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SB 38

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

2026 Regular Session Introduced by Ryan Fazio

Connecticut would tax capital gains from higher education endowments above a threshold, dedicating revenue to unspecified education purposes, potentially affecting tuition and institutional operations.

REF. TO JOINT COMM. ON Finance, Revenue and Bonding
#capitalgainsanddividendstax #foundations #institutionsofhighereducation #paidfamilyandmedicalleaveprogram
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Bill Summary · SB 38

Legislative bill overview

SB 38 would impose a capital gains tax on the investment returns of endowment funds held by Connecticut institutions of higher education above a certain threshold. The revenue generated would be dedicated to a specified purpose, likely education-related initiatives or financial aid programs. This represents a new tax specifically targeting university endowments rather than applying broadly to capital gains.

Why is this important

University endowments represent billions in assets that generate substantial annual returns, largely exempt from taxation under current law. This bill would redirect a portion of those returns to state coffers, potentially increasing funding for education or public programs while raising questions about higher education financing. The outcome could affect tuition costs, financial aid availability, and the competitiveness of Connecticut institutions versus peers in other states.

Potential points of contention

  • Endowment threshold and scope: Questions remain about which institutions are covered, what asset threshold triggers the tax, and whether this applies uniformly or targets specific schools
  • Tax incidence and burden: Disagreement over whether the tax ultimately reduces student aid, increases tuition, decreases institutional operations funding, or comes from endowment principal rather than returns
  • Competitiveness and recruitment: Concern that Connecticut's tax on endowments could disadvantage its universities in recruiting faculty and students compared to institutions in states without similar taxes

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

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