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The One Big Beautiful Bill (OBBB) includes some provisions relevant to private schools and donors who support K-12 education. The bill passed on July 3 and is expected to be signed by President Donald Trump by July 4. Most notably, the excise tax on investment income at private universities will now follow a tiered structure, with rates as high as 8% depending on a school’s per-student endowment. Schools with significant investment assets may need to reevaluate how those assets are held and managed.
In addition, a new federal $1,700 School Choice Credit has been introduced for donations to qualifying scholarship organizations. Our tax attorneys explain what these changes mean and how schools and donors can prepare.
Currently, under Section 4968, private universities with investment assets of $500,000 or more per student must pay an excise tax at a flat rate of 1.4.%.
Under the OBBB, the rate will now be tiered based on the amount of the student adjusted endowment (SAE):
The SAE is the fair market value of non-educational assets divided by the number of students at the school. In other words, SAE means the amount of the school’s investment assets per student
This tax still only applies to private schools with an SAE of at least $500,000.
Under current law and the OBBB, a school’s assets generally include assets held by certain related organizations and a school’s net income generally includes income derived from those assets. Because the amount of investment assets determine the rate of tax, schools should monitor the amount of assets held by related entities and perhaps coordinate their investment activity to mitigate exposure.
The House version had required that the calculation of the student adjusted endowment only include students that are U.S. citizens or permanent residents. This provision is not in the final bill and could have increased the number of schools subject to the tax by decreasing the denominator in the calculation of whether the school’s SAE exceeded $500,000.
In addition, the Parliamentarian removed an exemption for religious schools from a prior version of the OBBB.
The OBBB creates a new Section 25F which provides a nonrefundable credit for cash or marketable security donations made to 501(c)(3) organizations that provide scholarships for elementary and high school students.
The credit would be taken instead of a charitable contribution deduction and would be reduced by any amount allowed as a credit on a state tax return.
The recipient organization must:
Eligible students are students who are eligible to enroll in a public elementary or high school and members of a household with an income which, for the prior year, is not greater than 300 percent of the area median gross income.
Qualified elementary or high school education expenses include tuition, fees, books, room and board, uniforms and computer technology or equipment.
The credit is limited to $1,700, but excess over $1,700 may be carried over for five years.
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Find Your Next Job !
The One Big Beautiful Bill (OBBB) includes some provisions relevant to private schools and donors who support K-12 education. The bill passed on July 3 and is expected to be signed by President Donald Trump by July 4. Most notably, the excise tax on investment income at private universities will now follow a tiered structure, with rates as high as 8% depending on a school’s per-student endowment. Schools with significant investment assets may need to reevaluate how those assets are held and managed.
In addition, a new federal $1,700 School Choice Credit has been introduced for donations to qualifying scholarship organizations. Our tax attorneys explain what these changes mean and how schools and donors can prepare.
Currently, under Section 4968, private universities with investment assets of $500,000 or more per student must pay an excise tax at a flat rate of 1.4.%.
Under the OBBB, the rate will now be tiered based on the amount of the student adjusted endowment (SAE):
The SAE is the fair market value of non-educational assets divided by the number of students at the school. In other words, SAE means the amount of the school’s investment assets per student
This tax still only applies to private schools with an SAE of at least $500,000.
Under current law and the OBBB, a school’s assets generally include assets held by certain related organizations and a school’s net income generally includes income derived from those assets. Because the amount of investment assets determine the rate of tax, schools should monitor the amount of assets held by related entities and perhaps coordinate their investment activity to mitigate exposure.
The House version had required that the calculation of the student adjusted endowment only include students that are U.S. citizens or permanent residents. This provision is not in the final bill and could have increased the number of schools subject to the tax by decreasing the denominator in the calculation of whether the school’s SAE exceeded $500,000.
In addition, the Parliamentarian removed an exemption for religious schools from a prior version of the OBBB.
The OBBB creates a new Section 25F which provides a nonrefundable credit for cash or marketable security donations made to 501(c)(3) organizations that provide scholarships for elementary and high school students.
The credit would be taken instead of a charitable contribution deduction and would be reduced by any amount allowed as a credit on a state tax return.
The recipient organization must:
Eligible students are students who are eligible to enroll in a public elementary or high school and members of a household with an income which, for the prior year, is not greater than 300 percent of the area median gross income.
Qualified elementary or high school education expenses include tuition, fees, books, room and board, uniforms and computer technology or equipment.
The credit is limited to $1,700, but excess over $1,700 may be carried over for five years.
More Upcoming Events
Sign Up for any (or all) of our 25+ Newsletters
You are responsible for reading, understanding, and agreeing to the National Law Review’s (NLR’s) and the National Law Forum LLC’s Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free-to-use, no-log-in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates, or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys, or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.
Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com intended to be a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional. NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us.
Under certain state laws, the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.
The National Law Review – National Law Forum LLC 2070 Green Bay Rd., Suite 178, Highland Park, IL 60035 Telephone (708) 357-3317 or toll-free (877) 357-3317. If you would like to contact us via email please click here.
Copyright ©2025 National Law Forum, LLC