Private universities could face increased scrutiny under new GOP bill: 'On notice'

A private university is being targeted by a GOP lawmaker to increase taxes on their endowment profits to match the current corporate tax rate.

The Trump-era Tax Cuts and Jobs Act imposed a 1.4% tax on the interest earned by private universities from their endowments in 2017.

The proposed Republican bill aims to increase the tax on elite educational institutions to match the 21% corporate tax rate.

On Wednesday, Rep. Troy Nehls, R-Texas, plans to propose the Endowment Tax Fairness Act, which aims to increase the annual private university endowment investment return excise tax by almost 20 percentage points, from 1.4% to 21%.

The GOP-supported legislation mandates that the revenue be placed into the General Fund of the Treasury, which oversees the government's financial plan, to help reduce the national deficit.

Nehls explains to Planet Chronicle Digital that he introduced the bill to ensure that elite universities do not enjoy "significantly lower" tax rates than ordinary Americans.

Private universities with high status have amassed large endowments and pay a low tax on their investment earnings, which is significantly less than what most Americans pay in taxes. Despite this, these universities have raised tuition for American youth at an alarming rate, far exceeding the average annual inflation rate.

Private colleges and universities with 500 or more students would be subject to the tax.

According to the bill, universities that have a fair market value of assets of at least $500,000 per student and more than 50% of their student body located in the United States will be taxed.

Reportedly, Harvard, Yale, Princeton, and Columbia, endowments subject to tax, collectively manage $270 billion in assets.

"Nehls informed Fox that his bill would treat elite universities with large endowments equally to corporations in terms of tax standards, which he considered unacceptable."

The tax would become effective immediately upon the bill's enactment date.