Unlike nonprofit corporations classified as a public charity, private foundations in the United States are generally subject to a 1% or 2% excise tax on any net investment income.
[1][2] As enacted in the Tax Cuts and Jobs Act of 2017 and amended by the Bipartisan Budget Act of 2018, an excise tax of 1.4% on endowment income is levied on universities that have at least 500 tuition-paying students and net assets of at least $500,000 per student.
The $500,000 is not adjusted for inflation, so the threshold is effectively lowered over time.
[4][5] Critics note that the tax could threaten financial aid for low-income students, stifle social mobility, and prevent medical research.
[7] There continue to be vigorous efforts that advocate the repeal of the tax.