This bill increases the federal excise tax on investment income earned by private colleges and universities, a tax originally set at 1.4 percent. The legislation raises the base tax rate to 10 percent for most institutions, with a steeper 20 percent rate applied to colleges that have raised their net prices faster than inflation over the previous three years. The bill also expands which institutions must pay this tax by lowering the asset threshold from $500,000 to $250,000, meaning smaller endowments would be subject to taxation. These changes take effect for tax years beginning after December 31, 2024. The bill is designed to hold higher education institutions more accountable for rising tuition costs and generate additional federal revenue from private college endowments.
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