It has been more than two years since President Trump signed into law a controversial new tax on net investment income at wealthy colleges and universities -- the so-called endowment tax.

Since then, a few large universities have made headlines as they for the first time reported eight-figure endowment tax liabilities. Stanford University received attention for its $42.9 million estimated tax liability last week. A few months earlier, Harvard University grabbed headlines with a $37.7 million tax bill.

As eye-wateringly high as those figures may be, Harvard and Stanford are far from representative of the average college’s endowment. Harvard had the largest endowment in the country in the National Association of College and University Business Officers’ annual study of endowments, valued at $39.4 billion. Stanford’s was the third largest of any single university at $27.7 billion.

Both institutions were well over the threshold that triggers the endowment tax: $500,000 in assets per student. Those with more assets per student are subject to a 1.4 percent tax on net investment income.

Harvard had about $1.6 million in endowment assets per full-time-equivalent student, according to NACUBO estimates. Stanford had $1.64 million.

Meanwhile, the median college in the study had $35,555 per full-time-equivalent student. The median endowment value was a bit under $150 million.

The difference in scale can be hard to picture. For context, a thousand seconds is less than 17 minutes. A million seconds is the rough equivalent of 11 and a half days. A billion seconds is nearly 32 years.

So how much, exactly, are other colleges and universities paying on their 2019 endowment tax bills? The NACUBO study didn’t address the question this year. And it’s a deceptively hard one to answer, because the Internal Revenue Service and Treasury Department have yet to finalize regulations. That left colleges and universities making estimated payments under interim guidelines after they closed the books on their recent fiscal years.

Still, wealthy colleges and universities were supposed to try to make a good-faith effort.

“Ultimately, their legal obligation is to make a reasonable interpretation,” said Liz Clark, vice president for policy and research at NACUBO. “There were indeed a lot of questions inherent in the tax. It’s not as straightforward as one might believe.”

In an attempt to quantify how many colleges and universities are paying the tax -- and to gauge how much they’re paying -- Inside Higher Ed reached out to 49 wealthy institutions in December and January, requesting a range of financial information including estimated endowment tax paid. Those institutions were selected because their leaders signed a 2018 letter to Congress urging the endowment tax’s modification or repeal.

They may not represent every institution subject to the tax or on the brink of being subject to the tax. But it’s about the right number of colleges and universities to examine, according to NACUBO’s endowment data. NACUBO data show 46 institutions with per-student endowment assets of more than $500,000 on a full-time equivalent basis.

The list of 49 Inside Higher Ed used wasn’t an exact universe of likely endowment tax payers to poll, but with so much uncertainty surrounding the tax, it was a place to start -- and it was filled with institutions that had at least shown interest in the issue.

Still, the results of the polling should be interpreted with caution. Not only is there widespread confusion over how to calculate endowment tax liability at the moment, but some colleges that have reported tax liabilities say they won't actually end up paying the full liability in cash.

The $42.9 million listed in Stanford's financial statements represents the amount of excise tax the institution eventually expects to pay on all of its investment income for the 2019 fiscal year, according to a spokesperson, E. J. Miranda. Realized and unrealized gains are included.

"Because the current year tax is imposed only on realized capital gains, our current year tax will be less than the $42.9 million," Miranda said in an email. "Our actual cash payment for FY2019 will not be determined until we file our FY2019 tax return in July 2020. The difference between the $42.9 million and current year tax will be paid when the unrealized capital gains are eventually realized in future years."

Inside Higher Ed attempted to compensate for different reporting choices by asking colleges and universities how much tax they actually paid or expected to pay. But some simply responded with references to financial statements. In cases like Stanford's, where a liability was clearly attributed to the endowment tax and information on actual tax payments made was not easily accessible, it was considered along with other responses.

A Range of Results

Just 15 of the institutions that signed the letter urging the tax’s repeal responded to Inside Higher Ed’s queries with an estimated payment figure or listed an endowment tax entry in financial reports that were available as of last week.

Of those 15, two gave ranges. One said it estimated a tax liability of under $1 million; the other estimated its liability between $1 million and $1.8 million.

The remaining 13 institutions estimated tax bills between Stanford’s $42.9 million and $250,000 from The Juilliard School. Among other notable respondents was Rice University, which reported paying $7.5 million. The median was $1.5 million.​ (This paragraph and the next paragraph have been updated to reflect new information provided by Rice University.)

