26 USC 4968 - Excise tax based on investment income of private colleges and universities

U.S Code last checked for updates: Aug 18, 2025

§ 4968.

Excise tax based on investment income of private colleges and universities

(a)

Tax imposed

(b)

Applicable percentage

For purposes of this section, the term “applicable percentage” means—

(1)

1.4 percent in the case of an institution with a student adjusted endowment of at least $500,000, and not in excess of $750,000,

(2)

4 percent in the case of an institution with a student adjusted endowment in excess of $750,000, and not in excess of $2,000,000, and

(3)

8 percent in the case of an institution with a student adjusted endowment in excess of $2,000,000.

(c)

Applicable educational institution

For purposes of this subchapter, the term “applicable educational institution” means an eligible educational institution (as defined in section 25A(f)(2))—

(1)

which had at least 3,000 tuition-paying students during the preceding taxable year,

(2)

more than 50 percent of the tuition-paying students of which are located in the United States,

(3)

the student adjusted endowment of which is at least $500,000, and

(4)

which is not described in the first sentence of section 511(a)(2)(B) (relating to State colleges and universities).

(d)

Student adjusted endowment

For purposes of this section, the term “student adjusted endowment” means, with respect to any institution for any taxable year—

(1)

the aggregate fair market value of the assets of such institution (determined as of the end of the preceding taxable year), other than those assets which are used directly in carrying out the institution’s exempt purpose, divided by

(2)

the number of students of such institution.

(e)

Determination of number of students

(f)

Net investment income

For purposes of this section—

(1)

In general

(2)

Override of certain regulatory exceptions

(A)

Student loan interest

(B)

Federally-subsidized royalty income

(i)

In general

(ii)

Federally-subsidized royalty income

For purposes of this subparagraph—

(I)

In general

(II)

Otherwise-regulatory-exempt royalty income

(III)

Federal funds

(g)

Assets and net investment income of related organizations

(1)

In general

For purposes of subsections (d) and (f), assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income, respectively, of the educational institution, except that—

(A)

no such amount shall be taken into account with respect to more than 1 educational institution, and

(B)

unless such organization is controlled by such institution or is described in section 509(a)(3) with respect to such institution for the taxable year, assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account.

(2)

Related organization

For purposes of this subsection, the term “related organization” means, with respect to an educational institution, any organization which—

(A)

controls, or is controlled by, such institution,

(B)

is controlled by 1 or more persons which also control such institution, or

(C)

is a supported organization (as defined in section 509(f)(3)), or an organization described in section 509(a)(3), during the taxable year with respect to such institution.

(h)

Regulations

(Added Pub. L. 115–97, title I, § 13701(a), Dec. 22, 2017, 131 Stat. 2167; amended Pub. L. 115–123, div. D, title II, § 41109(a), Feb. 9, 2018, 132 Stat. 159; Pub. L. 119–21, title VII, § 70415(a), July 4, 2025, 139 Stat. 221.)

cite as: 26 USC 4968