Congress targets college endowments with tenfold tax hike
H.R. 1128 — Endowment Accountability Act · Filed by Michael Lawler (R-NY) · Introduced Feb 7, 2025 · Referred to committee
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What it does
This bill increases the federal excise tax on investment income earned by private colleges and universities from 1.4% to 10%, and lowers the asset threshold that triggers the tax from $500,000 per student to $200,000 per student. The effect is to tax more colleges' endowments at a much higher rate, raising federal revenue from institutions with large investment portfolios.
Why we flagged it
The bill's sole operative mechanism is a tenfold increase in the excise tax rate on college endowment investment income and a lowering of the asset threshold that triggers it. This is a direct revenue-raising measure targeting a specific class of institutions.
What the text implies
- Colleges may reduce financial aid or merit scholarships funded from endowment returns, shifting costs to students and families and potentially reducing access for lower-income applicants.
- Smaller private colleges with endowments near the new $200k-per-student threshold may face sudden tax liability, potentially forcing program cuts or institutional consolidation.
The full analysis lists 4 implications of this text.
Who stands to gain
U.S. federal government (increased excise tax revenue)