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Endowment tax is the taxation of financial endowments that are otherwise not taxed due to their charitable, educational, or religious mission. Endowments can be up to several billion dollars at some universities , some charitable foundations , and some medical foundations.
Endowments subject to the tax, such as Harvard, Yale, Princeton and Columbia, reportedly hold a combined $270 billion of assets under management. "This is unacceptable," Nehls told Fox.
In 2017, a federal endowment tax was enacted in the Tax Cuts and Jobs Act of 2017 in the form of an excise tax of 1.4% on institutions that have at least 500 tuition-paying students and net assets of at least $500,000 per student. The $500,000 is not adjusted for inflation, so the threshold is effectively lowered over time.
Private institutions with very large endowments, such as Harvard University, pay a 1.4% excise tax on net endowment investment income.
Engraving of Harvard College by Paul Revere, 1767. Harvard University's endowment was valued at $53.2 billion as of 2021. [1]A financial endowment is a legal structure for managing, and in many cases indefinitely perpetuating, a pool of financial, real estate, or other investments for a specific purpose according to the will of its founders and donors. [2]
Trump has also threatened to tax endowments of “woke” schools, and in 2023, now-Vice President J.D. Vance proposed raising taxes on endowment investments for schools with more than $10 billion ...
Until 1969, the term private foundation was not defined in the United States Internal Revenue Code.Since then, every U.S. charity that qualifies under Section 501(c)(3) of the Internal Revenue Service Code as tax-exempt is a "private foundation" unless it demonstrates to the IRS that it falls into another category such as public charity.
We all know there are certain items you always pay tax on: your income, your home and your investments. But there are plenty of things that aren't as crystal clear and you might not know about ...