Higher Education Endowment Tax Reform Act

To amend the Internal Revenue Code of 1986 to provide for a phaseout of the investment income excise tax for certain private colleges and universities, and for other purposes. 1. Short title This Act may be cited as the Higher Education Endowment Tax Reform Act 2. Phaseout of investment income excise tax for private colleges and universities providing sufficient grants and scholarships (a) In general Section 4968 (e) Phaseout for institutions providing qualified aid (1) In general The amount of tax imposed by subsection (a) (determined without regard to this subsection) shall be reduced (but not below zero) by the amount which bears the same ratio to such amount of tax (as so determined) as— (A) the excess (if any) of— (i) the aggregate amount of qualified aid awards provided by the institution to its first-time, full-time undergraduate students for academic periods beginning during the taxable year, over (ii) an amount equal to 20 percent of the aggregate undergraduate tuition and fees received by the institution from first-time, full-time undergraduate students for such academic periods, bears to (B) an amount equal to 13 percent of such aggregate undergraduate tuition and fees so received. (2) Institution must meet reporting requirement (A) In general Paragraph (1) shall not apply to an applicable educational institution for a taxable year unless such institution furnishes to the Secretary, and makes widely available, a statement detailing the average aggregate amount of Federal student loans received by a student for attendance at the institution, averaged among each of the following groups of first-time, full-time undergraduate students who during the taxable year completed a course of study for which the institution awarded a baccalaureate degree: (i) All such students. (ii) The students who have been awarded a Federal Pell Grant under subpart 1 of part A of title IV of the Higher Education Act of 1965 for attendance at the institution. (iii) The students who received work-study assistance under part C of title IV of such Act for attendance at such institution. (iv) The students who were provided such Federal student loans. (B) Form and manner for report Such statement shall be furnished at such time and in such form and manner, and made widely available, under such regulations or guidance as the Secretary may prescribe. (C) Federal student loans For purposes of this paragraph, the term Federal student loans (3) Other definitions For purposes of this subsection— (A) First-time, full-time undergraduate student The term first-time, full-time undergraduate student (B) Qualified aid awards The term qualified aid awards (C) Undergraduate tuition and fees The term undergraduate tuition and fees . (b) Effective date The amendment made by this section shall apply to taxable years beginning after …. 3. Inflation adjustment and clarification for definition of applicable educational institution (a) Inflation adjustment to per student asset threshold Section 4968(b) (3) Inflation adjustment In the case of any taxable year beginning after 2022, the dollar amount in paragraph (1)(D) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2021 calendar year 2016 If any increase determined under this paragraph is not a multiple of $1,000, such increase shall be rounded to the nearest multiple of $1,000. . (b) Clarification of 500 Section 4968(b)(1)(A) of such Code is amended by inserting below the graduate level 500 tuition-paying students (c) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

Summary: Higher Education Endowment Tax Reform Act This bill provides for a phaseout of the excise tax on the investment income of private colleges and university if such institutions provide a specified amount of qualified aid awards to their first-time, full-time undergraduate students. To qualify for the tax reduction, such educational institutions must report on loans and other assistance provided to their students.