The House Republicans’ plan to increase taxes on colleges’ endowment earnings could hit at least 35 institutions of higher education, according to a Chronicle analysis.
The new system would change how endowment taxes are calculated. It was released Monday, before the House Ways and Means Committee met Tuesday afternoon to mark up the bill, which is part of the reconciliation process that’s seen as key to enacting President Trump’s taxing and spending agenda.
The plan would organize colleges into four tiers based on the size of their endowment per full-time student:
- 21 percent for colleges with more than $2 million in endowment assets per student,
- 14 percent for colleges with over $1.25 million and up to $2 million per student,
- 7 percent for colleges with over $750,000 up to $1.25 million, and
- 1.4 percent for colleges with $500,000 to $750,000.
The lowest rate, 1.4 percent, is in keeping with a law passed in 2017. Fifty-six institutions paid the tax in 2023, according to the Internal Revenue Service. The Chronicle’s analysis of the new plan, which is based on federal data from 2023 maintained by the Education Department, shows that 51 colleges would be subject to the tax.
By increasing the tax on university endowments, and subjecting the largest ones to the corporate tax rate, the proposed plan “holds woke, elite universities that operate more like major corporations and other tax-exempt entities accountable, ensuring they can no longer abuse generous benefits provided through the tax code,” Rep. Jason Smith, Republican of Missouri and chair of the committee, said in a statement.
The tax would be imposed on net investment income generated in a taxable year, and it would apply to institutions with at least 500 students, more than half of whom “are located in the United States.” Another provision in the bill specifies that enrollment would be calculated according to how many citizens or permanent residents attend the institution. This means that colleges with significant numbers of international students, like Columbia University and the University of Pennsylvania, which have been targeted for funding cuts by the Trump administration, would see their endowment tax rates rise under these new rules.
After the Ways and Means Committee meets today, the bill, whether in its current or a revised form, would make its way to the floor of the House. The Senate and its committees may have their own approach to the endowment tax, and then negotiations between the two chambers will need to shake out.
The table below shows the endowment size, estimated enrollment (without international students), endowment per student, and potential tax rate, based on federal data, under the plan. The plan also exempts qualified religious institutions, which might affect some of the institutions on this list.
