House Republicans on Monday introduced a wide-ranging tax bill that would impose, through a new tiered system, higher taxes on private universities with large endowments and on private foundations with significant assets.
Overall, the bill would reduce federal revenues by more than $4.9 trillion over 10 years, according to an estimate of its impact prepared by Congress’s Joint Committee on Taxation. The reduction in revenue is intended to be balanced out by President Donald Trump’s efforts to reduce expenditures by the federal government.
The House Committee on Ways and Means is widely expected to vote later today to advance the legislation and fold it into the larger tax bill, which Republicans hope to pass this year.
The bill would make good on recent Republican efforts to boost the current 1.4% endowment tax rate as high as 21%—matching the corporate tax rate by implementing a tiered tax system based on a private universities’ asset size per student.
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Under the provision, private universities with endowment assets of between $500,000 and $749,999 per enrolled student will continue paying the current 1.4% tax rate on the investment gains of their endowment.
The tax rate on investment gains increases to 7% for universities with endowment assets between $750,000 and $1.25 million per student; 14% for private universities with endowment assets per student between $1.25 million and $2 million; and 21% for endowment assets of at least $2 million per student.
The tax would likely lead universities to consider changing their asset allocation to avoid the tax, which would have the largest effect on the universities with the largest endowments, such as Harvard University and Yale University, which have also both been subjected to federal funding cuts.
Only a handful of private universities would face the stiffest tax—likely Harvard, Yale, Stanford University, Princeton University and the Massachusetts Institute of Technology, based on the size of their endowments in 2024, according to data from the NACUBO-Commonfund Study of Endowments.
As an estimated example, Harvard’s endowment of more than $50 billion returned 9.6% in 2024, yielding about $4.86 billion that would be taxed at a 21% rate, resulting in more than $1 billion in federal taxes. Under the current rate, it would pay more than $68 million in taxes.
Under the new provisions, the tax on private foundations would remain the same if an organization’s assets are less than $50 million but would increase to 2.78% for private foundations with assets between $50 million and $250 million; 5% for those with assets between $250 million and $5 billion; and 10% for foundations with assets of at least $5 billion.
The provision also exempts religious institutions from the tax. Notre Dame University, for example, would not be subject to the tax.
The legislation does not include the elimination of the preferable tax treatment on carried interest, a tax break often used by private equity and hedge funders despite Trump’s previously expressed support for higher taxes for those asset managers and for ending the loophole.
Tags: Endowment Tax, Foundations
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