Colleges and universities still face an increase in taxes on their endowments as part of congressional budget reconciliation bill, but the latest plan coming out of the Senate dramatically scales back a version passed in the House.
The Senate Finance Committee recently proposed a revised endowment tax plan for private colleges and universities with a top tax rate of 8 percent compared to the House’s 21 percent maximum rate.
The tax applies to private universities with endowments exceeding $500,000 per student. Right now, institutions pay 1.4 percent.
“The Senate version retains the House’s tiered structure that specifies that the tax rate grows as the size of the endowment per student increases, and it also includes a similar methodology for calculating the tax rate,” Forbes reported.
According to Higher Ed Dive, the Senate’s plan would also “exempt religious colleges from the excise tax — a provision that the House bill also contained. It also would not impose the tax on colleges that don’t accept Title IV aid, which includes federal student loans and Pell Grants.”
This move would protect conservative institutions such as Hillsdale College, which does not accept federal aid. But the proposal would still hit universities like Harvard with massive endowments, and critics argue the tax unfairly targets voluntary giving to universities.
However, proponents have argued universities have received beneficial treatment from the tax code while disregarding the interests of taxpayers.
MORE: Universities brace for endowment tax hike as GOP budget bill
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