Category: Insights

Anne Duggan, CAIA, Managing Director, Client CIO Group at TIFF Investment Management, spoke with reporter Sabiq Shahidullah from FundFire on how large private university endowments are rethinking their investment strategies in response to recent changes to the federal excise tax on endowments. From tax-loss harvesting to rebalancing away from high-turnover strategies, Duggan outlines how even modest tax changes could prompt meaningful portfolio adjustments.

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The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

David Brenner, COO at TIFF Investment Management, is featured on Capital Allocators’ Investment Management Operations podcast with host, Scott MacDonald.

The conversation explores:

• David’s career journey from consulting to asset management to ultimately becoming COO at TIFF.
• The transformation of TIFF from a product-centric to a solution-oriented investment firm (TIFF 1.0 to 2.0), while staying true to its mission-driven identity.
• TIFF’s evolving board governance model, with the board serving as an active strategic partner in the firm’s transformation.
• The importance of building strong, and scalable, operational foundations, especially in smaller organizations.
• How data is elevated as a strategic pillar alongside people, process, and technology.
• The role and integration of AI and automation in improving efficiency and decision-making.
• How technology is reshaping how TIFF processes, accesses, and interacts with investment manager information.
• How TIFF is responding to industry trends and client expectations.

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Investment Management Operations of Capital Allocators is a podcast hosted by Scott MacDonald that dives into the operational side of the investment industry. Each episode features conversations with senior professionals across operations, compliance, legal, finance, and other non-investment roles—offering insight into how leading investment institutions are run behind the scenes. Website →

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. There is no guarantee that any particular asset allocation or mix of strategies will meet your investment objectives.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• An institution may consider changing its spend rate for various reasons, such as facing financial challenges and wanting to increase budgetary support or experiencing financial success and aiming to grow the endowment more quickly.
• When considering a change in spend rate, it is important to understand how it affects the endowment’s future purchasing power and budgetary support.
• Spend rates require careful balance: they cannot be so low that the institution lacks support, nor so high that maintaining inflation-adjusted principal becomes challenging, as the endowment must earn a return to offset spending plus inflation.
• Two main trade-offs to consider when changing spend rates:
  • Timing of value: Higher spending today versus more spending dollars in the future due to asset compounding over time
  • Impact to endowment strategy: Rate changes may require adjustments to target return requirements, risk level, and asset allocation

The Decision Framework

Whether driven by financial pressures or strategic opportunity, spend rate adjustments represent one of the most significant decisions an endowment can make. The process requires careful analysis of both quantitative impacts and qualitative institutional factors. As a reminder, spend rate is the percent an institution withdraws from its endowment on an annual basis. Please refer to our Spend Policy 101 for a foundational overview.

Balancing Mission Support and Purchasing Power

At its core, spend rate decisions involve balancing competing institutional priorities. These dual endowment goals—supporting today’s mission while preserving tomorrow’s purchasing power—create a natural tension that requires careful balance. Rates too low fail to adequately support institutional needs, while rates too high make it challenging to maintain real value over time.

Key Trade-offs in Changing the Rate

Timing of the Value

A key consideration in determining if a rate change is appropriate is identifying when the institution would benefit most from its endowment funds.

For example, funds left in the endowment will grow and compound creating a larger spend in the future, while funds taken from the endowment will provide an immediate budget impact today.

Case Study

The example below highlights the trade-off in a $100M endowment of raising a 3-year trailing average spend of 4% to 4.5%. The numbered commentary corresponds to the charts that follow.

1. There is an immediate impact on spend to support the budget, which continues for several years.
2. However, all else being equal, this larger spend reduces the size of the endowment.
3. At a certain point, the spend to the institution is now less at 4.5% than 4%, because the endowment size has been reduced over time.

Factors to Consider

When having these discussions, pairing quantitative analysis with collaborative discussion is important. Here are some key factors worth considering:

• Value of the change: Consider the net present value of the marginal budget support
  • For rate increases, determine whether they support long-term value or address one-time, short-term uses
• Duration of spend rate change: Spend rate changes are not permanent and can be changed again in the future
• Spend methodology: How the institution calculates the spend will impact the trade-offs
• Endowment portfolio construction: Consider target returns, long-term expected real returns excluding spend, and risk level
• Inflation expectations: These impact target returns as well as budget and potentially spend methodology
• Institutional factors: Evaluate current and future funding requirements, and the organization’s broader financial situation (revenue sources and stability, debt, etc.)
• Industry trends/perspective: Peer comparisons on both endowment and institutional factors exist to help contextualize each institution’s circumstances

Potential Impacts to the Endowment from Changing the Rate

Changing the rate can also have implications for the endowment, either providing more flexibility to grow or creating challenges to maintain principal. Most institutions maintain their investment strategy when lowering the rate, hoping to compound assets faster and build the endowment’s asset base for the future. The challenge arises when an institution increases its spend rate: can it adjust its risk or asset allocation enough to maintain the inflation-adjusted corpus?

