Reply to Amount of Endowment Tax Liability Expected for 25 Elite US Universities

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I don't know why they don't stop charging tuition. Or move the FA limits up to 500k HHI and 3mm assets. so only 20% pay tuition. [/quote]

Princeton probably will, at least to get the number of tuition-paying students below 3,000. They aren’t that far off already.[/quote]

No way they are going to let Princeton do a bit of wiggling to get off the hook. Some of the SLACs can probably get away with it but not Princeton.[/quote]

The threshold is 3,000 tuition-paying students. This is the legal interpretation as provided by the IRS. It’s not about “letting” anyone get off the hook. If you have fewer than 3,000 students paying tuition because you gave them enough aid that their tuition is zero, you don’t pay the tax.[/quote]

If you actually believe that Harvard and Princeton will be off the hook by increasing aid you are kidding yourself. This isn't about the money.[/quote]

Well, see, there is this thing called a tax law, and it isn’t applied discretionarily. It’s not about “getting off the hook” or the intent of changing the tax.

I say “changing” because the endowment tax already existed before this most recent bill. The IRS has already issued its formal guidance on which students apply to the thresholds. If a student doesn’t pay tuition (because they are charged zero due to aid), they don’t count toward the threshold. If you have fewer than 3,000 students that count toward the threshold, you don’t pay the tax. Thats how it works.

The reason Princeton may be able to push below the threshold is because a lot of the grad students go for free, and a lot of undergrads receive heavy assistance. They can likely get it under 3,000 if they haven’t already. It would be much harder for Harvard because Harvard is more reliant on grad student tuition through the MBA, law, and Kennedy programs.[/quote]

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