• The KillerFrogs

Taxing TCU’s Endowment Income?

TCUdirtbag

TCUdirtbag

Active Member
This is meant as a TCU humblebrag moreso than a tax policy post, but in today’s House GOP 400+ page “Tax Cut and Jobs Act” proposal there is a surprising new tax that would force TCU to pay a new federal tax on its endowment income.

The TCJA imposes a 1.4% tax on endowment income for colleges and universities with endowment assets greater than $100,000 per student.

How does this affect TCU and other Texas schools?

As of 2015, 50 US colleges and universities, including TCU, maintained endowments of $100,000 per student or more which would be subject to this new tax. The increasing stock market in 2016 and 2017 has likely increased this number. However the most recent numbers I found were from 2015. Here’s the rundown using those numbers:

Texas schools subject to the university endowment income tax under TCJA (the number in parentheses represents the asset per student ranking of the university’s endowment):

Rice (#12): $839k/student
Baylor Med (#17): $692k/student
Trinity (#25): $476k/student
TCU (#42): $151k/student
SMU (#45): $134k/student
UT System (#48): $111k/student

Texas schools not subject to the new tax:

A&M System (#55): $73k/student
Baylor (#56): $72k/student
Tech System (#67): $34k/student

This seems relevant given the TCU Vision in Action Phase 3: Lead On strategic plan which prioritizes raising more funds to expand the endowment. And it’s certainly an interesting twist to the proposed tax bill.

Bloomberg story: https://www.bloomberg.com/news/arti...aid-to-tax-university-endowment-income-at-1-4
Endowment reference: https://en.m.wikipedia.org/wiki/List_of_colleges_and_universities_in_the_United_States_by_endowment
 
LeagueCityFrog

LeagueCityFrog

Active Member
In other news, when is the annual Board of Trustees meeting and vote this Fall? I thought I saw that the new football stadium upgrades for the Jumbotron and east side were up for vote, maybe business school, maybe another awesome 5% tuition hike too then they immediately say how they are helping students with financial aid with the additional 5% tuition hike.
 
Pharm Frog

Pharm Frog

Full Member
Dogfrog said:
Looks like we timed our stadiums well.
Click to expand...

As did many NFL owners

The GOP plan would prohibit professional sports stadiums from taking advantage of tax-exempt bonds, which state and local governments often float for important public works projects.
 
Peacefrog

Peacefrog

Degenerate
TCUdirtbag said:
This is meant as a TCU humblebrag moreso than a tax policy post, but in today’s House GOP 400+ page “Tax Cut and Jobs Act” proposal there is a surprising new tax that would force TCU to pay a new federal tax on its endowment income.

The TCJA imposes a 1.4% tax on endowment income for colleges and universities with endowment assets greater than $100,000 per student.

How does this affect TCU and other Texas schools?

As of 2015, 50 US colleges and universities, including TCU, maintained endowments of $100,000 per student or more which would be subject to this new tax. The increasing stock market in 2016 and 2017 has likely increased this number. However the most recent numbers I found were from 2015. Here’s the rundown using those numbers:

Texas schools subject to the university endowment income tax under TCJA (the number in parentheses represents the asset per student ranking of the university’s endowment):

Rice (#12): $839k/student
Baylor Med (#17): $692k/student
Trinity (#25): $476k/student
TCU (#42): $151k/student
SMU (#45): $134k/student
UT System (#48): $111k/student

Texas schools not subject to the new tax:

A&M System (#55): $73k/student
Baylor (#56): $72k/student
Tech System (#67): $34k/student

This seems relevant given the TCU Vision in Action Phase 3: Lead On strategic plan which prioritizes raising more funds to expand the endowment. And it’s certainly an interesting twist to the proposed tax bill.

Bloomberg story: https://www.bloomberg.com/news/arti...aid-to-tax-university-endowment-income-at-1-4
Endowment reference: https://en.m.wikipedia.org/wiki/List_of_colleges_and_universities_in_the_United_States_by_endowment
Click to expand...
Up until you provided the link to the article I was convinced you read the entire bill proposal and figured you either have a very boring job or too much time on your hands.

Like always, thanks for the info.
 
I

iowa_frog

Member
I am pretty sure this will only apply to endowments of private universities. I believe there are constitutional issues that would arise if they tried to tax endowments of public universities.

Another one that impacts folks on this board....no deduction allowed for charitable contributions to secure seating rights for college athletics. Under the current code an 80% deduction is allowed.
 
