Tax on College Endowments, Foundations Increased in GOP Bill

House Republicans Monday proposed expanding a tax on college endowments and private foundations.

The levies are part of the tax section of a massive bill that aims to extend tax cuts expiring this year from the GOP’s 2017 law. That law included a 1.4% tax on investment income of certain large private colleges and universities to pay for other tax breaks.

The draft bill to be considered by the House Ways and Means Committee increases the excise tax based on investment income of certain private colleges and universities based on the size of the institution’s endowment. Universities with a student-adjusted endowment between $500,000 and $750,000 will keep the 1.4% tax. The tax has four phased increases, ending with a 21% tax on universities with a student-adjusted endowment above $2 million.

House Republicans are also proposing increasing the tax rate on net investment income for certain private foundations. That tax rate also increases based on the foundation’s size. For those with assets of less than $50 million, the tax rate is 1.39%, and it increases to 10% for foundations with assets of at least $5 billion.

• Republicans have criticized prestigious colleges for not doing enough to address antisemitism on campus and promoting progressive values.
• Colleges have pushed back against an increased endowment tax, saying it could threaten their research capabilities and ability to attract the best students.