In Notice 2018-55, the IRS provided private colleges and universities subject to the GOP tax law’s 1.4 percent endowment tax with much-needed relief. According to the notice, when colleges sell property, they will only have to apply the tax to gains in value since the end of 2017. The higher basis will result in less gain being subject to the endowment tax.
The notice indicated that the IRS is working on additional regulations to clarify the application of the endowment tax and has asked the public to submit comments by Sept. 6. The new endowment tax regulations is expected to have limited application, since the IRS estimates that fewer than 40 institutions are impacted by the rules.