The Door May Be Opening Wider on Endowments

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Senator Grassley continues his focus on the investment and payout policies of endowments. It is no secret that he and others in the tax writing committees have long held concerns about the actions and composition of certain sub-sets of the nonprofit sector. In a statement put out by his office in response to the release of University endowment data the Senator is quoted as saying:

It’s good to see that university endowments are starting to recover. Unfortunately, the recoveries aren’t leading to significantly higher payouts. There are more than 62 institutions with endowments greater than $1 billion and more than half of them are private, tax-exempt charities. The trends in endowment payout rates show that, even in a good economy, the wealthiest institutions hardly ever exceeded a payout of 5 percent. The trends also show that my concerns about a 5 percent payout rate being a ceiling rather than a floor are valid.

The recession, recovery and growing fiscal focus have all served to give new life to these issues. There is a good chance that larger tax reform efforts wanted by President Obama and leadership in both parties will include charitable activity. The sub-issues could cover executive salaries, foundation assets and payouts, management, overhead costs and more. Another driving force is the exponentially growing cost of higher education.

There is no doubt something will happen and those with interests would be wise to get involved early in the process. It may take a long time before anything final is accomplished, but key conversations are taking place.
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