A tax on college endowments began in Trump’s first administration. It could soon rise

By COLLIN BINKLEY AP Teaching Writer WASHINGTON AP A tax on the endowments of America s wealthiest colleges began during President Donald Trump s first administration collecting of their expenditure earnings Under Republican proposals on Capitol Hill that rate could increase by tenfold or more As Trump spars with prestigious colleges he accuses of indoctrinating students with leftist ideas calls to raise the tax have gained momentum Republicans have questioned whether colleges with huge endowments tens of billions of dollars in various cases should be entitled to tax breaks that are not offered to businesses Proposals to increase the tax have come as the House looks to cut or offset trillion in spending as part of the president s sweeping tax bill Colleges say the proposed increases would take money that otherwise could go to financial aid and other promotion for students The American Council on Guidance which lobbies on behalf of college presidents calls it a tax on scholarships What is the endowment tax In Congress passed the tax on wealthy colleges assets earnings It applies to colleges with at least tuition-paying students and endowments worth at least per full-time trainee Before that colleges weren t taxed on their endowment income The tax reflected a sentiment that specific colleges were too concerned with generating commitment income with huge endowments that operate like hedge funds Critics pointed to colleges like Harvard Yale and Stanford with tens of billions of dollars Harvard and dozens of other schools opposed the tax calling it an unprecedented and damaging tax on the charitable guidance of universities How does the tax work Those hit by the tax include big Ivy League schools along with smaller liberal arts colleges that have accrued large endowments Endowments are made up of donations that are invested to maintain the money over time Colleges often draw about of their funding earnings every year to put toward their budgets Much of it goes toward trainee financial aid along with other costs like research or endowed faculty positions The applies to those capital earnings In Harvard was taxed more than million For chosen smaller schools the bill was closer to million A relatively small number of schools are subject to the tax In the tax generated million from colleges Would the new tax affect other nonprofits Not directly The proposed tax increase applies only to certain colleges and universities and not other nonprofit organizations But in the past certain colleges have argued that any endowment tax threatens the tax-exempt status of other charitable groups Related Articles Appeals court to hear cases of university students one detained the other not long ago published US transaction deficit hits record high as businesses consumers try to get ahead of Trump tariffs What s in Trump s big bill Money for migrant clampdown but tax breaks and project cuts hit bumps Trump administration asks judge to toss suit restricting access to abortion medication Trump critics launch new group to highlight rising costs Selected say a tax increase would chip away at the idea that colleges provide a community benefit that deserves to be protected from taxation a principle that applies to other tax-exempt groups What s being proposed House Republicans already were considering a hike in the tax on college endowments earnings from to as part of Trump s tax bill As the president raises the stakes in his fight with Harvard and other Ivy League schools lawmakers are floating raising the rate as high as in line with the corporate tax rate It appears no decisions have been made A separate proposal being looked at would expand the number of schools subject to the tax It would change the calculation used to determine if a school has per attendee counting only U S citizens and residents If approved roughly a dozen additional colleges would be subject to the tax The Associated Press tuition coverage receives financial sponsorship from multiple private foundations AP is solely responsible for all content Find AP s standards for working with philanthropies a list of supporters and funded coverage areas at AP org