Skip to content Skip to navigation
See our Campus Ready site for most up to date information about the fall semester.Campus ReadyCOVID Help

Professor Charlie Eaton Weighs in on the Final Endowment Tax Rules

October 6, 2020

Education Dive interviews Professor Charlie Eaton on the final endowment tax rules and how they tailor the policy for colleges.

The IRS and the U.S. Department of the Treasury issued final rules for how they will implement the so-called endowment tax on private universities that the 2017 Tax Cuts and Jobs Act established. The tax applies a 1.4% levy to the net investment income of private colleges and universities that enroll at least 500 tuition-paying students and whose endowments are valued at $500,000 or more per student. The final rules include changes from interim rules posted last year that at least two higher education groups say could benefit colleges.

These changes may not have a major impact on the colleges subject to the tax, which was designed to apply "pretty narrowly" to institutions with the largest endowments, said Charlie Eaton, a sociology professor at the University of California, Merced, who studies endowments.

For instance, he's skeptical those schools enroll enough low-income students — who would be more likely to qualify for federal aid — for the changes around what tuition income counts to matter.

And the new exemptions to taxable income aren't typically what people would think of as endowment revenue, he added.

"We'll learn more as it's implemented," he said.

Read the entire article here.