Chapter 9: Special Issues & Problems

9.1 EXEMPTION ISSUES

(a) Obtaining and Maintaining Tax-Exempt Status
(b) Private Inurement

(i) Determining Whether an Individual is an Insider
(ii) Evaluating Reasonableness of Compensation
(iii) Bonuses
(iv) Non-Fair Market Value Transactions
(v) Partnerships and Joint Ventures
(vi) Analogy to Physician Recruitment and Payment Guidelines, Including Gainsharing Arrangements

(i) Exemption for State Colleges and Universities
(ii) Taxes Imposed
(iii) Date of Occurrence
(iv) Written Contract Exception
(v) Organizations Subject to the Rules
(vi) Disqualified Persons
(vii) Excess Benefit Transactions
(viii) Rebuttable Presumption
(ix) Correction of the Excess Benefit Transaction
(x) Effect on Tax-Exempt Status
(xi) IRS Audits of Intermediate Sanctions Issues
(xii) IRS Informal Explanation of Regulations

(e) Legislative Activities
(f) Political Activities
(g) Partnership Activities

(i) Impact on Tax-Exempt Status
(ii) Ancillary Joint Ventures
(iii) Recharacterization of Legal Relationships as Partnerships

(h) Governance Issues
(i) Making Grants or Providing Services to Nonexempt Entities

9.2 RELATED ENTITIES

(a) Why Establish a Subsidiary Organization?
(b) What Is a Related or Affiliated Entity?
(c) Treated as Separate Entity
(d) Operational Considerations, Including Liquidations of Subsidiaries
(e) Fraternity Foundations
(f) Supporting Organizations

9.3 SECTION 403(B) AND OTHER RETIREMENT PLANS

(a) Section 403(b)—Legislative Background
(b) Overview of Section 403(b)
(c) Eligibility
(d) Funding Arrangements
(e) Custodial Accounts
(f) Salary Reduction Contributions
(g) Contribution Limits

(i) The Annual Limitation
(ii) The Section 415 Limitation

(h) Nondiscrimination
(i) Minimum Distribution Requirements
(j) Transfers and Rollovers
(k) Tax-Sheltered Annuity Voluntary Correction Program
(l) Other Retirement Plan Vehicles for Employees of Colleges and Universities

9.4 TAX-EXEMPT BONDS

(a) Overview
(b) Qualified 501(c)(3) Bonds
(c) Private Business Use
(d) Research Agreements
(e) Management and Service Contracts
(f) Naming, Corporate Sponsorship and Other Rights
(g) Unrelated and Nonexempt Use
(h) Arbitrage and Administrative Costs
(i) Closing Agreement Programs
(j) Post-issuance Recordkeeping and Record Retention Practices

9.5 CONDUCTING ACTIVITIES OVERSEAS

(a) Whether the U.S. Institution Is Subject to Tax in the Foreign Country
(b) Establishing a Legal Structure to Conduct Foreign Operations
(c) Taxation of U.S. Citizen and Foreign National Employees

(i) Tax Consequences of Operating Through a Branch
(ii) Tax Consequences of Operating Through a Local Legal Entity

9.6 FORM 990 FILING ISSUES

9.7 STATE COLLEGES AND UNIVERSITIES

(a) Introduction
(b) Exemption Issues

(i) Section 115
(ii) Section 501(c)(3)

(i) FICA Taxes
(ii) FUTA Taxes

(e) State College and University Systems—Who Is the Taxpayer?

9.8 EDUCATION TAX INCENTIVES

(a) American Opportunity and Lifetime Learning Tax Credits
(b) Coverdale Education Savings Accounts
(c) Deduction for Student Loan Interest
(d) Forgiveness of Certain Student Loans
(e) Section 529 State Tuition Programs

9.9 PROHIBITED TAX SHELTER TRANSACTIONS

9.10 ALLOWING CHARITABLE REMAINDER TRUSTS TO PARTICIPATE IN ENDOWMENT INVESTMENT RETURN

9.11 TAX TREATMENT OF PAYMENTS MADE TO CLINICAL RESEARCH SUBJECTS

9.12 OBTAINING SECTION 501(C)(3) STATUS FOR LIMITED LIABILITY COMPANIES

9.13 THE FOREIGN FINANCIAL ACCOUNTS REPORTING REQUIREMENT (FBARS)

9.14 PERSONAL SERVICE CORPORATIONS

9.15 AUTOMATIC REVOCATIONS OF EXEMPT STATUS

9.16 RESEARCHER REFUSES INCOME AND DIRECTS TRANSFER TO OWN RESEARCH DEPARTMENT OR ACCOUNT

(a) Refusing Compensation for the Performance of Services
(b) Refusing Royalty Payments

(i) Declining One Royalty Payment
(ii) Declining All Royalty Payments

9.17 IRS COLLEGE AND UNIVERSITY COMPLIANCE PROJECT

(a) Unrelated Business Income Tax Findings
(b) Executive Compensation Findings

9.18 ABATEMENT OF PENALTIES FOR MISSING TAXPAYER IDENTIFICATION NUMBERS ON INFORMATION RETURNS

9.19 UNIVERSITIES AND 4-H CLUBS

9.20 PROFESSIONAL EMPLOYER ORGANIZATIONS

9.21 EXCISE TAX ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES

9.22 EXCISE TAX ON EXECUTIVE COMPENSATION

9.23 NEW TAX PROVISIONS ENACTED AND TRIGGERED AS PART OF COVID-19-RELATED LEGISLATION

(a) CARES Act Tax Provisions

(i) Employee Retention Credit
(ii) Delay of Payment of Employer Payroll Tax Payments
(iii) Modification of Net Operating Loss Rules

(b) FFCRA Tax Provisions

(i) Emergency Family and Medical Leave Expansion Act
(ii) Emergency Paid Sick Leave Act
(iii) Employer Tax Credits for Paid Sick and Family and Medical Leave

9.24 IMPACT OF INFLATION REDUCTION ACT OF 2022 ON COLLEGES AND UNIVERSITIES

(a) Numerous Tax Credit Opportunities
(b) Extension of Section 179D Allocation to Nearly all Colleges and Universities
(c) Corporate Minimum Tax on Book Income

9.25 NAME, IMAGE, AND LIKENESS (NIL)

(a) NIL Collectives — Exemption Issues
(b) Charitable Contribution Deduction Issues
(c) NIL Payments to Student-Athletes