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This bill would raise the federal tax on investment income earned by certain private colleges and universities. Right now, some of these schools pay a 1.4% tax on that income. The bill would increase that rate to 10%, and in some cases to 20% if a school’s net price has gone up faster than inflation over the last three years. It would also expand the number of schools that have to pay the tax by lowering the asset level that triggers it. The changes would apply starting with tax years after December 31, 2024.
- The current 1.4% excise tax on investment income would be raised to 10%.
- Some schools would pay 20% instead of 10% if their net price increased faster than the Consumer Price Index over the prior three-year period.
- The bill lowers the asset threshold for being covered by the tax from $500 million to $250 million, which would bring more private colleges and universities under the tax.
- The bill applies to tax years beginning after December 31, 2024.
Official Summaries
Higher Education Accountability Tax Act
This bill increases the excise tax on the net investment income of certain private university and college endowments and expands the number of universities and colleges that are subject to the excise tax.
Under current law, certain private universities and colleges with 500 or more tuition-paying students (of which more than 50% are located in the United States) and endowment assets of at least $500,000 per student (per student threshold) pay an excise tax in the amount of 1.4% on the net investment income from such endowments. Endowment assets that are used directly in carrying out the institution's tax-exempt educational purpose are excluded from the tax.
The bill increases the amount of the excise tax to (1) 10% of the net investment income from a university and college endowment, or (2) 20% of the net investment income from a university and college endowment maintained by an institution that increases tuition over a three-year period (preceding the current tax year) at a rate that is higher than the inflation rate.
Under the bill, the tuition price for purposes of determining whether the 20% excise tax rate applies is the average yearly price charged to all first-time, full-time undergraduate students (including students who receive financial aid).
Further, the bill expands the number of universities and colleges subject to the excise tax by lowering the per student threshold to $250,000.
Current Full Text
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1006 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 1006
To amend the Internal Revenue Code of 1986 to modify the excise tax on
investment income of private colleges and universities.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 5, 2025
Mr. Joyce of Ohio (for himself and Ms. Malliotakis) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to modify the excise tax on
investment income of private colleges and universities.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Higher Education Accountability Tax
Act''.
SEC. 2. MODIFICATION OF EXCISE TAX ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
(a) Increase in Rate of Tax.--Section 4968(a) of the Internal
Revenue Code of 1986 is amended by striking ``1.4 percent'' and
inserting ``10 percent''.
(b) Additional Increase in Rate of Tax for Institutions With
Increases in Net Price.--
(1) In general.--Section 4968(a) of such Code, as amended
by subsection (a), is amended by inserting ``(20 percent in the
case of a net-price-increase institution)'' after ``10
percent''.
(2) Net-price-increase institution.--Section 4968(b) of
such Code is amended by redesignating paragraph (2) as
paragraph (3) and by inserting after paragraph (1) the
following new paragraph:
``(2) Net-price-increase institution.--The term `net-price-
increase institution' means any applicable educational
institution for any taxable year if, during the 3-taxable-year
period ending with the taxable year immediately preceding such
taxable year, the net price of such institution increased at a
rate which exceeds the rate of increase in the Consumer Price
Index (as defined in section 1(f)(5)) for such period. For
purposes of the preceding sentence, the term `net price' has
the meaning given such term by section 132(a)(3) of the Higher
Education Act of 1986 (20 U.S.C. 1015a(a)(3)) except that such
price shall be determined by taking into account all first-
time, full-time undergraduate students at the institution (in
addition to such students who receive student aid).''.
(c) Expansion of Institutions Subject to Tax.--Section
4968(b)(1)(D) of such Code is amended by striking ``$500,000'' and
inserting ``$250,000''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2024.
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