Protecting American Students Act

This bill changes how the federal “endowment tax” applies to certain private colleges and universities. It says schools can only count students who meet a specific federal student eligibility rule when figuring out if the tax applies. In short, some students would no longer be counted in the math the IRS uses to decide whether a school owes the tax on its investment income.

It also makes schools report two numbers each year: how many students they counted before this change, and how many they counted after it. This helps the IRS and the public see the impact of the new rule. These changes would start for tax years beginning after December 31, 2025.

• Who is affected: Private colleges and universities that may owe the endowment tax; students are only counted if they meet a specific federal eligibility rule.
• What changes: Certain students won’t be included in the student count used to decide if a school owes the tax; schools must report both the “before” and “after” counts on their annual filing.
• When: Applies to tax years starting after December 31, 2025.