Two estimates are much larger than any other -- those from Harvard and Stanford. Remember, though, some institutions like Stanford are reporting liabilities that they won't pay this year, while others reporting less told Inside Higher Ed what they actually paid. Excluding them, the remaining 11 institutions posted a median of $1.3 million, and the largest individual bill was $7.5 million.

Of the other 34 colleges and universities polled, one responded that it made a payment but would not share the amount. Eight said they were not subject to the tax or that they made no payment. The remainder declined to respond, did not respond, did not break out the endowment excise tax from other taxes in their financial reports or said they were unable to calculate a tax liability without more guidance.

Respondents generally cautioned that the figures they reported were estimates and could change.

“The university believes it will be subject to the excise tax; however, the available proposed regulatory guidance is not sufficient to calculate a reasonable estimate,” the University of Richmond's financial statements said. “The university has reflected an estimate in its statements for unrelated trade or business income tax using the current proposed regulatory guidance. The university continues to evaluate the impact of the Act on current and future tax positions.”

Calculating the endowment tax is complicated by the fact that it technically doesn’t just cover endowments. The tax is a 1.4 percent tax on net investment income. It includes other investment income as defined by the IRS, like housing and royalties, said Andy Hirsch, a spokesman for Swarthmore College, in an email.

“I'll also share that Swarthmore is very concerned about the endowment tax,” Hirsch said. “Swarthmore is one of only a few colleges in the country that’s able to offer need-blind admissions, which means we admit students to the college regardless of their financial need and provide access to a college education for students who otherwise might not be able to afford it. That's only possible through the support of our endowment, and this tax diminishes our ability to do so. In essence, it's a punitive tax that threatens to reduce access to a college education for students from lower-income families.”

Swarthmore is far from the only institution continuing to object to the tax. The chief investment officer for the University of Notre Dame, which reported an $11.3 billion endowment in 2019, has called the tax “a very un-American excise tax” and called for its repeal.

Notre Dame declined to say how much its estimated 2019 payment was. The university’s estimated endowment value per full-time-equivalent student was more than $900,000 in 2019, according to the latest NACUBO data.

Even some responding that they are not currently subject to the tax indicated they are worried about the future under it.

“We are a small college and our endowment-per-student number isn’t high enough to reach the current threshold, but we’re mindful that as our endowment grows, we will be paying the tax,” said Jim Amidon, chief of staff at Wabash College, in an email.

Wabash’s endowment was valued at $344.3 million in 2019. That was just over $390,000 per full-time-equivalent student.

Different officials from colleges speaking on a condition of background cited a range of reasons for declining to share information on their tax payments. They included an argument that it is impossible to compare investment income tax for different institutions because colleges and universities have been left to interpret unfinished regulations on their own. Without more guidance, it’s comparing apples and oranges, the argument goes.

Others cited uncertainty about the tax’s calculation more generally -- they were squeamish releasing numbers that might not prove to be accurate.

Indeed, colleges in several cases reported paying the IRS less than they expect to owe after final calculations are complete.

A note from one college’s financial department said that "the estimated tax was a conservative estimate because we don't have all the data yet to actually calculate it. The calculation is not due to the IRS until May 15, 2020. The IRS has allowed colleges to use a stepped-up basis of Dec. 31, 2017, to calculate the gains, and we are still gathering this information. So once we have that, we'll calculate the actual tax which we expect to be less … the IRS will then refund us the difference."

Finally, some worried that if they were to speak up, the endowment tax might be modified in a way that would hurt their institutions instead of helping them. Regulations are still being finalized, and leaders still hope for changes or repeal. Why attract unwanted attention or burn bridges?

Outside experts, meanwhile, urged more of a focus on whether overall endowment spending rates and returns are lining up. Spending from endowments has inched up in recent years, according to NACUBO data, even though long-term capital market assumptions suggest investors should expect lower returns in the future than what they’ve experienced in the past.

Spending has increased most notably at small and midsize institutions, said Debashis Chowdhury, president and an investment consultant at Canterbury Consulting, in an email. But reported returns for institutions of different sizes suggest returns were clustered relatively narrowly in recent years.

Only 46 out of 780 NACUBO respondents reported an endowment value of more than $500,000 per full-time-equivalent student in 2019, Chowdhury pointed out.

“So that is less than 6 percent of the overall universe subject to that new tax,” he said. “Maybe that’s the story.”