Colleges Questioned on Tax-Exempt Endowments

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Amid widespread concern about rising tuition rates, top Republican tax-writers appear to be taking a hard look at the ways in which colleges and universities are using — or perhaps not using — their tax-exempt endowments.

Senate Finance Chairman Orrin Hatch, House Ways and Means Chairman Kevin Brady, and Ways and Means Oversight Subcommittee Chairman Peter Roskam sent letters to dozens of institutions with endowments over $1 billion, accord to a recent report in The Hill.

The lawmakers say many schools are raising tuition rates faster than inflation despite their large and growing endowments. They requested a prompt response from the schools, a few of which have built up endowments in excess of $22 billion.

Unlike private foundations, The Hill reports, colleges are not required to spend a minimum percentage of their endowments each year. Critics say the schools are hoarding cash while students struggle with ever-higher tuition rates and graduate with excessive student loan debt.

“Depending on the current practices that schools report,” a Roskam spokesman said, “we could potentially see legislative efforts to ensure that greater emphasis is placed on using funds to directly further the charitable purpose these tax preferences are designed to advance.”

Tax preferences generally receive less scrutiny than outright federal spending programs. This scrutiny of college endowment fund practices seems appropriate — and ideally could set an example for taking a closer look at other tax preferences as well.

External links:
College Endowments Under Scrutiny (The Hill)

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