Northwestern Not Worried About Endowment Tax

EVANSTON, IL — Northwestern University may escape a newly established tax targeting large private university endowments. A 1.4 percent levy on endowment investment income was included in the tax reform bill passed through Congress this week. But only schools with endowments larger than $500,000 for every "full-time student equivalent" have to pay the tax, and Crain's Chicago Business reports Northwestern would have been exempted if the tax had been in place this year.

The bill says it's is aimed at schools where the endowment is "so large that it is not commensurate with the scope of the institutions's activities in educating students." Northwestern has a roughly $10 billion endowment and 20,500 full-time student equivalents, narrowly edging under the threshold, according to Crain's.

Even if the tax were in place, the university is not worried.

"While it looks like the university may have to pay the tax on endowment earnings at some point in the near future, our grad students, faculty and staff will not be adversely affected," Northwestern spokesperson Alan Cubbage said.

The University of Chicago – with a smaller endowment and fewer students – is more likely to be ensnared by the tax next year. Its president and provost wrote a memo to the school community saying the tax would have a "negative effect on the ability of universities to make vital, long-term investments in education and research."

Earlier versions of the bill included taxes on tuition reimbursements and waivers for staff, graduate students and faculty – and a much lower $250,000 of endowment per student ratio, according to Crain's.

» Read more from Crain's Chicago Business

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