H.R. 1006: Higher Education Accountability Tax Act

This bill, known as the Higher Education Accountability Tax Act, proposes changes to the tax on investment income generated by private colleges and universities in the United States. Here are the key points of what the bill would do:

Modification of Excise Tax

The bill seeks to amend the Internal Revenue Code to modify the excise tax that private colleges and universities must pay on their investment income.

Increase in Tax Rate

• The current tax rate of 1.4 percent on investment income would be increased to 10 percent.

Additional Tax Rate for Institutions with Increasing Net Prices

If a private college or university raises its net tuition prices above the rate of inflation (as measured by the Consumer Price Index) over a three-year period, the tax rate would further increase to 20 percent. This classification is referred to as a net-price-increase institution.

• A net-price-increase institution is defined as an educational institution whose net price increases faster than the Consumer Price Index during the previous three taxable years.

Expansion of Institutions Subject to Tax

The threshold for institutions subject to this investment income tax would change. Instead of the current asset threshold of $500,000, it would be reduced to $250,000. As a result, more colleges and universities would be liable for this excise tax.

Effective Date

The changes proposed by this bill would take effect for taxable years starting after December 31, 2024.

Relevant Companies

• None found