[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1547 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 1547
To amend the Internal Revenue Code of 1986 to apply a 1 percent excise
tax on large endowments of certain private colleges and universities,
to require that such institutions distribute at least 5 percent of
large endowments in each taxable year, and for other purposes.
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IN THE SENATE OF THE UNITED STATES
May 11, 2021
Mr. Cotton introduced the following bill; which was read twice and
referred to the Committee on Finance
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A BILL
To amend the Internal Revenue Code of 1986 to apply a 1 percent excise
tax on large endowments of certain private colleges and universities,
to require that such institutions distribute at least 5 percent of
large endowments in each taxable year, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Ivory Tower Tax Act of 2021''.
SEC. 2. EXCISE TAX ON CERTAIN LARGE PRIVATE COLLEGE AND UNIVERSITY
ENDOWMENTS.
(a) In General.--Subchapter H of chapter 42 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 4969. EXCISE TAX ON CERTAIN LARGE PRIVATE COLLEGE AND UNIVERSITY
ENDOWMENTS.
``(a) Tax Imposed.--There is hereby imposed on each specified
applicable educational institution for the taxable year a tax equal to
1 percent of the aggregate fair market value of the assets of the
institution at the end of the preceding taxable year.
``(b) Specified Applicable Educational Institution.--For purposes
of this subchapter, the term `specified applicable educational
institution' means any applicable educational institution, other than
an institution which is religious in nature, the aggregate fair market
value of the assets of which at the end of the preceding taxable year
(other than those assets which are used directly in carrying out the
institution's exempt purpose) is at least $2,500,000,000.
``(c) Other Terms.--For purposes of this section--
``(1) Assets.--The rules of section 4968(d) shall apply.
``(2) Student.--The rules of section 4968(b)(2) shall
apply.''.
(b) Clerical Amendment.--The table of sections for subchapter H of
chapter 42 of the Internal Revenue Code of 1986 is amended by adding at
the end the following new item:
``Sec. 4969. Excise tax on certain large private college and university
endowments.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2021.
SEC. 3. FAILURE TO DISTRIBUTE ENDOWMENT ASSETS.
(a) In General.--Subchapter H of chapter 42 of the Internal Revenue
Code of 1986, as amended by section 2, is further amended by adding at
the end the following new section:
``SEC. 4970. FAILURE TO DISTRIBUTE ENDOWMENT ASSETS.
``(a) Tax Imposed.--There is hereby imposed on the undistributed
excess endowment amount of each specified applicable educational
institution for the taxable year, which has not been distributed before
the first day of the second (or any succeeding) taxable year following
such taxable year (if such first day falls within the taxable period),
a tax equal to 30 percent of such undistributed excess endowment amount
remaining undistributed at the beginning of such second (or succeeding)
taxable year. The tax imposed by this section shall not apply to the
undistributed excess endowment amount of a specified applicable
educational institution to the extent that the foundation failed to
distribute any amount solely because of an incorrect valuation of
assets, if--
``(1) the failure to value the assets properly was not
willful and was due to reasonable cause,
``(2) such amount is distributed as qualifying
distributions by the institution during the allowable
distribution period,
``(3) the institution notifies the Secretary that such
amount has been distributed as qualifying distributions to
correct such failure, and
``(4) such distribution is treated, by reason of subsection
(e)(2), as made out of the undistributed income for the taxable
year for which a tax would (except for this paragraph) have
been imposed under this subsection.
``(b) Additional Tax.--In any case in which an initial tax is
imposed under subsection (a) on the undistributed excess endowment
amount of any specified applicable educational institution for any
taxable year, if any portion of such amount remains undistributed at
the close of the taxable period, there is hereby imposed a tax equal to
100 percent of the amount remaining undistributed at such time.
``(c) Undistributed Excess Endowment Amount.--For purposes of this
section, the term `undistributed excess endowment amount' means, with
respect to any specified applicable educational institution for any
taxable year as of any time, the amount by which--
``(1) the distributable amount for such taxable year,
exceeds
``(2) the qualifying distributions made before such time
out of such distributable amount.
``(d) Distributable Amount.--For purposes of this section, the term
`distributable amount' means, with respect to any specified applicable
educational institution for any taxable year, an amount equal to 5
percent of the aggregate fair market value of the assets of the
institution at the end of the preceding taxable year. The rules of
section 4968(d) shall apply for purposes of this section.
``(e) Qualifying Distributions.--For purposes of this section--
``(1) In general.--The term `qualifying distribution' has
the meaning given such term in section 4942(g).
``(2) Other rules.--The rules of subsections (h) and (i) of
section 4942 shall apply.
``(f) Taxable Period; Allowable Distribution Period.--The rules of
paragraphs (1) and (2) of section 4942(j) shall apply for purposes of
this section.''.
(b) Clerical Amendment.--The table of sections for subchapter H of
chapter 42 of the Internal Revenue Code of 1986, as amended by section
2, is further amended by adding at the end the following new item:
``Sec. 4970. Failure to distribute endowment assets.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2021.
SEC. 4. TRANSFER OF FUNDS.
The Secretary of the Treasury (or such Secretary's delegate) shall
from time to time transfer from the general fund of the Treasury to the
Secretary of Labor amounts equal to the increase in revenues by reason
of the enactment of sections 2 and 3, for the purpose of expanding
opportunities relating to apprenticeship programs registered under the
National Apprenticeship Act. Such funds shall be available until
expended to carry out activities under such Act through grants,
cooperative agreements, contracts and other arrangements, with States
and other appropriate entities.
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