Phaseout of investment income excise tax for private colleges and universities providing sufficient grants and scholarships

(a)

In general

Section 4968 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(e)

Phaseout for institutions providing qualified aid

(1)

In general

The amount of tax imposed by subsection (a) (determined without regard to this subsection) shall be reduced (but not below zero) by the amount which bears the same ratio to such amount of tax (as so determined) as—(A)the excess (if any) of—(i)the aggregate amount of qualified aid awards provided by the institution to its first-time, full-time undergraduate students for academic periods beginning during the taxable year, over(ii)an amount equal to 20 percent of the aggregate undergraduate tuition and fees received by the institution from first-time, full-time undergraduate students for such academic periods, bears to(B)an amount equal to 13 percent of such aggregate undergraduate tuition and fees so received.(2)

Institution must meet reporting requirement

(A)

In general

Paragraph (1) shall not apply to an applicable educational institution for a taxable year unless such institution furnishes to the Secretary, and makes widely available, a statement detailing the average aggregate amount of Federal student loans received by a student for attendance at the institution, averaged among each of the following groups of first-time, full-time undergraduate students who during the taxable year completed a course of study for which the institution awarded a baccalaureate degree:(i)All such students.(ii)The students who have been awarded a Federal Pell Grant under subpart 1 of part A of title IV of the Higher Education Act of 1965 for attendance at the institution.(iii)The students who received work-study assistance under part C of title IV of such Act for attendance at such institution.(iv)The students who were provided such Federal student loans.(B)

Form and manner for report

Such statement shall be furnished at such time and in such form and manner, and made widely available, under such regulations or guidance as the Secretary may prescribe.(C)

Federal student loans

For purposes of this paragraph, the term Federal student loans means a loan made under part D of title IV of the Higher Education Act of 1965, except such term does not include a Federal Direct PLUS Loan made on behalf of a dependent student.(3)

Other definitions

For purposes of this subsection—(A)

First-time, full-time undergraduate student

The term first-time, full-time undergraduate student shall have the same meaning as when used in section 132 of the Higher Education Act of 1965.(B)

Qualified aid awards

The term qualified aid awards means, with respect to any applicable educational institution, grants and scholarships to the extent used for undergraduate tuition and fees. (C)

Undergraduate tuition and fees

The term undergraduate tuition and fees means, with respect to any institution, the tuition and fees required for the enrollment or attendance of a student as an undergraduate student at the institution.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after ….

Inflation adjustment and clarification for definition of applicable educational institution

(a)

Inflation adjustment to per student asset threshold

Section 4968(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(3)

Inflation adjustment

In the case of any taxable year beginning after 2022, the dollar amount in paragraph (1)(D) shall be increased by an amount equal to—(A)such dollar amount, multiplied by(B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2021 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any increase determined under this paragraph is not a multiple of $1,000, such increase shall be rounded to the nearest multiple of $1,000.

(b)

Clarification of 500 student threshold

Section 4968(b)(1)(A) of such Code is amended by inserting below the graduate level after 500 tuition-paying students. (c)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2021.