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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Endowments & Gifts; Freedom of Information & Public Record Laws; Tax; Practice of Higher Education Law; Foundations & Affiliated Entities; Governance

Transparent GMU v. George Mason Univ., et al. (Va. Cir. July 5, 2018)

Opinion Letter concluding that the George Mason University Foundation, Inc. is not a public body subject to the Virginia Freedom of Information Act (VFOIA). In considering this matter of first impression, the court looked to the plain language of VFOIA and limited its analysis to whether the Foundation was “support[ed] wholly or principally by public funds” and “perform[ed] delegated functions of the public body or… advise[d] the public body.” The court determined that neither factor rendered the Foundation to be a public body subject to VFOIA. Specifically, the court found under controlling state law and advisory board guidance that 1) private individual donations held by the Foundation for the benefit of GMU did not qualify as public funds, 2) the corporate structure of the Foundation separated it as an independent entity from GMU, and 3) the Foundation’s fundraising service did not qualify as a public function. However, the court held that the public had a right to inspect records under VFOIA where the GMU Gift Acceptance Committee accepts funds from the Foundation with restrictions or conditions.

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

Notice of Guidance on the Calculation of Net Investment Income for Purposes of the Section 4968 Excise Tax Applicable to Certain Private Colleges and Universities by the Internal Revenue Service (June 11, 2018)

Notice by the Internal Revenue Service (IRS) of Guidance on Determining Gain or Loss on Disposition of Property for Section 4940(c) of the Tax Cuts and Jobs Act of 2017. The notice states that “in the case of property held by an applicable educational institution on December 31, 2017, and continuously thereafter to the date of its disposition, basis of such property for determining gain shall be deemed to be not less than the fair market value of such property on December 31, 2017[.]” The notice further provides that taxpayers may rely on Section 3 of the notice, entitled Basis for Determining Gain or Loss on Disposition of Property, until further guidance is issued.

Tax; Government Relations; Authorizations & Regulations

National Association of College and University Business Officers Submits Recommendations for Implementation of Tax Reform Measures (April 16, 2018)

Letter by the National Association of College and University Business Officers (NACUBO) to various officials in the Internal Revenue Service (IRS) on the implementation of several provisions of the Tax Cuts and Jobs Act (TCJA). The letter specifically highlights recommendations to the implementation of Section 512(a)(7), Increase to Unrelated Business Taxable Income (UBTI) by Certain Disallowed Fringe Benefits; Section 512(a)(6), Requirements to Compute UBTI Separately for each Trade or Business; and Section 4960, Excise Tax on Executive Compensation. Among its recommendations, NACUBO urges the IRS not to consider employee pre-tax withholdings for transit or parking as part of UBTI, to treat all investment activities as a “single basket” in computing UBTI under 512(a)(6), and to delay the effective date of 512(a)(7) by one year so that institutions may prepare for its effects.  Additionally, NACUBO recommends a number of limitations on the levying of an excise tax on highly compensated executives of tax-exempt employers, such as adopting a five-year limit for identifying the highest-compensated employees and creating an exclusion for employees with a one-time vesting event.

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.