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July 11, 2016

Opinion: It's Time to Debate Colleges' Endowment Tax Exemption

Recent congressional inquiries into 56 large universities’ endowments call attention to the fact that many colleges own billions of dollars in real estate but make only small payments to their communities in lieu of paying taxes, according to an opinion piece in The Washington Post.

Stanford University, for instance, owns $8 billion in property and saves about $80 million a year in taxes, while George Washington University owns $1.7 billion in property and saves about $31.6 million in taxes each year, according to Mark Schneider, vice president and institute fellow at the American Institutes for Research, and Jorge Klor de Alva, president of the Nexus Research and Policy Center, who wrote the piece. 

Other major universities such as Harvard, Brown, Duke, and Columbia also have vast real estate holdings but pay little to communities through so-called PILOTs (payments in lieu of taxes), which are intended to help offset the cost of municipal services, the authors write. 

Colleges maintain that they provide their communities with countless economic benefits, as well other perks like free tickets to cultural and athletic events. But the authors argue that it’s time for communities to debate whether tax exemptions for university endowments are worth the economic benefits the institutions offer.

The information on endowments came as a result of a joint letter sent to the colleges by the Senate Committee on Finance and the House Committee on Ways and Means and its Oversight Subcommittee. The letters, which also asked for information on practices surrounding naming rights deals and fees paid to endowment fund managers, signal that Congress is taking notice, the authors write.