to 60 percent of adjusted gross income. Donations in exchange for athletic seating rights no longer deductible to the do
Impact of Tax Reform on Higher Education Charitable Giving What Changed Standard deduction almost doubles Estate tax exemption doubles Cash contribution limitation increased from 50 to 60 percent of adjusted gross income
Institutions may see a decline in contributions or a change in their overall cash flow from contributions.
Impact
Donations in exchange for athletic seating rights no longer deductible to the donor
Excise Tax on Executive Compensation Compensation practices need to be reconsidered, including the additional cost of nonqualified deferred compensation plans once vested. Institutions may have a difficult time recruiting and retaining top employees due to possible budget constraints. Severance payments should be evaluated to determine if the additional tax will apply.
What Changed 21 percent excise tax for certain individuals with taxable wages greater than $1M
Impact
Taxable wages include amounts paid by related organizations 21 percent excise tax for highly compensated employees with termination payments greater than three times their base salary (Exception for professional medical services)
Computation of Unrelated Business Income (UBI)
What Changed Net profit computed on an activity basis Net operating losses (NOL) incurred in tax years ending after 12.31.17 have an indefinite carryover (no carryback); NOLs incurred in tax years beginning after 12.31.17 are limited to 80 percent of taxable income New flat 21 percent corporate rate Corporate alternative minimum tax (AMT) repealed and AMT credits refundable from 2018 to 2021
Impact
Identify activities and compute the tax effect without the offset of losses. Be mindful that each K-1 may constitute a separate activity. Institutions with NOLs may have taxable income. Change in tax on income is based on rate differential.
Impact of Tax Reform on Higher Education UBI Includes Certain Fringe Benefits What Changed The amount paid or incurred for nontaxable fringe benefits offered to employees for qualified transportation, qualified parking and on-premises athletic facilities increases UBI
Impact
Institutions will need to evaluate their parking facilities and wellness centers plus fringe benefits in this area. Institutions will need to assess whether to include the benefits in an employee’s taxable wages or include the benefits on Form 990-T.
Excise Tax on Investment Income What Changed Expected to apply to approximately 30 private colleges. May hurt institutions that rely on those earnings for operations and could affect grants and scholarships.
Impact
Private colleges and universities could be subject to a 1.4 percent excise tax on investment income Requirements include at least 500 tuition-paying students; at least 50 percent of their tuitionpaying students are located within the U.S.; aggregated nonrelated use assets have a fair value of at least $500,000 per full-time student
Tax-Exempt Bond Financing
What Changed Income exclusion from gross income for interest on advance refunding bonds was repealed
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Impact
Institutions will need to pay close attention to the timing of redemption for their bond refunds to ensure the refunding is classified as current rather than advanced.
