New Endowment Tax impact on UR

[Spider17]

Curious if there will be impact on university operations with the new endowment tax that passed from the bill last month. Given our student enrollment size is greater than 3K we are not exempt from the tax. One report I’m seeing is we fall in 4% tax category and another 7% depending on how endowment per student is calculated. Wonder how the university will respond to this and if it’ll affect things like athletics.

https://twitter.com/x/status/1939055769921462398

The Private Universities Affected by Proposed Tiered Endowment Tax | Chief Investment Officer

At least 41 colleges and universities would be subject to an expanded federal endowment tax, with several subjected to new, higher rates.

www.ai-cio.com

 

[SFspidur]

Believe we were 4% under the Senate proposal and 7% under the House proposal. The Senate proposal was what was ultimately passed into law.

I recall seeing somewhere that it is likely to cost us in the $12m–$15m range per year over the next few years.

 

[Spider17]

Any way you see UR allocate funds in a way that we fall under the 750K per student threshold in which it becomes tax free? Also read there are tax emotions to religious affiliation with universities. Wasn’t UR once a Baptist school? Unfortunately Richmond got the short (but not shortest) end of the stick with this new tax, while other schools benefit from being completely tax exempt.

 

[SFspidur]

If we shrink to under 3,000 students, we become exempt (even though endowment per student would rise in that scenario). Unfortunately, while we're just over that threshold for undergrad population, grad students also count, so we'd have to shrink significantly. Otherwise, I'm not sure there's really anything we can do.

The threshold used to be 500 students and it was just raised to 3,000, so that's why smaller elite schools like Williams and W&L that have similar or higher endowments per student to us no longer have to pay anything.

 

[URFan1]

How many would we need to add to avoid the tax?

 

[SFspidur]

Depends on exactly what numbers are used, but they'd need to add on the order of 1,000 students to dip below the $750k/student mark to drop the tax to 1.4%. You'd need to essentially double the student body to 7,000 to get below $500k and avoid the tax entirely.

 

[URFan1]

Depends on exactly what numbers are used, but they'd need to add on the order of 1,000 students to dip below the $750k/student mark to drop the tax to 1.4%. You'd need to essentially double the student body to 7,000 to get below $500k and avoid the tax entirely.

Might be worth adding 1000 students, can they be on-line like so many schools now do?

 

[SFspidur]

I don't know if online students count. Even if they do, the applicable figure is full-time students and I don't think very many online students are full-time. Part-time students are typically considered 1/3 of a full-time student for calculation purposes, so you'd need to add 3,000 part-time students.

 

[fan2011]

This law seems pretty targeted. Not sure I expect it to last much more than 4 years. If this is the case it doesn't make much sense to make huge changes to the school.