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S. 1547: Ivory Tower Tax Act of 2021


The text of the bill below is as of May 11, 2021 (Introduced).


II

117th CONGRESS

1st Session

S. 1547

IN THE SENATE OF THE UNITED STATES

May 11, 2021

introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to apply a 1 percent excise tax on large endowments of certain private colleges and universities, to require that such institutions distribute at least 5 percent of large endowments in each taxable year, and for other purposes.

1.

Short title

This Act may be cited as the Ivory Tower Tax Act of 2021.

2.

Excise tax on certain large private college and university endowments

(a)

In general

Subchapter H of chapter 42 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

4969.

Excise tax on certain large private college and university endowments

(a)

Tax imposed

There is hereby imposed on each specified applicable educational institution for the taxable year a tax equal to 1 percent of the aggregate fair market value of the assets of the institution at the end of the preceding taxable year.

(b)

Specified applicable educational institution

For purposes of this subchapter, the term specified applicable educational institution means any applicable educational institution, other than an institution which is religious in nature, the aggregate fair market value of the assets of which at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institution's exempt purpose) is at least $2,500,000,000.

(c)

Other terms

For purposes of this section—

(1)

Assets

The rules of section 4968(d) shall apply.

(2)

Student

The rules of section 4968(b)(2) shall apply.

.

(b)

Clerical amendment

The table of sections for subchapter H of chapter 42 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Sec. 4969. Excise tax on certain large private college and university endowments.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

3.

Failure to distribute endowment assets

(a)

In general

Subchapter H of chapter 42 of the Internal Revenue Code of 1986, as amended by section 2, is further amended by adding at the end the following new section:

4970.

Failure to distribute endowment assets

(a)

Tax imposed

There is hereby imposed on the undistributed excess endowment amount of each specified applicable educational institution for the taxable year, which has not been distributed before the first day of the second (or any succeeding) taxable year following such taxable year (if such first day falls within the taxable period), a tax equal to 30 percent of such undistributed excess endowment amount remaining undistributed at the beginning of such second (or succeeding) taxable year. The tax imposed by this section shall not apply to the undistributed excess endowment amount of a specified applicable educational institution to the extent that the foundation failed to distribute any amount solely because of an incorrect valuation of assets, if—

(1)

the failure to value the assets properly was not willful and was due to reasonable cause,

(2)

such amount is distributed as qualifying distributions by the institution during the allowable distribution period,

(3)

the institution notifies the Secretary that such amount has been distributed as qualifying distributions to correct such failure, and

(4)

such distribution is treated, by reason of subsection (e)(2), as made out of the undistributed income for the taxable year for which a tax would (except for this paragraph) have been imposed under this subsection.

(b)

Additional tax

In any case in which an initial tax is imposed under subsection (a) on the undistributed excess endowment amount of any specified applicable educational institution for any taxable year, if any portion of such amount remains undistributed at the close of the taxable period, there is hereby imposed a tax equal to 100 percent of the amount remaining undistributed at such time.

(c)

Undistributed excess endowment amount

For purposes of this section, the term undistributed excess endowment amount means, with respect to any specified applicable educational institution for any taxable year as of any time, the amount by which—

(1)

the distributable amount for such taxable year, exceeds

(2)

the qualifying distributions made before such time out of such distributable amount.

(d)

Distributable amount

For purposes of this section, the term distributable amount means, with respect to any specified applicable educational institution for any taxable year, an amount equal to 5 percent of the aggregate fair market value of the assets of the institution at the end of the preceding taxable year. The rules of section 4968(d) shall apply for purposes of this section.

(e)

Qualifying distributions

For purposes of this section—

(1)

In general

The term qualifying distribution has the meaning given such term in section 4942(g).

(2)

Other rules

The rules of subsections (h) and (i) of section 4942 shall apply.

(f)

Taxable period; allowable distribution period

The rules of paragraphs (1) and (2) of section 4942(j) shall apply for purposes of this section.

.

(b)

Clerical amendment

The table of sections for subchapter H of chapter 42 of the Internal Revenue Code of 1986, as amended by section 2, is further amended by adding at the end the following new item:

Sec. 4970. Failure to distribute endowment assets.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

4.

Transfer of funds

The Secretary of the Treasury (or such Secretary's delegate) shall from time to time transfer from the general fund of the Treasury to the Secretary of Labor amounts equal to the increase in revenues by reason of the enactment of sections 2 and 3, for the purpose of expanding opportunities relating to apprenticeship programs registered under the National Apprenticeship Act. Such funds shall be available until expended to carry out activities under such Act through grants, cooperative agreements, contracts and other arrangements, with States and other appropriate entities.