University ‘Very Disappointed’ That Tax Legislation Retains Endowment Tax

The endowment tax included in the tax-overhaul bill that received final congressional approval could cost Princeton “tens of millions of dollars,” a spokesman said.

“We are pleased that the final tax bill preserved the exemption for graduate-student tuition waivers and employer-provided education assistance but very disappointed that it included a tax on the endowment earnings of the roughly 35 colleges and universities that will be affected,” said Dan Day, assistant vice president for communications.

The legislation includes a 1.4 percent excise tax on net investment income at private colleges and universities with endowments larger than $500,000 per student.

The cost to Princeton “will vary depending on each year’s net investment income — and depending on how that term is defined,” Day said.

“Ironically, the institutions affected by the endowment tax include many that have made the greatest efforts to use their endowments to provide financial aid and strengthen and expand their programs of teaching and research,” Day said in a statement. He noted that the endowment – valued at $23.8 billion as of June 30 – covers more than half of the University’s operating budget and supports financial aid.

He said the legislation also “overturns this country’s long-established policy” of exempting public charities from taxes and is counter to efforts to encourage access and affordability in higher education, as well as teaching and research essential to the country’s well-being.

The fate of tuition tax-waivers was a major concern to graduate students, many of whom could have faced substantial jumps in their tax obligations.