The University of Notre Dame, best known for the Fighting Irish, is taking on an off-field conflict, this one involving money. And art.
Smarting from a new federal endowment tax being imposed on wealthy private colleges, university officials say the levy will siphon money not only from financial aid and research but also from the school’s renowned art museum.
Notre Dame’s Snite Museum of Art is a local gem with a collection of 29,000 works from Rembrandt to Rodin. Free to the public, it offers lectures, concerts and a summer apprentice program for high school students. To encourage schoolchildren to visit, it pays for their transportation.
Some of that may be at risk as the government imposes the excise tax, said Elizabeth Zapf, a senior financial analyst at the Snite. The 1.4 percent levy, part of the Republican tax package passed in December 2017, is being assessed on the net investment income at schools with more than $500,000 in endowment assets per student. The Congressional Budget Office has estimated it will raise $200 million annually to offset tax cuts elsewhere.
About 30 of the wealthiest private universities will pay the tax for the fiscal year ended June 30. That may lead to cutbacks at university art museums, officials say.
Notre Dame’s tax could total about $3.5 million in the first year and more in the future, according to estimates from Scott Malpass, the school’s chief investment officer. Notre Dame is the richest college in the Midwest with an endowment worth $13.3 billion.
More than 30 separate funds have been set up by donors to benefit the Snite and they contribute as much as one-third of its approximately $3 million annual budget.
“The community that uses the museum will be shortchanged,” Zapf said an interview. She is among those who have sent comment letters to the Internal Revenue Service, which asked for public feedback by Oct. 1.
The levy may hit Amherst College’s museums. It has 138 endowments that support the Emily Dickinson and Mead Art museums in Amherst, Massachusetts, and the Folger Shakespeare Library in Washington.
“Our working assumption is that the endowments of each will be taxed,” said Caroline Hanna, an Amherst spokeswoman. Amherst in June announced a $22 million gift designated for the Dickinson museum, its largest ever.
The tax is a blow at a time when colleges are facing lower investment income. Dartmouth College and the Massachusetts Institute of Technology posted lower returns for fiscal 2019 than the previous year. South Bend, Indiana-based Notre Dame has yet to report its return.
“You’re going to have millions of dollars flow out to pay this tax every year,” Malpass said in an interview published by the school earlier this month.
— Janet Lorin
Bloomberg News
