Title: Ivory Tower Tax Act of 2021
Policy area: Taxation

Summary:
Ivory Tower Tax Act of 2021
This bill imposes on each specified applicable educational institution an excise tax of 1% of the aggregate fair market value of its assets as of the end of the preceding taxable year. The bill defines specified applicable educational institution as any applicable educational institution, other than a religious institution, whose assets have an aggregate fair market of at least $2.5 billion at the end of the preceding taxable year.
The bill also imposes a 30% tax on undistributed excess endowment amounts of an educational institution, unless the failure to distribute such amounts is due to an incorrect valuation of assets that was not willful and was due to reasonable cause.
The bill requires the Department of the Treasury to transfer revenues generated by this bill to the Department of Labor to expand apprenticeship opportunities.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1547 Introduced in Senate (IS)]

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117th CONGRESS
  1st Session
                                S. 1547

To amend the Internal Revenue Code of 1986 to apply a 1 percent excise 
 tax on large endowments of certain private colleges and universities, 
  to require that such institutions distribute at least 5 percent of 
     large endowments in each taxable year, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 11, 2021

  Mr. Cotton introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to apply a 1 percent excise 
 tax on large endowments of certain private colleges and universities, 
  to require that such institutions distribute at least 5 percent of 
     large endowments in each taxable year, 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 ``Ivory Tower Tax Act of 2021''.

SEC. 2. EXCISE TAX ON CERTAIN LARGE PRIVATE COLLEGE AND UNIVERSITY 
              ENDOWMENTS.

    (a) In General.--Subchapter H of chapter 42 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 4969. EXCISE TAX ON CERTAIN LARGE PRIVATE COLLEGE AND UNIVERSITY 
              ENDOWMENTS.

    ``(a) Tax Imposed.--There is hereby imposed on each specified 
applicable educational institution for the taxable year a tax equal to 
1 percent of the aggregate fair market value of the assets of the 
institution at the end of the preceding taxable year.
    ``(b) Specified Applicable Educational Institution.--For purposes 
of this subchapter, the term `specified applicable educational 
institution' means any applicable educational institution, other than 
an institution which is religious in nature, the aggregate fair market 
value of the assets of which at the end of the preceding taxable year 
(other than those assets which are used directly in carrying out the 
institution's exempt purpose) is at least $2,500,000,000.
    ``(c) Other Terms.--For purposes of this section--
            ``(1) Assets.--The rules of section 4968(d) shall apply.
            ``(2) Student.--The rules of section 4968(b)(2) shall 
        apply.''.
    (b) Clerical Amendment.--The table of sections for subchapter H of 
chapter 42 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new item:

``Sec. 4969. Excise tax on certain large private college and university 
                            endowments.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 3. FAILURE TO DISTRIBUTE ENDOWMENT ASSETS.

    (a) In General.--Subchapter H of chapter 42 of the Internal Revenue 
Code of 1986, as amended by section 2, is further amended by adding at 
the end the following new section:

``SEC. 4970. FAILURE TO DISTRIBUTE ENDOWMENT ASSETS.

    ``(a) Tax Imposed.--There is hereby imposed on the undistributed 
excess endowment amount of each specified applicable educational 
institution for the taxable year, which has not been distributed before 
the first day of the second (or any succeeding) taxable year following 
such taxable year (if such first day falls within the taxable period), 
a tax equal to 30 percent of such undistributed excess endowment amount 
remaining undistributed at the beginning of such second (or succeeding) 
taxable year. The tax imposed by this section shall not apply to the 
undistributed excess endowment amount of a specified applicable 
educational institution to the extent that the foundation failed to 
distribute any amount solely because of an incorrect valuation of 
assets, if--
            ``(1) the failure to value the assets properly was not 
        willful and was due to reasonable cause,
            ``(2) such amount is distributed as qualifying 
        distributions by the institution during the allowable 
        distribution period,
            ``(3) the institution notifies the Secretary that such 
        amount has been distributed as qualifying distributions to 
        correct such failure, and
            ``(4) such distribution is treated, by reason of subsection 
        (e)(2), as made out of the undistributed income for the taxable 
        year for which a tax would (except for this paragraph) have 
        been imposed under this subsection.
    ``(b) Additional Tax.--In any case in which an initial tax is 
imposed under subsection (a) on the undistributed excess endowment 
amount of any specified applicable educational institution for any 
taxable year, if any portion of such amount remains undistributed at 
the close of the taxable period, there is hereby imposed a tax equal to 
100 percent of the amount remaining undistributed at such time.
    ``(c) Undistributed Excess Endowment Amount.--For purposes of this 
section, the term `undistributed excess endowment amount' means, with 
respect to any specified applicable educational institution for any 
taxable year as of any time, the amount by which--
            ``(1) the distributable amount for such taxable year, 
        exceeds
            ``(2) the qualifying distributions made before such time 
        out of such distributable amount.
    ``(d) Distributable Amount.--For purposes of this section, the term 
`distributable amount' means, with respect to any specified applicable 
educational institution for any taxable year, an amount equal to 5 
percent of the aggregate fair market value of the assets of the 
institution at the end of the preceding taxable year. The rules of 
section 4968(d) shall apply for purposes of this section.
    ``(e) Qualifying Distributions.--For purposes of this section--
            ``(1) In general.--The term `qualifying distribution' has 
        the meaning given such term in section 4942(g).
            ``(2) Other rules.--The rules of subsections (h) and (i) of 
        section 4942 shall apply.
    ``(f) Taxable Period; Allowable Distribution Period.--The rules of 
paragraphs (1) and (2) of section 4942(j) shall apply for purposes of 
this section.''.
    (b) Clerical Amendment.--The table of sections for subchapter H of 
chapter 42 of the Internal Revenue Code of 1986, as amended by section 
2, is further amended by adding at the end the following new item:

``Sec. 4970. Failure to distribute endowment assets.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 4. TRANSFER OF FUNDS.

    The Secretary of the Treasury (or such Secretary's delegate) shall 
from time to time transfer from the general fund of the Treasury to the 
Secretary of Labor amounts equal to the increase in revenues by reason 
of the enactment of sections 2 and 3, for the purpose of expanding 
opportunities relating to apprenticeship programs registered under the 
National Apprenticeship Act. Such funds shall be available until 
expended to carry out activities under such Act through grants, 
cooperative agreements, contracts and other arrangements, with States 
and other appropriate entities.
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