Navigating the Tax Policy Maze

In a climate where every dollar counts, America's universities are facing a legislative crossroads that may redefine their financial and academic futures.? The capacity of private colleges and universities to innovate and educate may soon change radically to accommodate evolving tax policies. That future is not far off.

Legislators, responding to diverse pressures—on everything from debates on DEI to international conflicts—are proposing sweeping changes to university endowment taxation. The stakes? A seismic shift from a 1.4% tax to as high as 35%, based on current proposals. The implications? Significant alterations to the face of higher education as we know it.

Here’s a snapshot of what’s on the line:

• Billions of Dollars at Risk: For universities with substantial endowments, the financial implications are monumental, potentially affecting millions of dollars critical for research, scholarships, and infrastructure.
• A Looming Deadline: Between now and 2025, the expiration of the Tax Cuts and Jobs Act provisions puts tax policy at the forefront, demanding decisive action.
• Clean Energy Credits in Jeopardy: Proposed changes could also strip universities of incentives for renewable energy investments, crucial for sustainability goals.
• Student-Athletes: Proposals to treat paid student-athletes as employees can open universities up to a broad range of employment taxes

But within this challenge lies an opportunity for universities to be proactive —three strategic considerations for universities to navigate this labyrinth:

1. Audit and Anticipate: Gauge how your university's endowment might be impacted. Knowledge is power, and in this case, it's also financial foresight.
2. Mission Over Money: Reflect on how policy backlash could limit your mission’s reach. Higher education is more than an economic engine; it’s a societal pillar. Now is the time to shape your narrative with lawmakers from both parties.
3. Engage and Advocate: This is a call to arms for strategic advocacy. Building bipartisan support is not just wise; it’s essential.

Schools should start telling their story now, and consider how to engage their alumni, staff, and students.

As universities stand at this crossroads, it's not just about safeguarding funds but about defending the very essence of academic freedom and innovation. The narrative is not set in stone. Through informed engagement and proactive strategy, higher education can navigate this maze, emerging not just unscathed but stronger, more resilient, and more committed to its core mission than ever.