Conclusion

Changing an institution’s spend rate requires careful consideration, input from a multitude of stakeholders, and thorough analysis of both qualitative and quantitative trade-offs. It is not a decision to be made without robust dialogue with key constituents. If your institution is considering a change to your spend rate, TIFF is ready to help navigate the various considerations and determine the right path for your institution.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. There is no guarantee that any particular asset allocation or mix of strategies will meet your investment objectives.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Summary

• One Big Beautiful Bill (“OBBB”) was signed into legislation on July 4, 2025, by President Trump.
• OBBB contains various components that impact nonprofits and philanthropy at large. While the impact varies by type of institution, OBBB might have the unintended consequence of leaving nonprofits with a greater need to fulfill their mission in support of the community and smaller budgets to do so.

1. 1. Tax Impact: Broadly neutral, except for large, private higher education institutions with large endowments, who will receive a tax increase. No other tax increases were included.
   2. Charitable Giving Impact: Negative. Positive changes to encourage giving for small donors such as an increase in nonitemized giving are offset by large donor changes (an increase in corporate deduction floor and reduction in itemized giving for top individual taxpayers via 0.5% floor).
   3. Philanthropic Need: Increasing. For higher education, OBBB broadly looks to reduce federal loans and grants, increasing the need for financial aid. For other nonprofits, OBBB has broadly decreased entitlements and services, potentially creating a larger need for nonprofit services and aid.

• For over 3 decades, TIFF has helped nonprofits align their investment portfolio with institutional priorities. During these times of change, TIFF serves as a resource to clients to ensure their portfolio continues to serve the institution in the best way possible.

Overview

One Big Beautiful Bill is now One Big Beautiful Law. President Trump officially signed OBBB on July 4, 2025. Within the almost 900 pages of OBBB, there are a number of changes that directly and indirectly impact nonprofits – particularly through tax changes, charitable giving rules, and reductions in public services.

While the impacts will vary by institution, OBBB is likely to increase the demand for nonprofit services at a time when many organizations are facing tighter budgets.

TIFF has summarized major elements of OBBB and how it broadly impacts nonprofits and philanthropy:

1. Tax Impact

Endowment Tax

OBBB increases the excise tax on private higher education institutions with more than 3,000 students and large endowments per student. All else being equal, this tax would reduce the available budgets to impacted institutions at a particularly challenging time, as other revenue sources are also being cut.

Additional changes within the new legislation are:1

• Expansion of net investment income definition to include:2
  • Interest on institutional student loans
  • Royalties on federally-funded intellectual property (IP)

Considerations from prior drafts that were not ultimately included:

• Any changes to definition of “students” for tier determination (e.g., exclusion of international students)
• Exception for religious institutions

Implications:

• For some higher ed institutions, there is a fear this tax will disproportionately impact typically unrestricted budget categories, including financial aid, faculty and university maintenance and infrastructure.3, 4
• Joint Committee on Taxation estimates these changes will increase taxes by an additional $761 million over the next 10 years5 ($380 million was raised in 20236).

Other Taxes

Fortunately, the final OBBB did not contain any tax increases on nonprofit investment pools outside of the endowment tax increase.

2. Charitable Giving Impact

OBBB makes four major changes to charitable donation / giving rules for both individuals (three changes) and corporate entities (one change). While these changes broadly represent a reshuffling of incentives with an overall negative estimated impact, the law negatively impacts large donors—wealthy individuals and corporations—and helps smaller, everyday donors.

A new universal deduction is reinstated for small donors (previously unavailable post 2021). However, individual and corporate itemized givers must now clear a threshold before deductions apply: 0.5% of adjusted gross income (AGI) for individuals and 1% of taxable income for corporations. In addition, high-income filers face a cap on the deduction benefit at 35% the gift’s value.

7  8  9  10  11  12

Implications:

It will be important for nonprofits to understand their donor base to see how they might be impacted and how they will need to shift their fundraising strategies going forward to align with these new tax rules. Large donors have become important to many nonprofit organization budgets, so these shifts could be detrimental.

3. Philanthropic Need

While OBBB added some services and eliminated others, it has generally led to a reduction in services across various sectors of the U.S. economy and social system. Below are some of the highest profile services that were reduced which may ultimately lead to an increase in services and aid provided by nonprofit organizations:

