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Endowments and Charitable Giving

Charitable gifts are a critical source of revenue to nonprofit colleges and universities. These gifts are sometimes used to fund current operations through annual giving campaigns, while other gifts are directed to the long-term needs of the university. The basic principle underlying the charitable income tax deduction for gifts is that taxpayers should not be taxed on income that does not benefit them directly—because they give that income away to support the public good.

Many gifts are given to a university’s endowment. Endowments are complex, usually consisting of many—sometimes thousands—of different funds. Typically, most endowment funds are restricted by donors to support specific purposes, such as student scholarships, cancer research, and professorships. Colleges and universities are legally required to uphold donor intent when managing and spending endowment income.

Research universities use their endowments to support their educational missions of teaching, research, and public service by teaching students, performing research, and addressing problems affecting communities, states, and the nation. Endowments are also a critical source of student financial aid that helps to make college accessible and affordable.

 

 

A number of provisions in the Tax Cuts and Jobs Act (H.R. 1) affect higher education. This matrix compares prior legislation with new legislation enacted under this tax reform bill.
AAU President Mary Sue Coleman writes about how the proposed tax on private university endowments reduces support for student aid, academic programs and research, and redirects funds to the government.
AAU joined other education associations in supporting Senator James Lankford's charitable giving amendment (#1593) to H.R. 1, the Senate version of the Tax Cuts and Jobs Act.
I applaud Sen. Lankford & Rep. Walker for introducing the Universal Charitable Giving Act, which incentivizes charitable giving to nonprofit causes.
Endowments are collections of donated funds that are managed to provide permanent support for nonprofit universities' educational, scientific, and charitable missions -- namely, teaching students, performing research, and addressing problems affecting communities, states, and the nation.
Charitable gifts are a critically important source of revenue to universities.
AAU President Mary Sue Coleman sent letters to congressional leaders urging them to preserve universities' ability, through their endowments, to serve students and society.
Learn about why tax-exempt financing is critical for universities to advance their mission of educating and innovating for the public good.

The Association of American Universities and other associations urged the Senate Finance Committee to include provisions in any upcoming tax reform package that help students save and pay for higher education, and manage their student loan debt.

The Federal Tax Code impacts colleges and universities' missions through provisions affecting aid to students; incentives for charitable giving; tax-exempt financing; UBIT; and the R&D tax credit.