Internal Revenue Code · 26 U.S.C.
§ 4968. Excise tax based on investment income of private colleges and universities
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 4968
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- December 22, 2017 by Pub. L. 115–97
- Last amended
- July 4, 2025 by Pub. L. 119–21
- Amendments
- 2 dated changes in the source credit
- Length
- 8 subsections · 899 words · about 4 min to read
- Defines
- 7 terms
- Cross-references
- cites 4; cited by 1 Code section and 0 other regulations
- Regulations
- 4 issued under this section
There is hereby imposed on each applicable educational institution for the taxable year a tax equal to the applicable percentage of the net investment income of such institution for the taxable year.
For purposes of subsections (c) and (d), the number of students of an institution (including for purposes of determining the number of students at a particular location) shall be based on the daily average number of full-time students attending such institution (with part-time students taken into account on a full-time student equivalent basis).
Net investment income shall be determined under rules similar to the rules of section 4940(c).
Net investment income shall be determined by taking into account any interest income from a student loan made by the applicable educational institution (or any related organization) as gross investment income.
Net investment income shall be determined by taking into account any Federally-subsidized royalty income as gross investment income.
The term “Federally-subsidized royalty income” means any otherwise-regulatory-exempt royalty income if any Federal funds were used in the research, development, or creation of the patent, copyright, or other intellectual or intangible property from which such royalty income is derived.
For purposes of this subparagraph, the term “otherwise-regulatory-exempt royalty income” means royalty income which (but for this subparagraph) would not be taken into account as gross investment income by reason of being derived from patents, copyrights, or other intellectual or intangible property which resulted from the work of students or faculty members in their capacities as such with the applicable educational institution.
The term “Federal funds” includes any grant made by, and any payment made under any contract with, any Federal agency to the applicable educational institution, any related organization, or any student or faculty member referred to in subclause (II).
The Secretary shall prescribe such regulations or other guidance as may be necessary to prevent avoidance of the tax under this section, including regulations or other guidance to prevent avoidance of such tax through the restructuring of endowment funds or other arrangements designed to reduce or eliminate the value of net investment income or assets subject to the tax imposed by this section.
(Added Pub. L. 115–97, title I, § 13701(a), Dec. 22, 2017, 131 Stat. 2167; amended Pub. L. 115–123, div. D, title II, § 41109(a), Feb. 9, 2018, 132 Stat. 159; Pub. L. 119–21, title VII, § 70415(a), July 4, 2025, 139 Stat. 221.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- applicable educational institution § 4968(c)
- applicable percentage § 4968(b)
- Federal funds § 4968(f)(2)(B)(ii)(III)
- Federally-subsidized royalty income § 4968(f)(2)(B)(ii)(I)
- otherwise-regulatory-exempt royalty income § 4968(f)(2)(B)(ii)(II)
- related organization § 4968(g)(2)
- student adjusted endowment § 4968(d)
Regulations under this section
Treasury regulations (26 CFR) issued under § 4968
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 4 other sections
- § 25A(f)(2) American Opportunity and Lifetime Learning credits
- § 511(a)(2)(B) Imposition of tax on unrelated business income of charitable, etc., organizations
- § 4940(c) Excise tax based on investment income
- § 509(a)(3) Private foundation defined
Cited by 1 Code section
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2025—Pub. L. 119–21 amended section generally. Prior to amendment, section consisted of subsecs. (a) to (d) relating to tax imposed, applicable educational institution, net investment income, and assets and net investment income of related organizations, respectively.
2018—Subsec. (b)(1)(A). Pub. L. 115–123, § 41109(a)(1), inserted “tuition-paying” after “500”.
Subsec. (b)(1)(B). Pub. L. 115–123, § 41109(a)(2), inserted “tuition-paying” after “50 percent of the”.
Statutory Notes and Related Subsidiaries
Effective Date of 2025 Amendment
Pub. L. 119–21, title VII, § 70415(c), July 4, 2025, 139 Stat. 223, provided that: “The amendments made by this section [amending this section and section 6033 of this title] shall apply to taxable years beginning after December 31, 2025.”
Effective Date of 2018 Amendment
Pub. L. 115–123, div. D, title II, § 41109(b), Feb. 9, 2018, 132 Stat. 159, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.”
Effective Date
Pub. L. 115–97, title I, § 13701(c), Dec. 22, 2017, 131 Stat. 2168, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 2017.”