Anonymous
07/08/2025 15:28
Subject: LACs will avoid endowment tax
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.
It’s full-time students plus part-time students calculated on a full-time student equivalent basis. Will be tough to game. I think Smith is still just under 3k though.
Ah, I see the part of the bill now that mentions tuition-paying. But then that’s defined as full time + part time equivalent later on. Good luck to the tax writers with this crappy language.
In the previous iteration of the statute, IRS guidance defined “tuition-paying” as paying tuition. (And under recent Supreme Court precedent, they couldn’t interpret it any other way.)
Most of Princeton’s grad students don’t pay tuition. And 70 percent of undergrads receive aid and the average amount of aid (more than $70k) exceeds the cost of tuition, so a substantial number of undergrads are not “tuition-paying.” If Princeton isn’t already at fewer than 3,000 tuition-paying students, it could get there with a relatively small expansion of its financial aid policy.
I don’t know Dartmouth as well, but I’m guessing they could get there as well.
Interesting, I see the regs now. I also see an IRS presentation that points out the inconsistency in the language in the statute
typical Congress.
It does seem they both might get under the line. Guess it provides a good incentive for more full rides.
Anonymous
07/08/2025 15:04
Subject: LACs will avoid endowment tax
Anonymous wrote:Anonymous wrote:Anonymous wrote:It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.
It’s full-time students plus part-time students calculated on a full-time student equivalent basis. Will be tough to game. I think Smith is still just under 3k though.
Ah, I see the part of the bill now that mentions tuition-paying. But then that’s defined as full time + part time equivalent later on. Good luck to the tax writers with this crappy language.
In the previous iteration of the statute, IRS guidance defined “tuition-paying” as paying tuition. (And under recent Supreme Court precedent, they couldn’t interpret it any other way.)
Most of Princeton’s grad students don’t pay tuition. And 70 percent of undergrads receive aid and the average amount of aid (more than $70k) exceeds the cost of tuition, so a substantial number of undergrads are not “tuition-paying.” If Princeton isn’t already at fewer than 3,000 tuition-paying students, it could get there with a relatively small expansion of its financial aid policy.
I don’t know Dartmouth as well, but I’m guessing they could get there as well.
Anonymous
07/08/2025 14:58
Subject: LACs will avoid endowment tax
Anonymous wrote:Anonymous wrote:It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.
It’s full-time students plus part-time students calculated on a full-time student equivalent basis. Will be tough to game. I think Smith is still just under 3k though.
Ah, I see the part of the bill now that mentions tuition-paying. But then that’s defined as full time + part time equivalent later on. Good luck to the tax writers with this crappy language.
Anonymous
07/08/2025 14:55
Subject: LACs will avoid endowment tax
Anonymous wrote:It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.
It’s full-time students plus part-time students calculated on a full-time student equivalent basis. Will be tough to game. I think Smith is still just under 3k though.
Anonymous
07/08/2025 14:52
Subject: LACs will avoid endowment tax
Anonymous wrote:Which schools are affected?
Princeton, Harvard, Yale, MIT, Stanford in the 8% bracket. Eight or so others (Notre Dame, Dartmouth, Rice, Richmond, WashU, Penn, Emory, Vanderbilt, plus Smith and Duke close to the thresholds) in the 4% bracket. Some of those are close to the thresholds so could rise or fall depending on how their endowments and enrollments go.
Anonymous
07/08/2025 14:44
Subject: LACs will avoid endowment tax
It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.
Anonymous
07/08/2025 13:49
Subject: LACs will avoid endowment tax
Which schools are affected?
Anonymous
07/05/2025 15:32
Subject: LACs will avoid endowment tax
Anonymous wrote:Anonymous wrote:Smith is the only LAC affected, since its size is slightly over 3000.
Wesleyan is well over 3000 and I’m sure there are others.
Is Wesleyan's endowment per student over $500,000? If not, they aren't affected.
Anonymous
07/05/2025 15:22
Subject: LACs will avoid endowment tax
Anonymous wrote:Smith is the only LAC affected, since its size is slightly over 3000.
Wesleyan is well over 3000 and I’m sure there are others.
Anonymous
07/05/2025 15:15
Subject: LACs will avoid endowment tax
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:They also dropped the part that excluded international students from the calculation and lowered the rates to 1.4% between $500-750k per student, 4% between $750k-$2 million per student, and 8% over $2 million. A big nothing-burger for most institutions in the end.
Wow, people made such a big deal out of nothing. Life goes on.
For the schools subject to the tax, it’s a huge deal. This is a tax of several *billion* dollars for most of them.
No, it is not. An 8% tax on investment income (because it is not on the whole endowment, but on investment income only) is a billion dollars for exactly zero institutions. For Harvard it is maybe a bit over $300 million and it goes down quickly from there for other institutions. And that’s on an endowment over $50 billion and before they take steps to reduce their realized investment income. There are only four other institutions above the size threshold and in the 8% bracket.
I'm confused. Is the endowment tax a tax of AUM or on the income the endowment generates? I always thought is was the AUM.
It’s on net investment income of the university, which comes predominantly (though not exclusively) from the net investment income of the endowment. The endowment’s assets are only used to determine the tax rate thresholds (e.g., between $500k-$750k per student you get hit with a 1.4% rate, $750k-$2mm is a 4% rate, etc).
Anonymous
07/05/2025 15:07
Subject: LACs will avoid endowment tax
Smith is the only LAC affected, since its size is slightly over 3000.
Anonymous
07/05/2025 15:03
Subject: LACs will avoid endowment tax
My understand is it’s a tax on investment returns.