Congress quietly exempts religious colleges from endowment tax

What it does

This bill exempts qualified religious institutions from a 1.4% federal excise tax on net investment income that currently applies to colleges and universities with large endowments. To qualify, an institution must be established by or in association with a religious organization (like a church or denomination), have religious governance ties or a formal agreement with that organization, and maintain a published mission rooted in religious tenets. The exemption applies retroactively to tax years beginning after December 31, 2025.

Why we flagged it

The bill's operative mechanism is a targeted tax exemption for a defined class of religious institutions. It is not a broad religious-freedom protection or a general endowment-tax reform; it is a narrow financial carve-out that reduces federal revenue by exempting specific entities from an existing tax.

What the text implies

• The definition of 'qualified religious institution' is broad enough to include secular universities with nominal religious affiliations (e.g., universities founded by religious orders but now independent), potentially capturing institutions that do not operate primarily as religious entities.
• Retroactive effective date (Dec 31, 2025) means institutions may claim refunds for tax years already filed, creating a one-time revenue loss and administrative burden on the IRS.
• The 'formal written agreement' and 'governing body approval' pathways allow institutions to self-certify religious status with minimal external verification, creating audit and compliance risk.
• Exemption applies to investment income only, not operating revenue, but endowment-dependent institutions (many religious colleges) will see material tax savings, potentially widening the gap between well-endowed religious schools and under-resourced secular or non-religious institutions.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill reduces federal tax revenue by exempting a class of well-endowed institutions from a tax designed to fund public priorities. While religious freedom is a legitimate public value, the mechanism here is a direct financial subsidy to institutions that are already tax-exempt and often wealthy, funded by foregone public revenue. The exemption is narrowly tailored to religious institutions, not a broad policy principle, and provides no offsetting public benefit.

Who stands to gain

• Religious colleges and universities with endowments exceeding $500 million
• Religious organizations that control or affiliate with such institutions

Named in the bill

Internal Revenue Code Section 4968, Section 170(b)(1)(A)(i) (tax-exempt religious organizations), U.S. Treasury Department, Religious colleges and universities

Where it stands

1 cosponsor: 1 Democrats.

• Jun 18, 2026 — Introduced · Congress.gov: “Introduced in House”
• Jun 18, 2026 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $190,000 in lobbying spend. A filing names 13 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Mike Kelly, the sponsor, reported $955,974 in PAC receipts in the 2026 cycle.

• University of Notre Dame — $190,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.