Brenau University’s more than $50 million endowment appears to be protected from a new tax on investment earnings, but a bad precedent has been set, nevertheless, according to President Ed Schrader.
Private colleges and universities became an unlikely target in the sweeping tax reform bill Congress passed this week, with a 1.4 percent levy added to earnings from endowments and other investments.
Schools with these assets valued at $500,000 or more per full-time, enrolled student are subject to the tax.
Based on that threshold, Brenau’s endowment is about $17,300 per student, according to University spokesman David Morrison.
“We believe the immediate effect will be minimal, but we are awaiting final evaluation by our accountants,” Brenau President Ed Schrader told The Times in an email. “However, the issue is not the immediate monetary amount but the legitimate concern that this move will dampen donors’ desire to support students and private education because a portion of their gifts will be siphoned off to cover tax breaks and other deficit-increasing provisions that were written into the bill.”
Emory University in Atlanta, with an endowment of roughly $6.5 billion, is likely on the hook for a big tax bill.
And Harvard University outside Boston reports that it would have had to pay a $43 million tax on its $37 billion endowment in the last fiscal year if the tax were already in place.
“Because the congress could not find more justifiable sources of revenue for those tax breaks, it has now set a dangerous precedent for further erosion in support for higher education in this country,” Schrader said.
Meanwhile, a new $10,000 cap on state and local deductions could impact public education funding.
The National Education Association, a teachers union, estimates that changes to personal exemptions could threaten the availability of $15.2 billion in annual public school spending across the nation.
Hall County Schools Superintendent Will Schofield said he doesn’t think local school funding will be impacted by these changes, however.
“What you believe is the effect of spending cuts, tax cuts or entitlements almost always falls upon philosophical lines,” he said. “The recent tax cut that was passed by Congress relies on a belief, that I share, that when Americans have more available funds at their disposal, jobs are created, salary increases are realized, new product lines are introduced and a sense of optimism dominates the economic markets.”