NEW YORK, May 27 (Xinhua) -- U.S. House Republicans' plan to raise taxes on university endowments could drive the biggest shift to endowments' investment strategies in a generation, reported The Wall Street Journal on Tuesday.
The GOP plan is part of the broader bill of President Donald Trump, which passed the House of Representatives last week and now moves to the Senate for approval. "If the bill passes, it would lift the tax on investment income for some of the biggest endowments from 1.4 percent to 21 percent, in line with what U.S. corporations pay. Other schools would see their taxes jump by significant amounts as well," noted the report.
Under the new tax plan, universities might pull back from strategies that regularly generate short-term gains and shift money into other investments such as private equity, which generally don't realize gains for years, it said.
Several endowment officials said schools might balk at locking up too much money in long-term investments. They will need cash on hand to pay chunky tax bills and fund capital calls they might have committed to years earlier. Capital calls require clients to fund investment commitments they previously made. Many schools also already have much of their money in long-term investments and might not want to add more.
"Lobbyists for schools have spent months visiting Capitol Hill trying to soften the potential blow," added the report. "The schools say they are modeling for various possibilities, but haven't started making wholesale changes to their investment portfolios."