TCUdirtbag

TCUdirtbag

Active Member
LeagueCityFrog said:
In other news, when is the annual Board of Trustees meeting and vote this Fall? I thought I saw that the new football stadium upgrades for the Jumbotron and east side were up for vote, maybe business school, maybe another awesome 5% tuition hike too then they immediately say how they are helping students with financial aid with the additional 5% tuition hike.
Click to expand...

Semi-Annual full board meeting is usually in November. They will set 2018-19 tuition and financial aid budget at this one. Business school facility was approved last year - construction started over the summer. Not sure they are ready to proceed on the stadium project. There are however a number of other capital projects which could come up for a vote. That said it’s become fairly common for them to approve concepts with contingencies (ie, $), and authorize a committee to give final okay at a smaller meeting.
 
W

Way of the Frog

Guest
iowa_frog said:
I am pretty sure this will only apply to endowments of private universities. I believe there are constitutional issues that would arise if they tried to tax endowments of public universities.

Another one that impacts folks on this board....no deduction allowed for charitable contributions to secure seating rights for college athletics. Under the current code an 80% deduction is allowed.
Click to expand...


That would be significant and not just for TCU. There isn't one major university athletic program that doesn't have some "non-profit" that you have to pay to each year in order to buy tickets etc......
 
TCUdirtbag

TCUdirtbag

Active Member
Way of the Frog said:
That would be significant and not just for TCU. There isn't one major university athletic program that doesn't have some "non-profit" that you have to pay to each year in order to buy tickets etc......
Click to expand...

It would probably depend on how the treasury regs come out, but they may be distinguishing a seat license (money expressly for a right to purchase a seat) from a construction donation or a scholarship donation. If the law isn’t clear, which it probably won’t be, I’d assume it’ll get tied up ok regs and rev rulings. I’m sure we have some tax accountants that could chime in.
 
W

Way of the Frog

Guest
TCUdirtbag said:
It would probably depend on how the treasury regs come out, but they may be distinguishing a seat license (money expressly for a right to purchase a seat) from a construction donation or a scholarship donation. If the law isn’t clear, which it probably won’t be, I’d assume it’ll get tied up ok regs and rev rulings. I’m sure we have some tax accountants that could chime in.
Click to expand...

Agree though I can understand them looking more favorably on a true donation for construction purposes than the outright money grab of the seat licenses......I mean donation to the various letteman clubs etc....
 
M

MAcFroggy

Active Member
I do not mind ending municipal bonds for professional stadium projects. It looks like this only applies to professional venues, no? I think university stadiums would be okay?

I hate the idea of taxing endowments. Especially at $100,000 per student. That is not nearly as large as it seems.

Very strange to target universities that get money from seat donations. I imagine the the major universities in a lot of states will be against this. I imagine the schools from the P5 will lobby pretty heavily to keep this in tact. Mississippi, Tennesse, Alabama, South Carolina, etc. The reps/senators from those states would be getting lots of calls from lobbyist, admins at the schools, and wealthy alumni at these schools to stop this.
 
Deep Purple

Deep Purple

Full Member
Most of the things discussed in this thread, like seat donations, capital projects, and private or municipal bonds, wouldn't be affected under this bill. As I understand it, the bill is about taxing endowments. None of the above things are endowments.

Public universities can't be taxed by the feds because they are state entities. Since the states and the federal government share sovereignty in the American federal system, neither can tax the other. If I'm not mistaken, the Supreme Court has ruled on this.

The feds also can't tax counties, cities, or other local governmental jurisdictions (such as school districts and hospital districts) because they are administrative units of the states. A state can tax these units if it chooses, but rarely if ever does because the state would, in effect, be taxing itself.

Neither the feds nor the states may tax federally recognized Indian tribal governments because they are officially semi-autonomous internal nations. For-profit businesses set up by individual Indians may be taxed, but for-profit tribal businesses may or may not be taxed, depending on when they were formed and under what federal or state legal provisions they were formed.

Under current law, my understanding is that the feds have unlimited taxing authority only over individual American citizens (including Indians and residents of US territories) and most for-profit businesses operating within US jurisdiction.

I'm sure there are at least several here who understand these laws better than me, so if I've interpreted any of this incorrectly, I welcome correction.
 
I

iowa_frog

Member
I think it’s section 1306(b) of the bill that will change seat donation treatment by altering the language of IRC section 170(l)(1).
 
PhillyFrog

PhillyFrog

Active Member
When you combine the above with the elimination of SLID and the various education credits, the bill really does make it harder on students.

Those kids have just had it way too easy for way too long, if you ask me.
 

Latest posts

Top