Legislation now before a U.S. House committee would discourage universities from rewarding endowments to Chinese companies and others from countries considered hostile.
Tax exempt Universities in the United States are morally obligated to divest from such companies, legislation sponsor Rep. Greg Murphy (R-North Carolina) said in a news release the day after he introduced the bill into the House. Murphy introduced the Bill more than a month after his letter to the 15 private universities with the largest endowments didn't do the job.
"These billion-dollar, tax-advantaged university endowments have a moral obligation to divest from companies that are detrimental to the safety and security of the United States," Murphy said in his July 21 news release. "After reviewing the lackluster responses to my June 9th letter, it is clear that my bill is necessary to effect change. The fact is, at least 75% of the schools who responded to my letter have exposure to entities that have been deemed a risk to our nation's security."
That, Murphy said, "is completely unacceptable."
The problem already was on Murphy's mind last spring when he released the discussion draft of his Protecting Endowments from Our Adversaries Act, saying at the time that U.S. endowment dollars funding Chinese companies in the past is well known. The act would seek "to address the pervasiveness of the problem," Murphy said in a news release about the discussion draft.
"Colleges and universities have been warned about the national security implications of funding our adversaries," Murphy said in the news release announcing the discussion draft. "It's time that Congress have an open and honest conversation about the risks these investments carry and take action to address it."
Murphy's letter to the private universities that included Yale, Harvard, Duke and MIT, asked that they get rid of investment portfolios of "entities that are supporting the imprisonment of Uyghur Muslims or aiding the Russian Federation’s horrific invasion of Ukraine."
Buzzfeed reported in 2019 that Princeton, Duke and MIT all invested endowment money in Qiming Venture Partners, a Chinese venture capital firm linked to human rights abuses of China's Uighur Muslim minority community.
Murphy also asked the schools to vet their endowment portfolios for any "adversarial entities" named on U.S. government sanction lists.
Murphy's letter was described in a news release from his office at the time and reported in a news story by Politico.
Murphy sent letters to 15 private universities asking them to divest from “entities that are supporting the imprisonment of Uyghur Muslims or aiding the Russian Federation’s horrific invasion of Ukraine Politico reported. The 15 universities in Murphy's letter have an estimated combined endowment value of $331 billion, according to Politico's news story.
Murphy introduced the act, House Resolution 8447, on July 20. The bill would impose a 50% excise tax on "fair market values of certain investments made by private colleges and universities" that have assets or endowments exceeding $1 billion. The legislation would also tax 100% of the net income of those investments held over a year.
"These investments are in certain foreign persons or entities (e.g., Chinese or Russian companies) that are included on lists maintained by the Department of Commerce and the Federal Communications Commission that identify persons or entities engaged in human rights abuses or that pose a threat to U.S. national security," H.R. 8447's summary says.
Murphy said in Fox News' coverage of H.R. 8447 that schools would argue their investments are not illegal but that "Harvard and several schools" have been known to divest from companies "for a variety of reasons, including on the basis of Environmental Social Governance (ESG) causes."
"Unfortunately, it is clear that we must force their hand to take the same approach for compromising Chinese entities that are a known risk to U.S. national security," Murphy said in the Fox News story.
H.R. 8447 was referred to the House Committee on Ways and Means the same day it was introduced. No further action has been taken since the bill was introduced but it has picked up five co-sponsors, Rep. Brad Wenstrup (R-Ohio), Rep. Adrian Smith (R-Nebraska), Rep. Lloyd Smucker (R-Pennsylvania), Rep. Darin LaHood (R-Illinois) and Rep. Neal Dunn (R-Florida).
