The tax-law scholar talks to Michael E. Hartmann more about whether the reasoning underlying the excise tax on higher-education endowments could apply to private foundations, the potential for a cross-ideological coalition to back philanthropy reform, and the real-world ramifications of such reform.
Earlier this year, Pepperdine Law Review published Jennifer Bird-Pollan’s “Taxing the Ivory Tower: Evaluating the Excise Tax on University Endowments,” which caught our attention here at The Giving Review. The Tax Cuts and Jobs Act of 2017’s first-time excise tax on the investment income of certain college and university endowments, she writes in the article, “is a first step towards the exploration of taxing non-profit entities on the vast sums of wealth they hold in their endowments.”
Later, Bird-Pollan asks, “Why are we focused only on universities?” Hence our attention.
Bird-Pollan is the associate dean of academic affairs and the Judge William T. Lafferty Professor of Law at the J. David Rosenberg College of Law at the University of Kentucky. She teaches tax-law courses and studies intersections of tax law and philosophy.
She earned her law degree from Harvard, a Ph.D. in philosophy from Vanderbilt, and her bachelor’s degree in philosophy and French from Penn State. Before law school, she taught philosophy courses at Vanderbilt and Harvard. Before coming to Kentucky, she practiced tax law at Ropes & Gray in Boston.
Bird-Pollan was nice enough to join me for a conversation last week. In the first of two parts of our discussion, which is here, we talk about the excise tax on investment income in higher education and whether the reasoning underlying it could perhaps also apply in other nonprofit areas.
The almost 15-minute video below is the second part, during which we cover whether that reasoning could apply to private foundations, the potential for a cross-ideological coalition to back philanthropy reform, and the real-world ramifications of such reform
Bird-Pollan and Hartmann
“You could design, actually, quite a parallel tax and apply it to foundations,” according to Bird-Pollan.
So if the foundation earns income and reinvests it rather than spending that money on charitable purposes, then it will be subject to the tax. The goal of it might never be a revenue-raiser. It might instead just incentivize certain kinds of behavior that would be more consistent with what we expect charitable entities to be doing.
She concludes by saying more attention should be devoted to these topics. In the Pepperdine Law Review article, “I suggest this is just a first step. This excise tax” on higher-ed endowments “is really just just sort of a dipping of the toe into the water of thinking about taxing these universities and these endowments,” she says. “So I am interested in continuing the conversation. I think there are probably better and maybe more comprehensive ways to think about this.”