Yale opposes legislation to revoke its tax-exempt status

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Yale pays $4.5 million in property taxes to New Haven and an annual voluntary payment of $8.2 million. (Photo by Michael Marsland)

Yale recently presented testimony in opposition to legislation introduced in the Connecticut State Senate that would tax the university’s endowment and require it to pay property taxes on certain academic facilities.

“The most important contribution Yale can make to Connecticut is to continue what we have done for two decades in close partnership with New Haven — to strengthen neighborhoods, improve educational opportunity for students in New Haven schools, and cultivate new bioscience companies as well as retail establishments that add jobs, draw visitors to New Haven, and expand the tax base,” Richard Jacob, Yale’s associate vice president for federal and state relations, stated in testimony on behalf of Yale. “The proposed taxes on Yale would diminish the university’s ability to carry out its charitable mission and to enable and support growth in New Haven.”

Jacob cited a number of examples of Yale’s positive impact on New Haven and the region, including:

  • $8.8 billion in annual economic impact as estimated by The Connecticut Conference of Independent Colleges
  • $2.2 billion in yearly wages and benefits for its employees
  • Homebuyer Program assistance to more than 1,100 employees
  • 760 college scholarships funded through the New Haven Promise program
  • $8.2 million in annual voluntary payments to New Haven
  • $4.5 million in property taxes to New Haven for Yale’s commercial properties
  • 60 research spin-off companies that have attracted $1 billion in venture capital

“Everything that Yale does to improve the quality of life in New Haven — funding the New Haven Promise Scholarships, using the Homebuyer Program to encourage faculty and staff to live in New Haven, working in local schools, making voluntary payments to the city totaling $96 million to date — is ultimately made possible by Yale’s careful stewardship of its endowment,” Jacob said. He noted that New Haven has gained jobs over the past decade, while Connecticut’s other major cities have lost jobs during that period.

Read also from the Hartford Courant:

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The proposed legislation to tax the endowment would impose a 7.5% unrelated business income tax on any investment return that Yale does not spend. 

Yale said the bill would erode the value of the endowment and eventually reduce the amount of endowment revenue available to support recurring expenses. Yale would have to pay a tax on money that should be saved for future generations of students or spend at rates that would be considered imprudent under widely accepted financial standards. Either choice, the university maintained, would undermine Yale’s ability to sustain its exemplary record on affordability and access, state-of-the-art research, and generous investment in revitalizing New Haven.

Other legislation would revoke Yale’s property tax exemption if the property generates more than $6,000 in annual income from rent, admission to athletic events or facilities, or “royalties for any goods designed, produced, manufactured or generated” on university-owned property. Jacob stated that Yale currently pays property taxes on its non-academic properties, and that proponents of the proposed bill wish to tax the Yale laboratory space used to conduct federally funded research that leads to inventions that have been translated into companies in New Haven.

Yale would be the only institution of higher education in Connecticut that would be affected by the proposed legislation concerning the endowment and property taxes.  Jacob said that both bills were unconstitutional, as Connecticut’s Constitution established Yale’s right of non-taxation, and Yale would defend its constitutional right if they were enacted.

“Recent decades demonstrate that partnership is the path to progress and prosperity for New Haven,” Jacob stated. “The conflict of past generations yielded few benefits. Singling out one institution is bad policy, especially when that institution has been a strong partner with its hometown and its home state. The legislature should endorse partnership and so should reject these proposed bills.”

Yale was joined in its opposition to the legislation to tax Yale’s endowment by the Greater New Haven Chamber of Commerce.

“A proposal such as this bill ignores the economic impact created by Yale, and lacking any connection to reinvestment in the community, the bill misses the larger picture. Nonprofit colleges such as Yale, by definition, have to put revenues toward public purposes,” stated chamber president Anthony Rescigno. “College endowments exist to support financial aid for students, support research and advance these institutions’ charitable missions. Yale’s incredible economic impact is a direct result of it generating educated students and an educated workforce that build long-term economic growth and innovation. Taxing Yale’s endowment would hinder such economic vitality and negatively impact its students, and our economy.”

Connecticut Governor Dannel Mallloy also spoke against the proposed legislation.

“Many proposals are put forward during the legislative session, and many stay as just that — proposals. We value Yale, the students it educates, the research and innovation it generates, and the neighborhoods it strengthens in New Haven,” said Devon Puglia, Malloy’s spokesperson. “As the governor has made clear, we don’t believe that new taxes should be part of our solution as Connecticut adjusts to a new economic reality.”

Those who share these concerns are encouraged to reach out to your representative and senator. If you are unsure of your legislators, you can search for them here.