The AAMC Sept. 30 joined comments led by the National Association of College and University Business Officers (NACUBO) in response to the Department of Treasury’s Notice of Proposed Rule Making (NPRM) regarding a new excise tax on certain private colleges and universities, commonly known as the “endowment tax.”
The NPRM implements a provision in the Tax Cuts and Jobs Act 2017 that imposes a 1.4% excise tax on investment income at private schools with at least 500 tuition-paying students and endowments worth at least $500,000 per student [see Washington Highlights, Nov. 17, 2017]. The letter notes, “We remain strongly opposed to this tax. It is an unprecedented and damaging attack on the tax-exempt status of higher education institutions and their students. It will diminish charitable resources available for financial aid, research, academic support, public service, and innovation.”
Similar to private foundations, under this tax structure, certain private schools are subjected to taxes on interest, dividends and rental income including on any gifts to an institution, student loan interest, and room and board. The comments discuss how the guidance is “an unprecedented and damaging attack on the tax-exempt status of higher education institutions and their students. It will diminish charitable resources available for financial aid, research, academic support, public service, and innovation. As public charities and educational entities, colleges and universities dedicate their efforts and resources to the public good through education and scholarship.”
The comments continue, “As regulators examine ways to implement the new excise tax, it is important to recognize that existing rules that work well for private foundations are not inherently suitable for colleges and universities.”
A final rule is not expected until late 2019.
- Washington Highlights