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NACUBO Applauds IRS and Treasury for Reasonable Approach to Problematic Endowment Tax


The IRS and the Department of the Treasury on September 18 released final rules for the endowment excise tax created under the Tax Cuts and Jobs Act of 2017 – and took a measured approach to an otherwise misguided levy on certain private colleges and universities. 

“NACUBO is pleased to see that the IRS and Treasury recognized some of the unique operating challenges colleges and universities contend with,” said Liz Clark, NACUBO vice president for policy and research. “While we applaud this approach, NACUBO remains staunchly opposed to the legislative policy driving the creation of the tax, which diminishes the charitable resources the affected colleges have for students.” 

In the final rules, IRS and Treasury officials responded to many of the concerns raised by NACUBO and others and adopted many of NACUBO’s recommendations. The final regulation— 

  • Recognizes that colleges and universities are not strictly comparable to private foundations 
  • Provides a reasonable safe harbor for calculating cash needs 
  • Excludes from the definition of investment income certain categories of revenue that are inherently a part of efforts to further a student’s educational experience, such as student, faculty, and staff housing and royalty income derived from patents and copyrights resulting from the work of students or faculty members 
  • Streamlines the requirements to gather basis information from donors of gifts of appreciated property 

NACUBO’s analysis is ongoing and will continue after the official publication of the final rules. 


Katy McCreary

Director, Public Relations