Billions of dollars in untaxed, offshore investments by college endowments could be subject to taxation under a proposal being considered by the leaders of the U.S. Senate Finance Committee. The proposed change, which targets hedge funds, a popular investing strategy for many colleges, would affect the largest college endowments, including those at Duke, Harvard, and Yale Universities. Small college endowments, also heavily reliant on hedge funds, could see new taxes on one of their most lucrative sources of income. Many colleges that rely on the high-return, low-risk investment vehicles avoid federal taxes of up to 39 percent by investing in hedge funds that are incorporated in Bermuda or the Cayman Islands, where corporate taxes are nearly nonexistent. The Internal Revenue Service has upheld the practice of investing in such offshore funds to avoid taxation, and legal experts say it is widespread in higher education. However, some lawmakers, including Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, want to put an end to it. Endowment managers say that legislators may take aim at the nation's largest college endowments because they know there will be little popular opposition to the move.