An Act Authorizing Municipalities To Impose A Tax On The Endowment Funds Of Private Institutions Of Higher Education.
Summary
HB 7147 would authorize certain municipalities to levy a tax on the net investment income of large private, nonprofit institutions of higher education. The tax could be imposed only in a municipality where more than 50% of the students enrolled in the institution attend classes, and only if the municipality’s legislative body approves it. The bill defines an “applicable educational institution” as an independent institution of higher education with aggregate assets exceeding $300 million in the prior taxable year, and caps the municipal tax at 2% of the institution’s net investment income.
The bill also sets out basic administration rules. If adopted locally, the municipal legislative body would decide whether the tax is paid in one installment or two semiannual installments and set the due dates. Municipal tax collectors would administer the tax, while the Commissioner of Revenue Services would prescribe forms and may adopt regulations for enforcement. The measure is effective October 1, 2025, and applies to taxable years beginning on or after January 1, 2026.
Impact
This bill would create a new local taxing authority in Connecticut law for municipalities meeting the student-enrollment threshold, specifically targeting the endowment-related investment income of large private higher education institutions. It would add a new section to the general statutes and expand municipal revenue options while also involving the Department of Revenue Services in form-making and regulatory oversight. The practical effect would fall on qualifying independent colleges and universities with substantial assets, potentially affecting their endowment returns and local fiscal relationships.
Sentiment
The available vote history suggests the bill was generally supported in committee, passing on a Joint Favorable Substitute vote by 16 yeas to 3 nays. No transcript excerpts are available, so there is no recorded floor or committee debate to show detailed arguments, but the vote indicates meaningful support alongside some opposition. Overall, the measure appears to have been viewed as a serious policy proposal rather than a consensus item.
Contention
The main point of contention is likely the policy choice to allow municipalities to tax private college endowment income, which could be seen as a new burden on higher education institutions and a departure from traditional nonprofit tax treatment. Supporters would likely emphasize municipal revenue needs and the concentration of benefits and impacts in host communities, while opponents may argue that the tax could reduce institutional resources for scholarships, operations, and long-term investment. The narrow applicability to large institutions and municipalities with a student majority suggests the bill was designed to limit its reach, but the underlying question of taxing endowment income remains the central issue.