The last several weeks in Washington have seen several legislative efforts aimed at expanding the scope of the private college endowment tax.  These moves come in response to a growing assault on higher education and in the wake of recent congressional hearings on antisemitic activity on college campuses.

The House Education and Workforce Committee recently approved bipartisan short-term Pell legislation that is proposed to be paid for by stripping federal loans from students attending colleges and universities paying the endowment tax.  While the bill did pass the committee, several members spoke against the offset, and there are ongoing conversations about other alternatives to pay for the bill.

In direct response to the antisemitism hearings and media coverage of campus protests, Sen. Tom Cotton (R-AK) introduced legislation that would apply a one-time 6% excise tax to the 2022 value of the endowments of 10 private, nonprofit U.S. universities that each have endowment assets of at least $12.2 billion. Sen. Cotton’s legislation would also include institutions with endowment assets valued of at least $9 billion that also operate a “state contract college.”  The revenue gained from the tax would be used for aid for Israel in the war against Hamas, Ukraine’s war against Russia, and efforts to secure the southern U.S. border. Faith-based institutions would be excluded from Cotton’s legislation.

Sen. JD Vance (R-OH) attempted to get quick Senate approval of legislation he introduced that would raise the excise tax on endowment net investment income from 1.4% to 35% for private colleges and universities with at least $10 billion in assets that are currently paying the tax. Faith-based institutions would also be excluded from this bill.

In his floor statement, Sen. Vance said, “I rise to speak today about a problem born in America’s higher education system.  A problem of mass subsidy of the American taxpayer that has metastasized into one of the most corrupt, and one of the most politically active and politically hostile organizations in the U.S. – and that is elite colleges.”

Senate leadership ultimately blocked Sen. Vance’s bill from consideration.

These actions are similar to the flurry of bills that would have expanded the endowment tax that were introduced in the House and Senate in the last session of Congress in response to President Biden’s initial large-scale loan forgiveness efforts that were ultimately struck down by the Supreme Court.

The endowment tax only applies to private colleges and universities and is based on a formula of endowment per student, thereby discriminating against both private, nonprofit colleges and universities and smaller institutions.  There is no inflationary adjustment in the tax, so more and more institutions are caught in its provisions each year. 

NAICU has long opposed the tax for its unprecedented recoupment of charitable donations.