The Tax-Bill Provision That Would Cost Harvard Millions
Many of America’s elite colleges sit on massive pots of money, some worth billions of dollars. These endowments have grown significantly in recent years, the result of philanthropy and savvy investment techniques—and all the while they’re completely untaxed.
That’s poised to change, though, if GOP lawmakers succeed in enacting their tax-overhaul bill, which is now inching closer to becoming law: The bill stipulates that certain higher-education institutions would, for the first time ever, have to pay a tax on the income from those assets. The proposal comes at a time when lots of schools are struggling financially—including some that on paper might look like they’re swimming in cash.
As it stands, the provision would levy a 1.4 percent tax on the investment income that wealthy colleges—the institutions whose endowments are worth at least $250,000 per full-time student—make on those assets. Experts estimate that between $250 million and $300 it’d from their . Both the House version of the bill, which passed the chamber earlier this month, and the Senate’s , which is expected this week, seek the same tax on endowments. If the legislation passes Congress, it would go into effect almost immediately, requiring colleges and universities to start paying up in 2018.
