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Senators Charles Grassley and Max Baucus began the current debate over college and university endowments in May 2007 with a letter to Treasury Secretary Henry Paulsen.  The letter raised a simple but profound issue: when should a school or other charity have to spend more of its endowment in order to remain tax-exempt?  By merely raising this issue, the senators challenged long-standing laws that had left this decision to the discretion of colleges and universities.  Leading institutions with large endowments such as Harvard, Stanford, and Yale responded quickly by expanding their financial aid programs.  Even the current economic downturn, which hit endowments particularly hard, did not deter members of Congress from holding a public roundtable in fall 2008 to address this issue, nor did it deter congressional proposals to standardize reporting of financial aid, impose stricter disclosure requirements in federal tax filings for schools, and require annual university endowment payout rates.  Although none of these proposals became law, members of Congress continue to pressure colleges and universities to justify their endowment spending rates, and the Internal Revenue Service has launched a detailed study of endowment investment and spending practices.  Prof. Lloyd Mayer of Notre Dame Law School addresses these and other issues.


  • Prof. Lloyd Mayer, University of Notre Dame Law School