HSB 544 (LSB 5103YC (8) 91)

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 certain Iowa colleges and universities, limited charges relating to certain endowment funds, making appropriations to workforce grant and incentive programs, and making appropriations to supplement tuition grants for high-wage and high-demand jobs.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  SHORT TITLE.  This Act shall be known as the “Tax the Endowments Act”.
    Sec. 2.  Section 256.189, subsection 1, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  d.  (1)  Approve and award supplemental tuition grants after January 1, 2028.
   (2)  The commission shall adopt rules pursuant to chapter 17A to administer the approval and awarding of supplemental tuition grants.
    Sec. 3.  Section 256.189, subsection 3, Code 2026, is amended to read as follows:
   3.  a.  An Iowa tuition grants fund is established in the state treasury. The fund shall be administered by the commission and shall consist of moneys appropriated by the general assembly and other moneys received by the commission for deposit in the fund. The moneys in the fund are appropriated to the commission for purposes of providing tuition grants to qualified students who are enrolled in accredited private institutions. Notwithstanding section 8.33, moneys in the fund at the close of the fiscal year shall not revert to the general fund of the state but shall remain available for expenditure for purposes of providing tuition grants to qualified students who are enrolled in accredited private institutions for subsequent fiscal years. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys in the fund shall be credited to the fund and are appropriated to the commission for purposes of administering any scholarship or grant program described in this subchapter VII, part 4.
   b.  After January 1, 2028, a high-wage and high-demand jobs account shall be created within the fund. Moneys credited to the account from the tax, interest, and penalties collected under section 422B.1, subsection 3, paragraph “b”, shall be used to supplement tuition grants to qualified students enrolled in accredited private institutions in majors that correspond with high-wage and high-demand jobs identified pursuant to section 84A.1B, subsection 5.
    Sec. 4.  NEW SECTION.  262.29  Endowment —— fees.
   1.  As used in this section:
   a.  “Endowment” means the same as defined in section 422B.1.
   b.  “Endowment value” means the same as defined in section 422B.1.
   c.  “Institution” means an institution of higher education governed by the board.
   2.  An institution shall not charge or pay another entity more than five percent of the gross proceeds of any gift made to the institution.
   3.  An institution shall not charge an annual fee in excess of one percent of the endowment value for the management and administration of the endowment of the institution.
    Sec. 5.  NEW SECTION.  422B.1  Endowment tax.
   1.  For purposes of this chapter:
   a.  “Department” means the department of revenue.
   b.  “Educational institution” means any institution of higher education governed by the state board of regents or an accredited private institution as defined in section 256.183, with an endowment value in excess of two hundred fifty million dollars.
   c.  “Endowment” means the corpus of funds or other assets held and administered by an educational institution or a related organization to the educational institution, the principal of which is intended to be preserved and invested for the purpose of generating income to support the educational institution’s operations, scholarships, research, or other institutional purposes, whether unrestricted, temporarily restricted, or permanently restricted.
   d.  “Endowment value” means the total aggregate fair market value of all assets constituting the endowment at the close of the preceding tax year.
   e.  “Related organization” means any organization which controls or is controlled by the educational institution, is controlled by one or more persons which also controls the educational institution, or is a supported organization as defined in section 509(f)(3) of the Internal Revenue Code or an organization described in section 509(a)(3) of the Internal Revenue Code.
   2.  A tax shall be imposed annually upon an educational institution’s endowment value in excess of two hundred fifty million dollars at a rate of fifteen percent for tax years beginning on or after January 1, 2027.
   3.  a.  Taxes, interest, and penalties collected under this chapter from educational institutions governed by the state board of regents shall be deposited in the Iowa workforce grant incentive fund established in section 256.230.
   b.  Taxes, interest, and penalties collected from educational institutions that are accredited private institutions shall be deposited into the high-wage and high-demand account established in section 256.189, subsection 3, paragraph “b”.
   4.  The department shall adopt rules pursuant to chapter 17A to administer this chapter.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill creates an endowment tax on the endowment value of certain Iowa colleges and universities, limits charges relating to certain endowment funds, makes appropriations to workforce grant and incentive programs, and makes appropriations to supplemental tuition grants for high-wage and high-demand jobs. The bill shall be known as the “Tax the Endowments Act”.
   The bill imposes an endowment tax annually upon an educational institution’s endowment value in excess of $250 million at the close of the preceding tax year at a rate of 15 percent for tax years beginning on or after January 1, 2027. The bill specifies the department of revenue may adopt rules to administer the tax.
   The bill defines “educational institution” to mean any institution of higher education governed by the state board of regents or an accredited private institution as defined in Code section 256.183.
   The bill defines “endowment” to mean the corpus of any fund or account held and administered by an educational institution or a related organization to the educational institution, the principal of which is intended to be preserved and invested for the purpose of generating income to support the educational institution’s operations, scholarships, research, or other institutional purposes, whether unrestricted, temporarily restricted, or permanently restricted.
   The bill defines “endowment value” to mean the total aggregate fair market value of all assets constituting the endowment at the close of the preceding tax year.
   The endowment tax collected from educational institutions governed by the state board of regents are credited to the Iowa workforce grant incentive fund established in Code section 256.230(8), for the uses specified in the fund.
   The bill creates a high-wage and high-demand job account within the Iowa tuition grants fund created in Code section 256.189(3) (private colleges). The bill specifies the endowment tax collected from educational institutions that are accredited private institutions are to be deposited into to the high-wage and high-demand job account established in new Code section 256.189(3)(b). The moneys in the high-wage and high-demand job account are to be used to supplement Iowa tuition grants to students enrolled at private colleges in majors that correspond with the high-wage and high-demand jobs identified by the workforce development board and state board of regents pursuant to Code section 84A.1B(5). The bill requires the college student aid commission to adopt rules to administer the approval and awarding of supplemental tuition grants.
   The bill limits the amount a higher education institution governed by the state board of regents may charge another entity for gifts made to the institution to 5 percent of the gross proceeds of the gift. The bill also limits such an institution from annually charging more than 1 percent of the endowment value for the management and administration of the endowment.