TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, January 31, 2019

Tax Law's Effects On Colleges Unfolding

Inside Higher Ed, Tax Law's Effects on Colleges Unfolding:

When President Trump at the end of 2017 signed a Republican-backed tax-reform package into law that included significant changes for colleges and universities, higher ed leaders were left waiting for answers.

They wondered about rules for calculating a new tax on endowments. They sought guidance regarding a tax on parking and transportation benefits for employees. Questions circulated about a new tax on highly compensated nonprofit employees that had drawn criticism while the tax law was still being drafted.

And leaders also wondered about the tax law’s effects on human behavior. For instance, how would an increase in the standard deduction affect donor behavior? Would alumni newly covered by the larger standard deduction be less likely to give to colleges and universities because they wouldn’t be itemizing their taxes?

About a year later, some answers have become clearer, while others remain clear as mud -- and still others can be addressed by mucking around with pages of guidance from the Internal Revenue Service.

The Treasury Department and IRS have been rolling out interim guidance giving colleges an idea of how to handle technical issues like how to group separate lines of business subject to a new unrelated business income tax or how to handle parking and transportation benefits subject to taxation.

Broadly, experts say the guidance is in many cases helpful, even though it hasn't addressed every question raised. So it is possible today to take stock of key developments on tax reform issues that captured attention.

The guidance issued so far could also prompt some interesting behavior and unexpected effects. For instance, don’t be surprised if some colleges pull up signs designating parking spots for employees or redraw the lines in lots in order to dodge the parking tax.

In some cases, though, college leaders still have little choice but to wait for more information.

“It’s still early days,” said David Shapiro, a partner and tax chair at the law firm Saul Ewing Arnstein & Lehr in Philadelphia. “We won’t really see how it shakes out until we’re through at least one fiscal year.”

Below are brief discussions about some of the major tax reform issues and how they have changed over the last year.

https://taxprof.typepad.com/taxprof_blog/2019/01/tax-laws-effects-on-colleges-unfolding.html

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