Washington (AP) – a Taxes on donations Among the richest universities in America, it began during President Donald Trump’s first administration, collecting 1.4% of its investment income. Under Republican proposals on Capitol Hill, that rate could rise by more than 10 times.
As a Trump Famous University Spa He accused students of “indoctrinating” with the ideas of the left, and calls for raising taxes have gained momentum.
Republicans question whether universities with huge donations (in some cases tens of thousands of dollars) are entitled to tax credits not being offered to businesses. As part of the president, proposals to increase taxes have come as homes appear to cut or offset $1.5 trillion Tax bill.
The university says the proposed increase would take money that otherwise could go to financial aid and other support for students. The American Council of Education, which lobbys on behalf of the university president, calls it a “tax on scholarships.”
What is donation tax?
In 2017, Congress passed a 1.4% tax on investment returns of wealthy universities. It applies to students who pay at least 500 tuition fees and universities with a donation of at least $500,000 per full-time student of at least $500,000.
Prior to that, universities were not taxed on donation income.
The tax reflected the sentiment that some universities were too interested in generating investment income, and there were huge donations that act like hedge funds. Critics pointed out universities like HarvardYale and Stanford, hundreds of billions of dollars.
Harvard and dozens of other schools have opposed the tax, calling it the university’s “an unprecedented damage tax on charitable resources.”
How does tax work?
Tax hits include along with a small liberal arts college that has won a big fund, along with Big Ivy League schools.
A donation consists of donations that are invested in maintaining money over time. Universities often draw about 5% of their investment returns towards their budgets each year. Much of this is directed towards student financial aid, along with other costs such as research and donated faculty positions.
1.4% applies to these investment returns. In 2024, Harvard was taxed over $40 million. In some small schools, the bill has come close to $1 million.
A relatively small number of schools are subject to tax. In 2023, taxes generated $380 million from 56 universities.
Will the new tax affect other nonprofits?
It’s not directly. The proposed tax increase applies only to certain universities and is not other nonprofit organizations. However, in the past, some universities have argued that donation taxes threaten the tax-free status of other charities.
Some say tax increases will reduce the idea that universities provide a public interest worthy of protection from taxation.
What is being proposed?
House Republicans were already considering increasing the tax from 1.4% to 14% of university donation revenue as part of Trump’s tax bill. As the president raises his interests Fighting Harvard Other Ivy League school lawmakers have increased their tax rates as high as 21% in line with the corporate tax rate. It appears that no decision has been made.
Another proposal under consideration will expand the number of schools subject to tax. Change the calculation used to determine if a school has $500,000 per student, counting only US citizens and residents. If approved, approximately 12 additional universities will be subject to tax.
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