Nehls proposes higher tax rate for elite university endowment profits

Congressman Troy E. Nehls has introduced the Endowment Tax Fairness Act, a bill aimed at increasing the excise tax on profits from certain private university endowments from 1.4% to 21%. The proposed legislation targets elite private universities with substantial endowments.

"Elite private universities have accumulated and sit on massive university endowments and pay a tax less than 2% on the investment earnings of their endowments, which is far lower than what most hardworking Americans pay in taxes," said Congressman Nehls. "Meanwhile, these universities have significantly increased tuition on America’s youth, which has overwhelmingly surpassed the average annual inflation rate. This is unacceptable. My bill would put elite universities with massive endowments on notice by holding them to the same tax standard as corporations."

The bill outlines specific criteria for applicability: it would affect private colleges and universities with 500 or more students and an aggregate fair market value of assets of at least $500,000 per student. Additionally, more than half of the student body must be located within the United States. Revenue generated from this act would contribute to national deficit reduction through deposit into the general fund of the Treasury.

Congresswoman Lauren Boebert is noted as an original cosponsor of this legislation.

Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, net investment earnings on private college and university endowments were not taxed. The TCJA introduced a 1.4% excise tax on these profits. As of Fiscal Year 2022, institutions subject to this tax hold approximately $270 billion in assets under management, including prominent universities such as Harvard, Yale, Princeton, Stanford, MIT, University of Pennsylvania, Northwestern University, Washington University, Duke University, and Vanderbilt University.