Harvard Crimson, With Endowment Tax on the Horizon, Harvard Still Doesn’t Know How to File Its Returns:
Harvard is still awaiting federal guidance on how to file taxes under a law passed in Dec. 2017 that levied an “unprecedented” excise tax on some universities’ endowment returns, according to University spokesperson Melodie L. Jackson.
Harvard’s endowment, the largest University endowment in the world at $37.1 billion, would qualify for taxation under the the new tax codes Republican lawmakers passed last year. The University's endowment was previously exempt from taxes because the school is a non-profit entity.
Under the new law, Harvard would have paid an estimated $43 million on its endowment returns in 2017 had those been taxed, according to University administrators.
The new tax takes effect only for fiscal years starting after Dec. 31, 2017, and Harvard’s 2018 fiscal year began in July 2017. Endowment returns from fiscal year 2019 will be the first taxed under the new code, so Harvard won’t shell out money to the federal government until next year.
The new tax leaves much to be interpreted, though, and Jackson said the U.S. Treasury Department has still not provided guidance on how schools should file those taxes when they come due. ...
Howard E. Abrams, a visiting professor at the Law School, said it’s common, especially after such a large tax overhaul, to see delays in guidance on each provision. An absence of official guidance does not, however, exempt taxpayers from filing.
“Even if there’s no guidance, the statute is enacted and taxpayers have to comply even if the Treasury doesn’t tell them how to handle all the details,” Abrams said.
Abrams said that without instructions, it might not be clear to universities what exactly is being taxed and how schools should consider each of their entities when filing.