Republican senators have further scaled back a proposed system for taxing the investment income of private college and university endowments by sheltering smaller colleges from facing the levy at all and removing the exclusion of international students from the calculation.
The revised version of the now 940-page tax and policy legislation released over the weekend exempts institutions from the endowment tax if they have fewer than 3,000 full-time students, up from plans to stick with the original 2017 limit of 500 full-time students.
This exemption would exclude private institutions like Swarthmore College, Pomona College and Grinnell College to name a few, that enroll fewer than 2,000 students but have endowments with more than $2 billion in assets.
According to a previous CIO analysis, the colleges would have faced a 14% endowment tax under the House version of the bill, and a 4% tax in the Senate’s legislation. Under the latest Senate version, they would not be taxed at all.
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Meanwhile, recent amendments also benefit larger institutions, namely Columbia University, Cornell University and John Hopkins University.
As part of the revisions, the Senate removed a controversial provision that would exclude international students from its calculation shielding the universities.
The endowment tax is triggered when a university has an endowment per student ratio of more than $500,000, starting at a 1.4% tax that increases as the ratio widens. Since the universities enroll many international students, including those students would significantly lower their ratio, shielding them from the tax.
In addition, the Senate’s parliamentarian ruled that the House and Senate’s proposed exemption for religious schools violated the chamber’s rules for what can be included in so-called reconciliation bills.
That reversal would make institutions like Hillsdale College subject to the tax, although since the private Christian university enrolls fewer than 3,000 students, it would remain exempt.
However, the University of Notre Dame, which enrolled more than 13,000 students in 2024, would lose its religious exemption and be subject to the tax.
The university did not respond to a request for comment by press time.
An earlier version of the Senate’s dialed back endowment tax was estimated to raise $3.8 billion over the next decade, according to the Joint Committee on Taxation. The latest JCT estimate released June 28 estimated the provision would raise $761 million over the next 10 years.
Tags: Congress, Endowment Tax, endowments and foundations
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