University Endowments and Offshore Investments

November 9, 2017

Some university endowments use offshore investments to avoid certain taxes or controversy over holdings, The New York Times reported, citing information from a trove of leaked documents, dubbed the Paradise Papers.

For example, endowments have created so-called blocker corporations to skirt federal taxes that apply to private equity and hedge fund holdings, the newspaper reported.

"Establishing another corporate layer between private equity funds and endowments effectively blocks any taxable income from flowing to the endowments, the reason they are called blocker corporations," according to The Times. "The tax is instead owed by the corporations, which are established in no-tax or low-tax jurisdictions like the Cayman Islands or the British Virgin Islands."

Republicans in the U.S. Congress are mulling a proposed excise tax on relatively large endowments owned by private colleges.

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