HF2240: Endowment Tax

Imposes a new annual tax on the endowment values exceeding $500 million for public and private colleges and universities. The tax rate is set at the highest corporate income tax rate (currently 7.1%). Revenues from public institutions go to the Iowa workforce grant incentive fund, while revenues from private institutions are deposited in a new account to supplement tuition grants for students in high-wage and high-demand job majors. The bill also caps gift processing fees at 5% and endowment management fees at 1% for institutions governed by the board of regents. New administrative rules and appropriations mechanisms are established to implement these changes.

Key Points & Impacts:

• Imposes an annual endowment tax on Iowa colleges/universities with endowments exceeding $500 million, at the highest corporate income tax rate.

• Defines 'endowment' and 'endowment value' for purposes of the tax, including assets held by related organizations.

• Tax revenues from public institutions (board of regents) are appropriated to the Iowa workforce grant incentive fund.

• Tax revenues from private institutions are appropriated to a new 'high-wage and high-demand jobs' account within the Iowa tuition grants fund.

• Funds in the new account are used to supplement tuition grants for students in majors leading to high-wage, high-demand jobs, as identified by state workforce authorities.

• Caps fees for processing gifts to institutions at 5% of gross proceeds, and annual endowment management fees at 1% of endowment value for board of regents institutions.

• Requires new administrative rules for the approval and awarding of supplemental tuition grants after January 1, 2028.

  • Establishes appropriations mechanisms to ensure funds do not revert to the state general fund and are available for future tuition grants.