REDUCE ACT
Reducing Excessive Debt and Unfair Costs of Education Act of 2015
Rep. Tom Reed (NY-23)
Outline


Universities & Colleges with endowments of more than $1 billion:



Are required to pay out 25% of the endowments earnings in grants to working-family
students for the cost of attendance
o Working Families – family income between 100 and 600% of poverty line
o Progressive Payout: schools can pay more to lower income working families



Earnings = Difference between the FMV of the endowment’s assets at end of previous
year minus and the FMV of the second preceding year, subtracting any contributions and
adding back any spending



If earnings greater than the cost of attendance for working-families, then earning go next
to low-income students



If all cost of attendance for working-family and low-income students are covered, then no
penalties



Penalties
o First year of non-compliance - 30% tax on the undistributed required payout
(amount of the earnings that should have gone to students)
o Second year of non-compliance - 100% tax on the undistributed required payout
o Loss of tax-exempt status if non-compliant for 3 years



Effective taxable year after date of enactment