Case Western Reserve University and Oberlin College Among Ohio Schools Facing New Tax
One of the items in the federal tax overhaul released Thursday is a new tax on endowments at some private colleges and universities.
Private colleges and universities with more than 500 students and with an endowment of more $100,000 per student would be charged 1.4 percent on net investment income.
Tracy Filosa is with the investment consulting company Cambridge Associates and advises schools on managing their endowments. Filosa says adding a tax might lead to less spending on operations.
“Because again these institutions are trying to maintain the value of these endowments so that they continue to be there for future generations of students," says Filosa.
Filosa says it's not clear exactly what's meant by 'net investment income.'
She says schools usually spend about 5 percent of their endowments annually on things like financial aid and salaries. She says over the past couple decades, yearly investment income has averaged about 7 percent.
According to a list compiled by The Chronicle of Higher Education, a few schools in Ohio would be subject to the new tax, including Case Western Reserve University and Oberlin College.