H.R. 4462: Protecting Endowments from Our Adversaries Act

This bill, titled the "Protecting Endowments from Our Adversaries Act," proposes changes to the Internal Revenue Code specifically targeting certain investments made by private colleges and universities. The key provisions of the bill are as follows:

Excise Tax on Investments

The bill introduces an excise tax that applies to specified educational institutions that acquire certain listed investments. The main points include:

• Tax on Acquisition: If a private college or university acquires one or more "listed investments," an excise tax of 50% of the fair market value of those investments is imposed on the date of acquisition.
• Tax on Net Income: There's an additional tax of 100% on the net income from “1-year listed investments.” This includes all income received and all gains from sales or disposals of such investments during the taxable year, minus applicable deductions and losses.
• Definition of Listed Investments: A "listed investment" refers to specific interests in entities identified on certain government lists, including the Entity List, Military End User List, and others which may include entities considered a threat to U.S. national security.

Definitions and Scope

Several terms are defined to clarify who and what is subject to the tax:

• Specified Educational Institution: This refers to private colleges or universities with significant asset values, specifically those with over $1 billion in assets, excluding those directly used for educational purposes.
• 1-Year Listed Investment: This term refers to any listed investment held for at least one year prior to income realization or gain recognition.

Regulation and Compliance

The bill places responsibilities on the Secretary of Commerce and the Secretary of the Treasury to maintain and update lists of entities that qualify as listed investments. Institutions must comply with regulations that will be established to facilitate adherence to the law.

Effective Dates and Transitional Rules

The provisions of this bill will take effect starting from the end of the first calendar year following the bill's passage. Various transitional rules are included, stating that the excise tax will not retroactively apply to investments acquired before the effective date.

Relevant Companies

None found