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University Endowments Spending and Tax Policy - Podcast

Administrative Law & Regulation Practice Group

July 28, 2009

Lloyd Hitoshi Mayer

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  University Endowments Spending and Tax Policy 7-28-09 - MP3
Running Time: 00:24:43

Senators Charles Grassley and Max Baucus began the current debate over college and university endowments in May 2007 with a letter to Treasury Secretary Henry Paulsen.  The letter raised a simple but profound issue: when should a school or other charity have to spend more of its endowment in order to remain tax-exempt?  By merely raising this issue, the senators challenged long-standing laws that had left this decision to the discretion of colleges and universities.  Leading institutions with large endowments such as Harvard, Stanford, and Yale responded quickly by expanding their financial aid programs.  Even the current economic downturn, which hit endowments particularly hard, did not deter members of Congress from holding a public roundtable in fall 2008 to address this issue, nor did it deter congressional proposals to standardize reporting of financial aid, impose stricter disclosure requirements in federal tax filings for schools, and require annual university endowment payout rates.  Although none of these proposals became law, members of Congress continue to pressure colleges and universities to justify their endowment spending rates, and the Internal Revenue Service has launched a detailed study of endowment investment and spending practices.  Prof. Lloyd Mayer of Notre Dame Law School addresses these and other issues.


  • Prof. Lloyd Mayer, University of Notre Dame Law School

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Related Links

May 2007 Press Release & Letter from Senators Charles Grassley (R-Iowa) & Max Baucus (D-Mont.) to the Treasury Department regarding tax-exempt organizations and discussing endowments on page 3 (PDF)
August 2007 Congressional Research Service Memorandum on “Tax Issues and University Endowments” (PDF)
December 2007 “Harvard Announces Sweeping Middle-Income Initiative”
January 2008 “Yale’s Financial Facelift Shakes Up the Future of Aid”
January 2008 Letter from Senators Baucus & Grassley to the 136 U.S. colleges and universities with endowments of $500 million or more (PDF)
February 2008 “Stanford Enhances Undergraduate Financial Aid Program”
September 2008 Senate Finance Committee Endowment Roundtable Summary (prepared by the Council for Advancement and Support of Education)
Internal Revenue Service Colleges and Universities Compliance Project
National Association of College and University Business Officers Endowment Data
Henry Hansmann, “Why Do Universities Have Endowments” (1990) (PDF)
Uniform Management of Institutional Funds Act
Uniform Prudent Management of Institutional Funds Act

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