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This bill would raise the tax that some private colleges and universities pay on their investment income, and it would also make more schools subject to that tax. Right now, certain private schools pay a 1.4% tax on this income. The bill would increase that rate to 10%. It would also lower the financial threshold used to decide which schools are covered, so schools with smaller endowments per student would still be included. In simple terms, the bill is designed to increase taxes on larger private college endowments and expand the number of schools that must pay them.
- The tax rate on investment income for covered private colleges and universities would go from 1.4% to 10%.
- The rule used to decide whether a school is covered would change from $500,000 to $200,000 in fair market value per student.
- The new rules would apply to tax years starting after the bill becomes law.
Official Summaries
Endowment Accountability Act
This bill increases the excise tax on the net investment income of certain private university and college endowments. The bill also expands the number of endowments subject to the excise tax by lowering the endowment asset amount per-student threshold.
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 endowments that are 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.
The bill increases the amount of the excise tax to 10% of the net investment income from such university and college endowments and lowers the per-student threshold to $200,000.
Current Full Text
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1128 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 1128
To amend the Internal Revenue Code of 1986 to increase the rate of the
excise tax based on investment income of private colleges and
universities and to broaden the definition of applicable educational
institution by lowering the threshold with respect to aggregate fair
market value per student, and for other purposes.
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IN THE HOUSE OF REPRESENTATIVES
February 7, 2025
Mr. Lawler introduced the following bill; which was referred to the
Committee on Ways and Means
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A BILL
To amend the Internal Revenue Code of 1986 to increase the rate of the
excise tax based on investment income of private colleges and
universities and to broaden the definition of applicable educational
institution by lowering the threshold with respect to aggregate fair
market value per student, and for other purposes.
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 ``Endowment Accountability Act''.
SEC. 2. EXCISE TAX BASED 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) Lowering Asset Per Student Threshold for Definition of
Applicable Educational Institution.--Section 4968(b)(1)(D) of such Code
is amended by striking ``$500,000'' and inserting ``$200,000''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
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