Worries mount as U.S. House Republicans advance a major tax bill that includes increasing private universities' endowment tax from 1.4% currently to up to 21%.

The measure has been tucked into the text of a 1,116-page bill, dubbed “The One Big Beautiful Bill,” which made it out of committee last weekend in the U.S. House of Representatives. The bill holds the majority of President Donald Trump’s legislative agenda, including extending 2017 tax cuts.

The new system would change how private universities calculate the excise tax on their endowment. The plan would include four tiers:

21% for colleges with more than $2 million in endowment assets per full-time student
14% for colleges with between $1.25 million and $2 million per full-time student
7% for colleges with between $750,001 and $1.25 million per full time student
1.4% for colleges with between $500,000 and $750,000, per full time student

In Houston, that means that the federal government could further tax Rice University’s $7.5 billion endowment. The institution is currently subject to a 1.4% tax rate under present-day law.

Under the proposal, Rice would see its endowment tax raised to 7%, according to an analysis conducted by the Houston Business Journal. That's based on the 8,941 full-time students at Rice, according to the latest data from the National Center for Educational Statistics.

Rice declined to comment on the accuracy of this number.

Kelly Fox, Rice’s executive vice president for operations, finance and support, told the HBJ in an interview that the university is monitoring the bill, but she declined to give specifics on how it would impact Rice’s programs.

If the bill’s tax rates go into effect, “we would have longer concerns about what that means for the student experience,” Fox said.

How Rice's endowment is used

Rice’s endowment is valued at $7.5 billion, excluding directly held real estate, but if real estate is included, that number would rise to $8.1 billion, John Lawrence, chief investment officer and president of Rice Management Co., told the HBJ.

Rice draws 5% of its endowment annually, which contributes about 40% of the school’s operating budget. School representatives said the rate is in line with other private universities.

In an interview with The Chronicle of Higher Education, Rice University President Reginald DesRoches told the outlet that he’s spent a majority of his time on Capitol Hill this year explaining how the university spends its endowment, especially as the university gears up for a 30% increase in enrollment by 2028.

Fox told the HBJ that a substantial portion of Rice's endowment is used in financial aid, especially since the university implemented The Rice Investment, a plan that grants financial aid based on a student’s family income. Those with families that make $75,000 and below can go to the university for free, with living expenses and fees paid. Students with families who make between $75,000 and $140,000 receive full tuition, while those between $140,000 to $200,000 receive half tuition.

The program is a return to Rice’s roots, officials said. The institution, which was founded in 1891, was free until 1965. Its founder, William March Rice, wished to keep the university accessible for all.

“The [endowment] dollars sound really big. It has the impression of a bank account, but it’s not a bank account. We’re drawing up a notion — and students are at the heart of that mission,” Fox said.

Fox says a better way to think about the endowment is as funds that must last "hundreds of years."

"These [funds] are intended to keep The Rice Investment for generations to come," she added.

As the school grows, even more funds must be invested into financial aid, which requires a greater resource every year, Fox said. In addition, the school is working to invest in student success programs and differed maintenance. For example, some of the endowment funds go toward offering research and new interdisciplinary opportunities, institutes and centers, according to Fox and Lawrence.

“One of our defining values is the commitment to students and access, which differentiates [us] across other private universities,” Fox said.

The HBJ reached out to the office of U.S Congresswoman Lizzie Fletcher. Rice is in the 7th Congressional District, which Fletcher represents. In a statement, Fletcher said that the proposal is part of a broader campaign by the Trump administration to "undermine the very foundations of our academic and scientific enterprise."

“Like many of my Democratic colleagues, I have expressed these concerns to members of the Ways & Means Committee, which has jurisdiction over these provisions of this budget and tax proposal," Fletcher said. "But let me be clear: this bill is not about fiscal responsibility; it is about hampering access to all that comes with the pursuit of education — learning, opportunity, and the ability to think critically and challenge what is before us. Rice University — and all institutions of higher learning — must be empowered to grow, to innovate, and to open doors for the next generation of leaders and thinkers."

She added: "Now, by targeting colleges and universities, the Trump administration and its Congressional enablers are going after the very resources that allow institutions like Rice University — one of the country’s premier educational institutions — to provide financial aid, fund groundbreaking research, attract international scholars, and provide opportunities for students and researchers alike."

Read this article in the Houston Business Journal.