year.