Sponsor
Thomas Bryant Cotton
Senator · R-AR
Senator · R-AR
The bill generates meaningful one-time federal revenue by taxing the largest private college endowments while limiting coverage to ultra-wealthy institutions and exempting religious schools — but it risks reducing funds for scholarships and programs at taxed schools and could lead them to raise tuition or cut services.
Taxpayers: the bill raises a one-time revenue stream by imposing a 6% tax on the assets of very large private college endowments, creating federal funds that could be used for public priorities.
Students and most colleges: the tax applies only to institutions with very large assets, so its narrow scope reduces the chance that typical colleges or most students will be directly affected.
Religious organizations: religiously affiliated institutions are exempted from the $11.9 billion threshold category, protecting them from this tax treatment under the bill.
Students and affected institutions: colleges hit by the 6% one-time tax may have substantially smaller endowments available for scholarships, research, and operations.
Students and families: institutions might respond by raising tuition or cutting services and programs to offset the tax, increasing costs for students and parents.
Schools, taxpayers, and the IRS: implementing and complying with a one-time large-asset tax will raise administrative and valuation burdens for institutions and for the IRS.
Based on analysis of 2 sections of legislative text.
Imposes a one-time 6% excise tax in 2025 on the fair market value of assets of very large private, nonreligious colleges and certain state-operated colleges above set asset thresholds.
Introduced March 11, 2025 by Thomas Bryant Cotton · Last progress March 11, 2025
Creates a one-time federal excise tax on very large private, nonreligious colleges and certain colleges that operate on behalf of a state. The tax equals 6% of the institution’s aggregate fair market value of assets (excluding assets used directly for exempt purposes) measured at the end of the preceding taxable year and applies to the first taxable year beginning in 2025 for institutions that meet specified asset thresholds. The measure excludes institutions that are religious in nature, relies on existing tax-code rules for asset and student definitions, sets different asset thresholds for private versus state-operated colleges, and adds a new tax provision to the Internal Revenue Code. The change is a one-time charge, not a recurring annual tax.