University President Lawrence S. Bacow joined five other Massachusetts university and college presidents in urging United States Representative Richard E. Neal (D-Mass.) to repeal the endowment tax set to be levied on Harvard’s next filings in a letter last month.
Neal is chair of the House Ways and Means Committee, which oversees the 1.4 percent excise tax on endowment returns at institutions with endowments greater than $500,000 per student.
Harvard’s endowment, the largest University endowment in the world at nearly $40 billion, qualifies for taxation under the 2017 Republican-led Tax Cuts and Jobs Act. The University’s endowment was previously exempt from taxes because the school is a non-profit entity.
The letter stated that Massachusetts is “disproportionately” affected since the state is home to six out of the 30 schools anticipated to fall under the tax, and who are estimated to pay about 40 percent of the revenue raised by the tax.
“We anticipate the first payments under this provision are likely to be due later this year and hope that you and your colleagues will move to address it with some urgency,” the letter reads. “The impact of this pernicious tax will grow significantly over time, as more institutions are affected, and the levy erodes our philanthropic resources.”
“We believe that this must be addressed swiftly and definitively to ensure that no precedent is set for such a damaging tax,” the letter added.
Signatories of the letter include Bacow, Amherst President Biddy Martin, MIT President L. Rafael Reif, Smith College President Kathleen McCartney, Wellesley College President Paula A. Johnson ’80, and Williams College President Maud S. Mandel.
The letter also projected the tax’s likely negative impact on financial aid.
“At all our schools, the neediest undergraduates receive grants that cover not just tuition but most of their other costs as well,” the letter reads. “This tax, purportedly motivated to address cost and encourage aid, will make these policies harder to sustain and expand.”
Harvard lobbied to prevent the tax for years before it became law. Bacow has also traveled to Washington, D.C. several times since he took office last year urging legislators to repeal the tax. Both Bacow and his predecessor, former University President Drew G. Faust, have objected to the tax, often citing the increase in cost of higher education and threat to financial aid.
In a March interview, Bacow indicated that Neal’s appointment as chair of the Ways and Means Committee and Rep. James P. McGovern’s (D-Mass.) appointment as chair of the House Rules Committee provided Harvard a “better shot” of getting Congress to revisit the endowment tax.
“This tax disproportionately affects Massachusetts and I think both Congressman Neal and Congressman McGovern understand that,” Bacow said at the time. “They're in a position now to be helpful in ways that they weren't before.”
Even with the endowment tax’s first filing drawing near, Harvard is still awaiting federal guidance on how to file taxes under the new law. Endowment returns from fiscal year 2019 will be the first taxed under the new code.
—Staff writer Alexandra A. Chaidez can be reached at email@example.com. Follow her on Twitter @a_achaidez.
—Staff writer Aidan F. Ryan can be reached at firstname.lastname@example.org. Follow him on Twitter @AidanRyanNH.