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SB 385

AN ACT ESTABLISHING A CAPITAL GAINS TAX ON CERTAIN ENDOWMENT FUNDS OF INSTITUTIONS OF HIGHER EDUCATION AND CONCERNING THE USE OF THE REVENUE GENERATED.

2025 Regular Session Introduced by Ryan Fazio

Connecticut bill imposes capital gains tax on university endowment investment returns to generate state revenue, potentially affecting institutional finances and tuition costs.

REF. TO JOINT COMM. ON Finance, Revenue and Bonding
#capitalgainsanddividendstax #endowmentfunds(publiccollegesanduniversities) #paidfamilyandmedicalleaveprogram
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Bill Summary · SB 385

Legislative bill overview

SB 385 would impose a capital gains tax specifically on investment returns from endowment funds held by Connecticut colleges and universities. Revenue generated from this tax would be designated for specified purposes, likely related to higher education funding or public benefit. The bill targets wealthy institutional investors rather than individual taxpayers.

Why is this important

University endowments represent billions in assets that generate substantial returns largely exempt from state taxation. This proposal would tap into a significant revenue source while potentially affecting institutional finances, tuition costs, or investment strategies at Connecticut's higher education institutions. The outcome could influence how other states approach taxation of institutional wealth.

Potential points of contention

  • Institutional impact: Universities may reduce endowment distributions to students/operations, increase tuition, or relocate to more favorable tax jurisdictions, potentially affecting educational access and competitiveness
  • Economic efficiency: Tax on investment returns could reduce capital available for reinvestment, potentially lowering long-term endowment growth and institutional financial stability
  • Scope and fairness: Targeting only educational institutions raises questions about why similar taxes don't apply to hospital systems, foundations, or other tax-exempt entities with large endowments
  • Revenue reliability: Endowment returns fluctuate significantly with market conditions, making projected revenues unpredictable for budgeting purposes

Compiled from official sources — confirm details with the bill’s official record.

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