The excise tax would apply to all tax-exempt organizations where an executive is compensated at $1 million or more — including university presidents, charities and nonprofit medical systems. Though it would hit endowments especially hard, where the need to achieve superior investment returns and recruit Wall Street's best talent to handle the billions in endowment assets has led to multi-million dollar compensation that resemble financial services industry pay packages. Charities, by and large, do not pay executives over $1 million, according to research from Charity Navigator, though there are exceptions and it would be difficult for a charity to explain having to use donations for a 20 percent excise tax on executive compensation.
While several university presidents at both public and private schools make more than $1 million, there are even more investment managers at university endowments being compensated at that level of higher.
Charles Skorina, who recruits investment talent for endowments at his firm Charles Skorina & Co., said based on his analysis of 2014 IRS filings, there are 35 university endowments making more than $1 million, and at some of these endowments, multiple members of management teams are also paid in excess of $1 million. At some top schools there may be between five to 10 managers paid more than $1 million. As an example, based on tax filings archived by ProPublica, Princeton University paid five members of the Princo investment management company more than $1 million.
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Harvard Management Company's CEO, N. P. Narvekar — who was recruited away from Columbia University, where he made more than $3 million — is being paid close to $6 million a year now.
While NABUCO, the trade group representing college and university business officers, is making the case that these tax reforms will hit students and employees of higher education, Skorina said it is going to be a tough fight. "Good luck to the lobbyists," he said. "I think this caught them [the schools] by surprise."
Skorina at Charles Skorina & Co. said that, in his experience, defending university endowments is "not a popular position to take and that is why I am worried."
"I am the lone guy while arrows come at me," he said. "Salaries are too high and endowments are too big: End of story. That's what people say. But if you tax education salaries and endowment earnings you really are hurting schools."