Endowment Tax Fairness Act
The Endowment Tax Fairness Act would amend the Internal Revenue Code to drastically increase the excise tax on the investment income of private colleges and universities. Specifically, it would raise the rate from the current 1.4% to 21% on the net investment income of eligible institutions, with the change applying to taxable years beginning after enactment. The revenue from this higher tax would go into the general fund of the U.S. Treasury and be used first to reduce the federal deficit and, thereafter, to reduce the national debt. The bill is introduced in the House and carries a short title reflecting its purpose. In short, the bill significantly increases the federal tax on endowment investment income for private colleges and universities and uses the resulting revenue to reduce the deficit/debt.
Key Points
- 1Tax rate increase: The excise tax on investment income (net investment income) of private colleges and universities would jump from 1.4% to 21%.
- 2Scope: The change targets private colleges and universities subject to the existing endowment investment income tax (Section 4968), i.e., the institutions currently taxed under that provision.
- 3Effective date: The higher rate would apply to taxable years beginning after the date of enactment.
- 4Revenue use: All additional revenue from the rate increase would go to the general fund and be used to reduce the federal deficit, and thereafter to reduce the national debt.
- 5Title and framing: The bill is designated as the “Endowment Tax Fairness Act,” signaling its purpose as a sweeping change to endowment-related taxation for private higher education institutions.