HB1905, titled the Protecting American Students Act, would amend the Internal Revenue Code rules governing the excise tax on net investment income that applies to certain private colleges and universities. Under current law, the tax calculation can depend in part on the number of students at an institution. This bill would require that, for that calculation, students who do not meet the student eligibility requirements in section 484(a)(5) of the Higher Education Act of 1965 would not be counted.
The bill also adds a reporting requirement for affected educational institutions. Private colleges and universities subject to the tax would have to report both the number of students counted before the new exclusion and the number counted after it, creating a clearer record of how the endowment-tax threshold is determined. The changes would apply to taxable years beginning after December 31, 2025.
Impact
The bill would amend sections 4968 and 6033 of the Internal Revenue Code, narrowing the student count used to determine whether a private college or university is subject to the excise tax on net investment income and adding a new disclosure obligation for affected institutions. In practice, this could change which institutions meet the endowment-tax threshold and may reduce tax exposure for some schools by excluding certain students from the calculation. It would also require additional IRS reporting by applicable educational institutions beginning with taxable years after 2025.
Sentiment
The available context suggests generally supportive sentiment, at least among the bill’s sponsors and co-sponsors, who frame it as a measure to protect American students and refine the tax treatment of private colleges and universities. There is no recorded committee transcript or vote history in the provided material, so no formal opposition or bipartisan debate can be identified from the available record. The bill was introduced and referred to the House Committee on Ways and Means.
Contention
The main policy issue is how to define which students should count when calculating the endowment-tax threshold for private colleges and universities. Supporters appear to favor excluding students who do not meet the Higher Education Act eligibility standard, likely arguing that the tax should not be triggered by students outside that category. Potentially affected parties include private colleges and universities subject to the excise tax, as well as the IRS, which would receive additional reporting data. No specific objections are documented in the provided materials, but the change could be contentious for institutions that would lose or gain tax liability depending on how student counts are adjusted.