Iowa lawmakers proposed legislation to establish a tax on public and private university endowments that have more than $250 million in funds.
House Study Bill 544 would impose an annual 15% tax on educational institution endowment values exceeding $250 million, calculated at the close of the preceding tax year, effective for tax years beginning on or after January 1, 2027. A proposed amendment by the bill’s sponsor would raise the taxable endowment value to $500 million from $250 million and would lower the tax to match the state’s corporate tax rate of 7.1% from the original 15%.
According to a CIO analysis, four Iowa institutions would face the endowment tax, based on their reported endowment sizes: the University of Iowa, Grinnell College, Iowa State University and Drake University. Grinnell College, known for its connection to Warren Buffett, avoided the federal endowment tax passed in last year’s One Big Beautiful Bill Act after Senate amendments narrowed the bill’s scope, sparing smaller colleges that have substantial endowments from larger tax bills.
If the amendment to the Iowa bill clears, Drake University would no longer be subject to the endowment tax, since its endowment holds less than $500 million, according to recent financial reports.
According to the bill, the endowment tax revenue from accredited private institutions would be placed into a high-wage and high-demand job account. These funds would supplement Iowa tuition grants for private college students majoring in fields identified as high-wage and high-demand by the state workforce development board and board of regents. The college student aid commission would create rules for approving and awarding supplemental grants from the funds to private college and university students that qualify.
The bill also would limit what Iowa Board of Regents-governed institutions can charge on gifts. They would be allowed to charge other entities no more than 5% of gross gift proceeds and no more than 1% of total endowment value annually for endowment management and administration.
Connecticut, home to Yale University, owner of the third-largest endowment in the country, previously proposed legislation to tax higher education endowments in the state, but the legislation has yet to become law.
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