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The presidents and chancellors of nearly 50 American colleges and universities—including Harvard University, Yale University, and Stanford University—have joined to object to the endowment excise tax imposed by the new tax law.
Under the 2017 tax act, a 1.4 percent excise tax will be imposed on endowments of private colleges and universities with more than 500 students and net assets of at least $500,000 per student. The March 7 letter, addressed to Republican and Democratic congressional leaders, urges Congress to repeal or amend the “unprecedented and damaging” tax to “preserve resources that support students, teaching and research.”
The tax won’t “address the cost of college or student indebtedness, as some have tried to suggest,” the letter said. “Instead, it will constrain the resources available to the very institutions that lead the nation in reducing, if not eliminating, the costs for low- and middle-income students, and will impede the efforts of other institutions striving to grow their endowments for this very purpose.”
The new tax also creates a precedent that “threatens all charities” through a tax on foundations that have “significant operations,” the letter said.
In the short term, private universities and colleges want Congress to modify the endowment tax, possibly through an omnibus bill, according to a former Senate staff member familiar with the discussions. Realistically, there isn’t enough time to prepare for a repeal of the endowment tax before the omnibus bill or the upcoming Federal Aviation Administration funding bill, the next piece of legislation that has a tax title, the former aide said.
Rep. Tom Reed (R-N.Y.), a Ways and Means Committee member and proponent of the tax, previously told Bloomberg Tax he was working on a proposal that would suspend the tax in exchange for new transparency and cost control measures on endowments. Reed said at the time that he had floated legislative text to other members’ offices and planned to introduce a bill in the spring to align with college graduations.
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