• Medicaid: Single largest OBBB spending cut ($1 trillion over 10 years) and estimated increase of uninsured people by 11.8 million. OBBB impacts Medicaid by tightening eligibility for ACA-expansion adults—requiring 80 hours of verified work a month and eliminating Biden’s “simplified enrollment”. On the provider side, it bars new or higher hospital/MCO provider taxes in expansion states and trims existing ones, and caps state-directed supplemental payments. Finally, states must re-check adults’ eligibility twice a year instead of annually, with additional documentation for income and residency.13
  • Impact: Healthcare
• SNAP: OBBB cuts an estimated $186 billion over 10 years and CBO estimates 3 million to drop out or lose benefits from the program. The changes reduce funding, shifts a portion of its cost to states (up to 15%), and changes work and documentation requirements.14
  • Impact: Food security
• Student Loans: OBBB had a major overhaul for government student loan, with loan options decreasing, in particular for graduate students, and repayment plans becoming less generous. OBBB cuts back how much students can borrow from the government, with the sharpest reductions for graduate and professional programs and eliminates popular options entirely (Grad PLUS). Only two repayment plans remain, monthly bills will generally be higher, and forgiveness now comes after 30 years instead of 20–25. Finally, borrowers can pause payments for just 12 months total over the life of the loan.
  • Impact: Financial aid

There are some notable positive service additions, including:

• Child and Family Policies: A number of changes to help families with children, including permanent Child Tax Credit under TCJA, permanent increases to Child and Dependent Care Tax Credit to 50%, increase of dependent care FSA and “Trump Accounts” for sub 8-year-olds savings.15
• Tax Relief for Seniors: $6,000 standard deduction for individuals over 65 for the next 3 years. Phaseout for those earning over $75,000 (or $150,000 joint filers).16

Implications:

• TIFF has identified several key areas within OBBB where service reductions could significantly affect community needs. These cuts may leave your nonprofit constituents with fewer resources, potentially increasing their reliance on your organization’s services and support.

Preparing for Change: Nonprofit Action Steps

What steps can nonprofits take to effectively respond to the anticipated changes resulting from OBBB?

Understand impact to budget:

Endowment Tax: If you are a higher education institution, understand your tier and tax implication to your budget. It will also be important to understand tier management if you are near a breakpoint.

Change in Giving: For all institutions, evaluate donor profiles to anticipate shifts in giving patterns. Your fundraising staff may need to alter its strategy to help donors maximize their giving.

Understanding impact to your institution’s focus areas:

Look at how the OBBB impacts your service areas and how the need for philanthropy may change. It may increase or evolve from where it is today. This may require a refresh on grant making strategy or broader budget approach.

How Can TIFF Help

For more than three decades, TIFF has been helping institutions fund their missions through their investment portfolios. We collaborate closely with organizational leadership and Investment Committees to ensure that portfolio construction is thoughtfully aligned with institutional priorities. In times of change, TIFF has helped clients understand if changing institutional priorities impacts their Strategy Asset Allocation. We also have helped our clients work through scenarios planning on how to best utilize the investment pool’s annual withdrawal (if other than 5% for private foundations) and how changes in gifts may impact withdrawal size in the future. We look forward to helping our clients navigate these changes.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Overview

• The Senate Committee on Finance released its draft of the One Big Beautiful Bill (OB3), which reduces or eliminates changes to the taxation of endowments and private foundations compared to the House-approved bill.1
  • Reduces the endowment tax tiers, dropping the top rate from 21% to 8%.
  • Removes any proposed increase or modification to the private foundation tax.
• Reminder: Bills are revised frequently before becoming legislation, and OB3 is likely to undergo further revisions.
• Legislative Process: This draft is the beginning of the negotiations within the Senate, which still needs to vote on the revised bill. In the Senate, Republicans have a 53-47 majority. If approved, the bill will return to the House for another vote. The final step is obtaining President Trump’s signature.
• Timing: President Trump has requested Congress to finish OB3 before July 4^th.

Endowment Tax Tiers Reduced

The Senate Finance Committee has reduced the tax rates within the tiers, dropping the top rate of 21% to 8%. The current rate is 1.4%.

Both the Senate and the House bills exclude2:

• Religious institutions (e.g., Notre Dame University) from taxation.
• International students in the tax tier calculation (e.g., assets per eligible student). Without the inclusion of international students, higher education institutions with larger international student populations will be more likely to be pushed into a higher tax tier.

The investment impact at Senate tax tier levels is well below those of the House tax tiers, which will influence how much impacted endowments adjust their investment strategies and budgets.

No Private Foundation Tax Changes; Remain at 1.39%

Unlike the House version, the Senate Finance Committee has removed any proposed changes to private foundation tax.3 As a result, all private foundations would remain at the 1.39% excise tax on net investment income.

While the private foundation tax has received less media attention than the endowment tax, it is actually more financially meaningful ($15.9B vs. $6.7B in 10-year revenue4) as it is applied to all private foundations vs. the endowment tax which applies to a select number of private universities. This would be a benefit to private foundations to maintain their current tax rate, allowing these nonprofits to focus on funding their philanthropic missions.

Summary

These changes are a meaningful departure from the House-approved OB3 and are beneficial to both endowments and private foundations. For impacted endowments, the tax burden at the highest proposed rate of 8% is more manageable and under the Senate’s new language, private foundations will be subject to no change to their current tax obligations.

TIFF remains committed to closely monitoring these developments and advising clients accordingly.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.