S.2045 - Protecting Endowments from Our Adversaries Act (119th Congress)
Summary
S.2045, the "Protecting Endowments from Our Adversaries Act," aims to amend the Internal Revenue Code of 1986 by imposing excise taxes on certain investments made by private colleges and universities. These taxes would target investments in entities listed on specific federal lists related to national security concerns, such as the Entity List and the FCC Covered List. The bill seeks to discourage investments in companies deemed to be adversaries of the United States by penalizing educational institutions that hold such investments.
Expected Effects
The bill would likely lead to private colleges and universities divesting from companies listed on the designated federal lists. This could reduce the capital available to those companies and potentially impact their operations. The new tax revenue generated could be used for other government programs, or it could simply reduce the deficit.
Potential Benefits
- National Security: Reduces financial support for entities considered adversaries, strengthening national security.
- Economic Incentive: Encourages universities to invest in companies aligned with U.S. interests.
- Transparency: Increases scrutiny of university investment practices.
- Potential Revenue: Generates tax revenue from penalized investments.
- Discourages Undesirable Investments: Deters investment in entities that pose a risk to U.S. security and interests.
Potential Disadvantages
- Reduced Investment Returns: Limits investment options for universities, potentially reducing endowment returns.
- Compliance Costs: Increases administrative burden and costs for universities to monitor and comply with the new regulations.
- Potential for Overreach: The scope of the lists could be overly broad, capturing companies with tangential connections to adversarial activities.
- Impact on Academic Freedom: Could be perceived as government interference in university investment decisions, impacting academic freedom.
- Unintended Consequences: May lead to complex financial maneuvering to avoid the tax, reducing its effectiveness.
Most Disadvantaged Areas:
Constitutional Alignment
The bill's constitutionality is complex. Congress has broad power to tax and regulate commerce under Article I, Section 8. However, the bill could face challenges under the First Amendment if it is argued that it infringes on academic freedom or freedom of association by restricting investment choices based on political considerations. The due process clause of the Fifth Amendment could also be invoked if the listing process lacks sufficient transparency or fairness.
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).