House Study Bill 544 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON HIGHER EDUCATION BILL BY CHAIRPERSON COLLINS) A BILL FOR An Act creating an endowment tax on the endowment value of 1 certain Iowa colleges and universities, limited charges 2 relating to certain endowment funds, making appropriations 3 to workforce grant and incentive programs, and making 4 appropriations to supplement tuition grants for high-wage 5 and high-demand jobs. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5103YC (8) 91 jm/jh

H.F. _____ Section 1. SHORT TITLE. This Act shall be known as the “Tax 1 the Endowments Act”. 2 Sec. 2. Section 256.189, subsection 1, Code 2026, is amended 3 by adding the following new paragraph: 4 NEW PARAGRAPH . d. (1) Approve and award supplemental 5 tuition grants after January 1, 2028. 6 (2) The commission shall adopt rules pursuant to chapter 17A 7 to administer the approval and awarding of supplemental tuition 8 grants. 9 Sec. 3. Section 256.189, subsection 3, Code 2026, is amended 10 to read as follows: 11 3. a. An Iowa tuition grants fund is established in 12 the state treasury. The fund shall be administered by 13 the commission and shall consist of moneys appropriated 14 by the general assembly and other moneys received by the 15 commission for deposit in the fund. The moneys in the fund 16 are appropriated to the commission for purposes of providing 17 tuition grants to qualified students who are enrolled in 18 accredited private institutions. Notwithstanding section 19 8.33 , moneys in the fund at the close of the fiscal year 20 shall not revert to the general fund of the state but shall 21 remain available for expenditure for purposes of providing 22 tuition grants to qualified students who are enrolled in 23 accredited private institutions for subsequent fiscal years. 24 Notwithstanding section 12C.7, subsection 2 , interest or 25 earnings on moneys in the fund shall be credited to the 26 fund and are appropriated to the commission for purposes of 27 administering any scholarship or grant program described in 28 this subchapter VII, part 4 . 29 b. After January 1, 2028, a high-wage and high-demand jobs 30 account shall be created within the fund. Moneys credited to 31 the account from the tax, interest, and penalties collected 32 under section 422B.1, subsection 3, paragraph “b” , shall be used 33 to supplement tuition grants to qualified students enrolled in 34 accredited private institutions in majors that correspond with 35 -1- LSB 5103YC (8) 91 jm/jh 1/ 5

H.F. _____ high-wage and high-demand jobs identified pursuant to section 1 84A.1B, subsection 5. 2 Sec. 4. NEW SECTION . 262.29 Endowment —— fees. 3 1. As used in this section: 4 a. “Endowment” means the same as defined in section 422B.1. 5 b. “Endowment value” means the same as defined in section 6 422B.1. 7 c. “Institution” means an institution of higher education 8 governed by the board. 9 2. An institution shall not charge or pay another entity 10 more than five percent of the gross proceeds of any gift made 11 to the institution. 12 3. An institution shall not charge an annual fee in excess 13 of one percent of the endowment value for the management and 14 administration of the endowment of the institution. 15 Sec. 5. NEW SECTION . 422B.1 Endowment tax. 16 1. For purposes of this chapter: 17 a. “Department” means the department of revenue. 18 b. “Educational institution” means any institution of 19 higher education governed by the state board of regents or an 20 accredited private institution as defined in section 256.183, 21 with an endowment value in excess of two hundred fifty million 22 dollars. 23 c. “Endowment” means the corpus of funds or other assets 24 held and administered by an educational institution or a 25 related organization to the educational institution, the 26 principal of which is intended to be preserved and invested for 27 the purpose of generating income to support the educational 28 institution’s operations, scholarships, research, or other 29 institutional purposes, whether unrestricted, temporarily 30 restricted, or permanently restricted. 31 d. “Endowment value” means the total aggregate fair market 32 value of all assets constituting the endowment at the close of 33 the preceding tax year. 34 e. “Related organization” means any organization which 35 -2- LSB 5103YC (8) 91 jm/jh 2/ 5

H.F. _____ controls or is controlled by the educational institution, is 1 controlled by one or more persons which also controls the 2 educational institution, or is a supported organization as 3 defined in section 509(f)(3) of the Internal Revenue Code or 4 an organization described in section 509(a)(3) of the Internal 5 Revenue Code. 6 2. A tax shall be imposed annually upon an educational 7 institution’s endowment value in excess of two hundred fifty 8 million dollars at a rate of fifteen percent for tax years 9 beginning on or after January 1, 2027. 10 3. a. Taxes, interest, and penalties collected under this 11 chapter from educational institutions governed by the state 12 board of regents shall be deposited in the Iowa workforce grant 13 incentive fund established in section 256.230. 14 b. Taxes, interest, and penalties collected from educational 15 institutions that are accredited private institutions shall 16 be deposited into the high-wage and high-demand account 17 established in section 256.189, subsection 3, paragraph “b” . 18 4. The department shall adopt rules pursuant to chapter 17A 19 to administer this chapter. 20 EXPLANATION 21 The inclusion of this explanation does not constitute agreement with 22 the explanation’s substance by the members of the general assembly. 23 This bill creates an endowment tax on the endowment value of 24 certain Iowa colleges and universities, limits charges relating 25 to certain endowment funds, makes appropriations to workforce 26 grant and incentive programs, and makes appropriations to 27 supplemental tuition grants for high-wage and high-demand jobs. 28 The bill shall be known as the “Tax the Endowments Act”. 29 The bill imposes an endowment tax annually upon an 30 educational institution’s endowment value in excess of $250 31 million at the close of the preceding tax year at a rate of 15 32 percent for tax years beginning on or after January 1, 2027. 33 The bill specifies the department of revenue may adopt rules 34 to administer the tax. 35 -3- LSB 5103YC (8) 91 jm/jh 3/ 5

H.F. _____ The bill defines “educational institution” to mean any 1 institution of higher education governed by the state board of 2 regents or an accredited private institution as defined in Code 3 section 256.183. 4 The bill defines “endowment” to mean the corpus of any fund 5 or account held and administered by an educational institution 6 or a related organization to the educational institution, the 7 principal of which is intended to be preserved and invested for 8 the purpose of generating income to support the educational 9 institution’s operations, scholarships, research, or other 10 institutional purposes, whether unrestricted, temporarily 11 restricted, or permanently restricted. 12 The bill defines “endowment value” to mean the total 13 aggregate fair market value of all assets constituting the 14 endowment at the close of the preceding tax year. 15 The endowment tax collected from educational institutions 16 governed by the state board of regents are credited to the Iowa 17 workforce grant incentive fund established in Code section 18 256.230(8), for the uses specified in the fund. 19 The bill creates a high-wage and high-demand job account 20 within the Iowa tuition grants fund created in Code section 21 256.189(3) (private colleges). The bill specifies the 22 endowment tax collected from educational institutions that 23 are accredited private institutions are to be deposited into 24 to the high-wage and high-demand job account established in 25 new Code section 256.189(3)(b). The moneys in the high-wage 26 and high-demand job account are to be used to supplement Iowa 27 tuition grants to students enrolled at private colleges in 28 majors that correspond with the high-wage and high-demand 29 jobs identified by the workforce development board and state 30 board of regents pursuant to Code section 84A.1B(5). The bill 31 requires the college student aid commission to adopt rules to 32 administer the approval and awarding of supplemental tuition 33 grants. 34 The bill limits the amount a higher education institution 35 -4- LSB 5103YC (8) 91 jm/jh 4/ 5