People throughout the country continue to discover the full impact of the Tax Cuts and Jobs Act (TCJA). One of the earliest concerns and first official discoveries was the fact that the new tax law had a disproportionate impact on high tax states, like California. This is because the law included a $10,000 limitation in the amount taxpayers could deduct from their federal tax returns for state and local tax (SALT) bills.
Another negative impact: a hit to university funding. A recent report notes the TCJA led to a big bill for Stanford University’s endowment fund. According the report, the prestigious California university could find itself facing an unexpected tax bill due to the TCJA’s endowment tax. The university uses the endowment fund to provide essential support for the educational institution’s mission, including financial aid. The tax at issue is, essentially, a 1.4% excise tax. This translates to a $42.9 million tax bill for the school due to this endowment. The university states it will pay off the tax bill in increments as it becomes due.
Stanford is not alone. Harvard University has also reported a large tax bill due to this change, stating it paid almost $50 million in 2019 to meet this obligation. The law targets universities with over $500,000 in endowment assets per student and enroll at least 500 students. It is estimated to impact 25 to 30 schools throughout the nation.
If you are struggling to meet your tax obligations, you are not alone. Even large, well-known educational institutions are finding themselves facing unexpected tax bills. Options are available. An attorney experienced in this niche area of California tax law can review your situation and discuss your options.