Endowments
Endowments are permanent funds from charitable gifts that offer colleges and universities the enduring stability to empower generations of students and shape our world's future.
Endowments are:
- charitable funds that offer a source of stability.
- critical to the financial health of colleges and universities.
- essential to support institutions as they work to offer high-quality, affordable, accessible education.
Learn here about what endowments are (and aren't) and U.S. legislation and policy issues around endowments.
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Key Facts on Endowments
An institution's "endowment" is a collection of hundreds to thousands of funds set up through the generous charitable gifts.
Donors typically give endowed gifts for specific educational purposes: creating scholarships, undertaking life-saving research, supporting professorships, starting new programs or building new facilities.
Endowments provide colleges and universities financial stability and certainty. Institutions spend a portion of their endowments each year to meet current teaching and learning needs, and they invest the rest to meet the needs of future generations.
Endowments vary in size. Most institutions do not have large endowments.
Legislation and Policy Issues on Endowments
Concerned about the rising cost of college, some U.S. lawmakers have proposed legislation on endowment spending and investment.
Proposed Legislation and Background
- Lawmakers Sens. Charles Grassley (R-IA), Rep. Peter Welch (D-VT) and Rep. Tom Reed (R-NY) have introduced or considered introducing legislation requiring institutions to annually payout 5 percent of the market rate of their endowed assets towards scholarships and student financial aid.
- In his tax reform discussion draft, former House Ways and Means Chairman Dave Camp (R-MI) proposed a 1 percent excise tax on private institution endowments with a value exceeding $100,000 per student.
- In 2018, Rep. Reed introduced another bill which would have required certain colleges and universities to direct 25% of their endowment investment gains to support working class families or face tax penalties.
- The Tax Cuts and Jobs Act passed in 2017 and included an excise tax on certain endowments of private colleges and universities.
- During the 115th Congress, Reps. John Delaney (D-MD) and Bradley Byrne (R-AL) introduced the Don't Tax Higher Education Act which would have repealed the new 1.4 percent endowment excise tax.
Impact
- Attempts to tax endowments are a tax on generosity.
- These endowment payout requirements impede institutions' ability to effectively manage endowment funds.
- Such misguided tax policies will result in fewer funds for scholarships, research, and academic programs.
- Instead of bringing down college costs, this tax does the opposite. College and university endowment funds are an important source of revenue which support student financial aid, teaching, research, and public service missions. The new law redirected charitable funds away from these purposes and discourages donor generosity.
CASE Position
We support a repeal of the 1.4 percent endowment tax and oppose any tax on endowed funds.
Endowments offer colleges and universities the enduring stability to empower generations of students and shape our world's future. Attempts to tax endowments are a tax on generosity.
Resources for Lawmakers & Government Relations Professionals
- CASE one-pager on Endowments
- Talking Points on Endowments
- Debunking 5 Myths about Endowments
- Endowments: Where Does the Money Go?
- Facts About College and University Endowments, CASE, American Council on Education, Association of American Universities, Association of Public and Land-grant Universities, National Association of Independent Colleges and Universities and others, Jan. 2017
- College and University Endowments: Overview and Tax Policy Options, Congressional Research Service, Dec. 2015
- Understanding College and University Endowments, American Council on Education, Dec. 2014
Resources for Higher Education Professionals
This collection includes articles and tips on communicating about endowments, as well as sample endowment policies and reports.
This collection features reports and white papers on endowments trends and data, as well as articles and other resources on managing and communicating about endowments.
- "Endowments Are Forever," Currents, Oct. 2016
This article explores key messages about endowments.
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