(Bloomberg) -- A House bill to repeal the four-month-old U.S. college endowment tax has gained sponsors on both sides of the political aisle.
Yet none of the sponsors, including Republicans Lamar Smith of Texas and Bradley Byrne of Alabama, sit on the critical Ways and Means Committee, which is in charge of introducing the bill, HR 5220.
College endowments, with $567 billion in assets as of June 30, for years have attracted scrutiny from Congress. Endowments were included in the Republican tax overhaul passed in December with a 1.4 percent excise tax on net investment earnings that would affect about 30 private schools, according to a Congressional report issued this month.
The repeal bill’s initial sponsors, Byrne and John Delaney, a Democrat of Maryland, circulated a letter to all 435 members in April. Since the December legislation didn’t include adjustments for inflation, it’s likely that more institutions will be subject to the tax in the future, they wrote.
“Now that the door is opened, the tax could always be expanded to cover a larger number of colleges and universities down the road,” they wrote.
Each of the eight sponsors have ties to schools, mainly as alumni, that may pay the tax, meet the threshold or could be tapped to pay in the future. The tax is expected to raise $200 million annually.
A spokeswoman for the House Ways and Means Committee said in a statement that it’s “interested in hearing ideas about further improvements that can be made to make the code better.”
The private schools affected have at least $500,000 of endowment per student and enough tuition-paying students to meet a threshold imposed by Congress.
The list of schools included in the Congressional Research Service report also discusses policy options, such as repealing or modifying the tax, and ways to increase endowment data reporting, such as through the 990 tax forms that colleges submit to the Internal Revenue Service.
“Another area of potential concern is administrative expenses associated with managing the endowment, including fees paid to third parties,” according to the report.
Assets are concentrated among the richest schools, with 12 percent holding 75 percent of the money in 2017, according to the report. The richest private schools, Harvard, Yale, Princeton and Stanford, each hold more than 4 percent of total endowment assets.
“Changing the tax treatment of college and university endowments could be used to further various policy objectives,” including encouraging additional spending for tuition assistance or other purposes, according to the report.
The report lists endowments that meet the threshold, though that doesn’t necessarily represent the institutions that would pay the tax. The IRS hasn’t yet issued guidance on the excise tax.
Research universities including Duke and Northwestern universities and liberal arts schools such as Grinnell and Smith colleges also are on the list.
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