Notre Dame’s over $20 billion endowment will face a higher tax rate after President Donald Trump signed a major tax and spending bill into law on Friday, July 4. The bill, dubbed the “One Big Beautiful Bill Act,” is Trump’s signature legislative initiative thus far in his second term.
While the bill slashes taxes by $4.5 trillion across the economy, it contains a notable tax increase on the endowments of wealthy private universities, including Notre Dame.
The University’s investment income will be taxed at a rate of 4%, up from a 1.4% rate established by the 2017 Tax Cuts and Jobs Act, signed by Trump in his first term.
If the higher rate had been in effect in the last fiscal year, in which the University reported $1.8 billion in investment return from its endowment, Notre Dame would have owed approximately $50 million more in taxes to the federal government, according to The Observer’s analysis.
If the University had attempted to pay such a tax obligation solely from its operating budget ($1.89 billion this year), it would have had to reduce its operating budget by about 2.5%.
The tax increase comes after a concerted lobbying effort by Notre Dame and other schools in the Association of American Universities against the change.
Notre Dame’s lobbying efforts appeared to pay off when the House of Representatives passed a version of the bill on May 22 that included tax exemptions for religiously-affiliated schools, including Notre Dame.
However, the Senate parliamentarian ruled that provision violated the strict standards of budget reconciliation, a legislative tool that allows taxation and spending bills to bypass the Senate filibuster.
The Senate’s version of the bill, which it passed on July 1, stripped the bill of the religious exemption to comply with the parliamentarian’s ruling. However, it set more modest endowment tax increases than those included in the House’s version.
In a written statement, University spokesperson Erin Blasko said, “We are deeply disappointed by the removal of language protecting religious institutions of higher education from the endowment tax before passage of the final bill. The Constitution guarantees freedom of religion, and Congress and the courts have historically protected and even expanded that freedom — to the substantial benefit of society. Any expansion of the endowment tax threatens to undermine the ability of a broad range of faith-based institutions to serve their religious purpose. We are proud to have stood with a coalition of these institutions against that threat, and we are encouraged by the strong support for a religious exemption received from both chambers. We believe that faith-based colleges and universities occupy an important and distinctive place in the landscape of U.S. higher education directly connected to their religious nature.”
Prior to the endowment tax being passed into law, Notre Dame announced in “A Message from the Executive Officers: June 2025” that it would continue a hiring freeze it began in March for the foreseeable future and implement a 2.5% overall budget reduction. Additionally, the University stated it would not launch construction of any new buildings on campus in the next year.
A handful of even wealthier universities will be subject to an 8% tax under the new law, while a number of less wealthy schools will continue to pay the 1.4% rate. The rates are set based on the size of the institution’s endowment relative to its number of students. Public universities are exempt from the tax, as are schools with fewer than 3,000 students.
Editor’s note: This story has been updated to include relevant information from "A Message from the Executive Officers: June 2025.”
