The proposed bill, Substitute House Bill No. 7147, authorizes municipalities to impose a tax on the net investment income of certain private nonprofit institutions of higher education, specifically those with assets exceeding $300 million. This tax can only be levied if more than 50% of the institution's students attend classes at the main campus located within the municipality. The tax rate is capped at 2% of the institution's net investment income for each taxable year, and the bill outlines that the tax will be administered by the local tax collector, with necessary forms prescribed by the Commissioner of Revenue Services. The effective date for this tax is set for October 1, 2025, and it will apply to taxable years commencing on or after January 1, 2026.

The bill also clarifies that it does not apply to certain institutions with special act charters that exempt them from taxation, such as Trinity College, Wesleyan University, and Yale College. The legislative body of the municipality will determine the payment structure of the tax, whether in a single installment or two semiannual installments, and the due dates for these payments. The bill aims to provide municipalities with a potential revenue source while ensuring that the administration of the tax is managed locally.