Bipartisan lawmakers in Congress fight tax on college endowments

Under the sweeping overhaul of the tax code that will Republicans passed last year, private colleges must pay a 1.4 percent annual excise tax on the gains in their endowments. The provision only applies to institutions with endowments larger than $500,000 per full-time student.

About 30 schools are likely to be affected, according to a list compiled by the National Association of Independent Colleges along with Universities. the item includes some of the most prestigious schools within the country: Princeton, Yale, Darmouth, Stanford along with MIT, among others.

According to government estimates, the provision will raise nearly $2 billion over the next decade, helping to offset the $1.5 trillion cost tag of the brand new tax law. Harvard reportedly projected the item would certainly have paid $43 million on its endowment gains if the levy had been in place last fiscal year. MIT predicted the tax will cost the item at least $10 million next year.

nevertheless those numbers are highly uncertain, said Karin Johns, tax policy director at NAICU. Endowment funds used for educational purposes are exempt through the tax, nevertheless lawmakers did not define what that will means.

At Harvard, for example, endowment funds cover about 36 percent of the university’s operating budget – a larger share than tuition. The endowment also pays for financial aid for lower-income students, Faust said, along with the item is usually unclear whether that will money would certainly be subject to the brand new levy.

Without guidance through the Treasury Department along with the IRS, the precise financial toll on universities remains uncertain. nevertheless Johns said many schools believe the tax will be “devastating.”

“They just feel like they’re going to have their hands tied on what they can spend their own money on on their own campuses,” she said.

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