New Cases and Developments

NACUA's Legal Resources staff summarizes current higher education cases and developments and provides the full text of selected cases to members. New cases and developments are archived here for up to 12 months.  Cases provided by Fastcase, Inc.

Selected Topics: Tax
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Unrelated Business Income; Tax-exempt Funding; Endowments & Gifts; Tax; Authorizations & Regulations

NACUBO Summary on Key Provisions in the Senate and House Tax Bills (Jan. 5, 2018)

Summary by the National Association of College and University Business Officers (NACUBO) analyzing provisions impacting higher education in the House version and Senate version of The Tax Cuts and Jobs Act (Tax Reform Bill). Such provisions include education incentives, the endowment excise tax, charitable giving, other exempt organizations provisions/UBIT, bond reforms, the deductibility of state and local taxes, and the Johnson Amendment. Text appearing in red compares changes in the Senate version to the House version, while highlighted portions show final changes to the Tax Reform Bill by the conference agreement. 

Endowments & Gifts; Tax; Government Relations; Authorizations & Regulations

Letter from Bipartisan Group of Lawmakers Urging Congress to Oppose a Proposed Tax on Private College and University Endowments (Dec. 13, 2017)

Letter from a group of nearly thirty bipartisan lawmakers expressing strong opposition to a provision under consideration by Congress to tax private college and university endowments. In their view, the proposal wrongly equates colleges and universities to private foundations, opens a pathway for future increase and expansion of the endowment tax to public colleges and universities, and jeopardizes need-based financial aid for college students, while generating less than two-tenths of one percent of the revenue needed for the tax bill. The letter closes by urging Congress to remove the tax on private college and university endowments, or alternatively, to provide these institutions with a credit for the financial aid they grant. 


University of Utah v. United States (D. Utah September 20, 2017)

Memorandum Decision and Order denying Plaintiff’s Motion for Partial Summary Judgment and granting Defendant’s Motion for Summary Judgment. Plaintiff sued the United States for a refund of Federal Income Contributions Act (FICA) taxes, arguing that medical residents were exempt from FICA taxation.  The Internal Revenue Code allows states to opt into FICA taxation through §218 Agreements, and also allows states to exclude certain classifications of statutorily-defined employees from FICA taxation through these agreements. In 1999, the University of Utah modified its §218 Agreement to exclude “service performed in the employ of a school, college, or university if such service is performed by a student who is enrolled and regularly attends classes . . . . “ The University interpreted this modification to exclude medical residents.  Relying in-part on the Social Security Administration’s (SSA) long-standing position of excluding medical residents from the statutory definition of “students,” the court concluded that medical residents were not students under the University’s §218 Agreement. 


Comments to the Senate Finance Committee on Tax Reform and Higher Education (July 17, 2017)

Comments submitted by the American Council on Education (ACE) on behalf of itself and nineteen other higher education associations to the Senate Finance Committee on federal tax provisions affecting institutions of higher education. The comments describe how existing tax provisions help lower- and middle-income students pay for a higher education, encourage charitable giving to institutions, and make tax exempt financing available to institutions. They also explain how these provisions may be improved through tax reform measures. 

Tax; Employment Separation, RIFs, ERIPs & Retrenchment; Faculty & Staff

Unemployment Insurance Program Letter on the Interpretation of “Contract” and “Reasonable Assurance” (Dec. 22, 2016)

Letter issued by the U.S. Department of Labor on the interpretation of the terms “contract” and “reasonable assurance” in the Federal Unemployment Tax Act (FUTA). This letter outlines the criteria that state agencies should use when determining whether an individual has a contract or reasonable assurance to work at an educational institution in order to determine eligibility for unemployment compensation during periods when school is not in session. This matter is especially relevant to adjunct faculty members, who often receive contracts or offers to teach on a contingent basis.


Update: Announcement on Limited Penalty Relief for Filers of Form 1098-T

Announcement 2016-17 by the Internal Revenue Service (IRS) indicating that the IRS will not impose penalties on institutions for reporting the aggregate amount billed for qualified tuition and related expenses (Box 2) on 2016 Form 1098-T instead of the aggregate amount of payments received (Box 1). Section 212 of the Protecting Americans from Tax Hikes Act (PATH Act) of 2015 eliminated the option for eligible educational institutions to report aggregate qualified tuition and related expenses billed for the calendar year. The announcement states that the penalties that would normally apply for failure to file correct information will not apply to institutions that reported the aggregate amount billed rather than the aggregate amount of payments received if it is shown that the failure is due to reasonable cause as opposed to willful neglect.

Letter from Higher Education Associations Urging the Internal Revenue Service to Delay Changes in Reporting Requirements

Letter sent to the Internal Revenue Service (IRS) by fifteen higher education associations urging it to delay the implementation of changes to reporting requirements for IRS Form 1098-T. The changes are designed to allow institutions to report how much students paid rather than how much they were billed. The letter states that the vast majority of institutions represented by the signing associations do not have the ability to modify their software systems to meet the new reporting requirements within the time period specified. While the associations express strong support for the IRS's efforts to make it easier for students to claim education benefits and to ensure reporting accuracy, they contend that a rush to implement new reporting requirements "will be counterproductive to achieving these shared goals." 

Letter to the Internal Revenue Service on Changes to Form 1098-T Reporting

Letter from the National Association of College and University Business Officers (NACUBO) to the Internal Revenue Service (IRS) regarding changes to IRS Form 1098-T reporting. On December 18, 2015, the Consolidated Appropriations Act amended the Internal Code to remove the option for colleges and universities to report amounts billed for qualified tuition and expenses. Due to the complexities involved in transitioning to the new methodology, NACUBO is requesting a delay in the implementation of changes to the reporting requirements. NACUBO also urges the IRS to develop guidance for filing institutions that accommodates the realities of tax year reporting of information that is tied to academic periods, and to publish web-based resources to assist taxpayers with the transition.