Reply to College Endowment Tax Hike

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Reply to "College Endowment Tax Hike"

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[quote=Anonymous][quote=Anonymous]This was the statement by the acting president of Pomona College
[quote]Federal Endowment Tax
As you know, one of the continuing issues being debated in Congress is increasing the federal tax on endowments of nonprofit colleges and universities whose endowment per student exceeds $500,000, which includes Pomona. As shared previously, since this tax was introduced in 2017, the cost to Pomona has been more than $16 million, which is roughly equivalent to 184 full student scholarships. As part of the emerging budget package, the Republican majority in both houses of Congress is discussing increasing the current 1.4% tax rate to between 10% and 21%, a dramatic increase that would impact both the College’s operations and the endowment. We are working closely with peer institutions through the Small Colleges Coalition to express to Congressional offices the negative impact such increases would have on the College’s investment of endowment resources in financial aid and other essential aspects of our educational mission. In addition, we are working to convey this concern through our own Washington, D.C. contacts and our higher education consortia, including the American Council on Education and the National Association of Independent Colleges and Universities.
 
We also recognize that other institutions, including Harvard, Princeton, Johns Hopkins, Brown, and others, are facing different challenges from the current administration. These challenges include the administration’s series of announcements that it is withholding hundreds of millions and even billions of dollars in federal funding that had been allocated to those universities for research and other critical programs. While Pomona’s faculty are recipients of some federal grants, the College’s budget does not depend on federal investments like those other institutions.
 
Pomona community members have shared with us their own concerns about the potential impact of Executive Orders and other federal decisions on the College’s finances. While the decisions that Congress might ultimately make remain quite unclear, and the most extreme outcomes being discussed would create severe budget challenges for Pomona, I want to stress that we are prepared to adapt our budget to meet a wide range of outcomes from the above decisions. We do not receive much federal funding, donors to the College across generations and strong investment performance have enhanced our endowment, and Pomona has practiced careful budget management across the years. For the 2026 academic year, we have prepared well, including by identifying savings initiatives, and expect the College’s budget to be stable as we face this period of uncertainty around federal funding and tax-policy discussions. [/quote][/quote]

This would hit top SLACs hard. Pomona and many others would be in the 20% bracket. And about half of their operating revenues come from their endowment.
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