Taxing the Ivory Tower: Evaluating the Excise Tax on University Endowments

28 Pages Posted: 8 Jul 2021

See all articles by Jennifer Bird-Pollan

Jennifer Bird-Pollan

University of Kentucky J. David Rosenberg College of Law

Date Written: July 2021

Abstract

The Tax Cuts and Jobs Act of 2017 introduced the first ever excise tax imposed on the investment income of university endowments. While it is a relatively small tax, this new law is a first step towards the exploration of taxing non-profit entities on the vast sums of wealth they hold in their endowments. In this Essay I take the new tax as a starting place for investigating the justification for tax exemption for universities and thinking through the consequences of changing our approach, both in the form of the new excise tax and possible alternatives. There remain reasons to be skeptical both about the design of the current tax and its ability to withstand the political efforts of the powerful set of universities who will be subject to it. Nonetheless, this new tax opens the door to a discussion of whether it is time to treat universities’ endowments more like the private equity funds they increasingly resemble.

Keywords: taxation, non-profits, universities, TCJA, endowments

JEL Classification: H

Suggested Citation

Bird-Pollan, Jennifer, Taxing the Ivory Tower: Evaluating the Excise Tax on University Endowments (July 2021). Pepperdine Law Review, Vol. 48, No. 4, 2021, Available at SSRN: https://ssrn.com/abstract=3880551

Jennifer Bird-Pollan (Contact Author)

University of Kentucky J. David Rosenberg College of Law ( email )

Law Building
Lexington, KY 40506

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