H.R.1128 - Endowment Accountability Act (119th Congress)
Summary
H.R. 1128, the "Endowment Accountability Act," proposes amendments to the Internal Revenue Code of 1986 concerning the excise tax on investment income of private colleges and universities. The bill aims to increase the excise tax rate from 1.4% to 10%. It also seeks to broaden the definition of "applicable educational institution" by lowering the asset-per-student threshold from $500,000 to $200,000.
Expected Effects
If enacted, H.R. 1128 would significantly increase the tax burden on private colleges and universities with substantial endowments. This could lead to changes in how these institutions manage their finances. The lowered asset threshold would subject more institutions to the excise tax.
Potential Benefits
- Increased government revenue from higher excise tax rates.
- Potential for increased financial aid or reduced tuition if universities choose to allocate funds differently.
- Greater accountability for institutions with large endowments.
- Discourages excessive accumulation of wealth by educational institutions.
- Could incentivize universities to invest in programs that directly benefit students and the public.
Most Benefited Areas:
Potential Disadvantages
- Reduced financial resources for universities, potentially impacting research, infrastructure, and educational programs.
- Increased tuition costs if universities pass the tax burden onto students.
- Potential for decreased donations to universities due to higher taxes.
- Could disproportionately affect smaller or less wealthy private institutions.
- May lead to universities reducing financial aid or cutting programs to offset the increased tax burden.
Most Disadvantaged Areas:
Constitutional Alignment
The bill's constitutional alignment primarily concerns Article I, Section 8, which grants Congress the power to lay and collect taxes. The Sixteenth Amendment further clarifies this power by allowing Congress to tax income, "from whatever source derived," without apportionment among the several states.
The bill appears to fall within the scope of Congress's taxing power. However, arguments could be made regarding whether the tax is applied fairly and equitably, although such arguments typically fall outside strict constitutional challenges.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).