Higher Education Endowment Tax Reform Act
Bill: H.R.5152 | Sponsor: Rep. Boyle, Brendan F. (D-PA)
Policy area: Taxation

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.

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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Higher Education Endowment Tax 
Reform Act''.

SEC. 2. PHASEOUT OF INVESTMENT INCOME EXCISE TAX FOR PRIVATE COLLEGES 
              AND UNIVERSITIES PROVIDING SUFFICIENT GRANTS AND 
              SCHOLARSHIPS.

    (a) In General.--Section 4968 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(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' means a 
                loan made under part D of title IV of the Higher 
                Education Act of 1965, except such term does not 
                include a Federal Direct PLUS Loan made on behalf of a 
                dependent student.
            ``(3) Other definitions.--For purposes of this subsection--
                    ``(A) First-time, full-time undergraduate 
                student.--The term `first-time, full-time undergraduate 
                student' shall have the same meaning as when used in 
                section 132 of the Higher Education Act of 1965.
                    ``(B) Qualified aid awards.--The term `qualified 
                aid awards' means, with respect to any applicable 
                educational institution, grants and scholarships to the 
                extent used for undergraduate tuition and fees.
                    ``(C) Undergraduate tuition and fees.--The term 
                `undergraduate tuition and fees' means, with respect to 
                any institution, the tuition and fees required for the 
                enrollment or attendance of a student as an 
                undergraduate student at the institution.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after . . ..

SEC. 3. INFLATION ADJUSTMENT AND CLARIFICATION FOR DEFINITION OF 
              APPLICABLE EDUCATIONAL INSTITUTION.

    (a) Inflation Adjustment to Per Student Asset Threshold.--Section 
4968(b) of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new paragraph:
            ``(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' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.
        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 Student Threshold.--Section 4968(b)(1)(A) 
of such Code is amended by inserting ``below the graduate level'' after 
``500 tuition-paying students''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2021.
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