On Jan. 15, Rep. Troy Nells (R-TX) introduced the Endowment Tax Fairness Act in the United States House of Representatives. If signed into law, the act would make Grinnell College’s endowment subject to a 21% excise tax, a sharp increase from the current 1.4% tax. The tax would affect “realized investment gains and income” of the endowment, according to Ellen de Graffenreid, Vice President of Communications and Marketing. The rate of 21% is the current corporate tax rate, according to de Graffenreid.
The endowment excise tax, which was initially ratified as 1.4% in 2017 , applies to any institution where the endowment per student is greater than $500,000. The endowment per student at Grinnell College was $1,526,198 in 2024, according to the National Association of College and University Business Officers.
Grinnell’s endowment per student value is the fourteenth highest in the nation, with peer institutions Amherst College, Pomona College and Swarthmore College slightly higher in the rankings. “Small liberal arts colleges like Grinnell College rely on their endowments to a greater degree than, for example, state institutions that receive hundreds of millions of dollars in grants and other support,” de Graffenreid wrote in an email to The S&B.
De Graffenreid detailed the College’s response to the proposed legislation as a joint effort with other institutions. “The College is reaching out to elected representatives to share the potential impact of the proposed endowment tax on Grinnell, both on our own and through higher education associations,” she wrote. “In our work with legislators, we underscore that policies that negatively impact endowments, such as the endowment tax, disproportionately harm small colleges,” de Graffenreid added.
De Graffenreid wrote that the College “is committed to remaining a need-blind institution that meets 100% of demonstrated need without required loans,” but added that the tax would be harmful to this goal. “This kind of financial aid support is possible because of the College’s endowment,” de Graffenreid wrote.
While Grinnell’s large endowment provides some financial security for the school, decreasing reliance on the endowment has been one of the major goals in recent years. The “Knowledge into Action” plan, which details the College’s strategy for 2023-2030, aims to, in part, “identify long-term ways to reduce endowment dependency.”
A May 13, 2024 all-campus email from President Harris reflected the need for change to the financial structure of the College. “More than 60% of Grinnell’s operating budget is funded by the endowment, making it one of the most endowment-dependent institutions in the U.S,” she wrote in the email. Harris’s email went on to state, “Recognizing that over-dependence on any one source of revenue is not financially prudent, RED (Reduce Endowment Dependence) is seeking $5 million in annual operational budget space (through either cost-savings or new revenue) by FY29.”
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Brady • Mar 31, 2025 at 2:35 pm
I get writing about legislation that would directly impact the college’s endowment and limit its ability to continue providing need-blind aid, but I think there are bigger fish to fry than an outlandish bill that will never get out of subcommittee. Would love to see some pieces on the executive branch, or maybe how congress is turning into an American Duma.
Bill Baar '76 • Apr 1, 2025 at 8:32 am
Outlandish bills can pass congress. This one might easily gain traction.
Brady • Apr 1, 2025 at 4:00 pm
It has three cosponsors and hasn’t moved in two months. I certainly hope it doesn’t, but the fact remains that the last Congress enacted only 3% of introduced legislation, including through incorporation. Further, this Congress has only passed four of over 4,000 pieces of legislation. Republicans aren’t going to spend their political capital getting this through when they can barely agree to a budget.