Domestic Tax Compliance

The University operates as an income tax-exempt entity. However, when revenues are generated from sources that fall outside of the University’s exempt purpose, these amounts are called unrelated business income and are reported on the University's Unrelated Business Income Tax Return (Form 990-T), for the applicable fiscal year.

A three-part test determines whether an activity is UBI. If the activity is (1) a trade or business, (2) not substantially related to the University’s tax-exempt purpose and (3) regularly carried on by the University, it is UBI. All three requirements must be met, so if any of these factors are absent, the revenue stream is not taxable as UBI.

1. Trade or Business
   • An activity is a trade or business if it is carried on for the production of income, sells goods or performs services.
2. Not Substantially Related to tax-exempt Purpose
   • A substantial relationship exists if it has a causal and important relationship to the achievement of the University's exempt purpose. If these requirements are met, the activity is not UBI.
     An activity is not mission-related just because it raises funds that can be spent on mission activities. The IRS has ruled that the nature of the activity is what must be considered to be substantially related to the mission - not how the money will eventually be spent.
3. Regularly Carried On
   • Considerations include both the frequency and continuity with which the activities are conducted, and the manner in which the activities are pursued. Short-term activities, which are sporadic or intermittent, are not activities regularly carried on by the University. However, seasonal activities may be regularly carried on even if they only occur for a short period each year. Therefore, the activity doesn't need to be ongoing throughout the year to be labeled as regularly carried on.

For additional information and potential exclusions, see the slide presentation below or contact the office of Tax Compliance for any inquiries:

• Unrelated Business Income Tax presentation 

Previous filings of Form 990-T can be found here: /990t

Forms 1099-NEC and 1099-MISC

               1099-NEC

Form 1099-NEC is sent to individuals who receive at least $600 for services performed by someone who is not an employee and for payments to attorneys. The non-employee compensation must be reported on Form 1099-NEC and be furnished to the recipient by January 31.

1099-MISC

A Form 1099-MISC is sent to individuals who receive at least $10 in royalties and/or to individuals (non- employees) who received at least $600 in rents, prizes and awards, medical services and other income payments, such as final employee wages paid to a beneficiary. Form 1099-MISC must be furnished to the recipient by January 31.

For 1099 inquiries, contact the office of Tax Compliance: 479-575-4717.

Fringe Benefits

A fringe benefit is a form of pay for the performance of services.  Per IRS regulations, any payment to an employee is considered taxable unless otherwise excluded.

Taxable Fringe Benefits

If a fringe benefit is considered taxable, it is reported to the payroll office for taxing.  Some examples include:

Employee Awards (Employee of the Quarter, etc.)

General Guidelines:

Gifts and awards received by employees are taxable and must be reported as additional earnings if their value exceeds the following thresholds:  

• Cash or gift certificates of any value 
• The IRS considers gift certificates and gift cards to be a cash equivalent even if the property or service acquired with the gift certificate would normally be excludable.
• Gifts or awards of tangible personal property with a value greater than $100 
• Gifts and awards of tangible personal property to employees are “de minimis” when they are awarded infrequently and are not greater than $100. 
• Gifts or awards of tangible personal property greater than $400 for a length of service or retirement award
• These awards may not be made within the employee’s first five years of service or more frequently than every five years. 

Moving Expenses

The Tax Cuts and Jobs Act repealed the employee deduction and income exclusion for moving expenses. Therefore, reimbursement of qualifying moving expenses reimbursed in 2018 and forward are recognized as taxable income for the employee. No longer can qualified relocation expenses be reimbursed tax-free. This applies to both moving expenses that are reimbursed to an employee and moving expenses paid directly to a moving company on the employee's behalf.

Memberships

Memberships to private clubs (country clubs, airline clubs, etc.) are deemed to taxable fringe benefits by the IRS, even if used primarily for business purposes.

For additional questions regarding Taxable Fringe Benefits, contact the office of Tax Compliance: 479-575-4717

 

IRS Form W-9

All University W-9 inquiries must be requested from the office of Tax Compliance.  W-9’s are not to be used for multiple requests unless expressly stated by the office Tax Compliance.

Additional Resources

IRS Section 274 Substantiation Form 

Prize Form 

Fayetteville Policy 408.1 - Guidelines on Taxable Fringe Benefits

Fayetteville Policy 411.1 - Moving Expenses

For any other tax related questions, contact the office of Tax Compliance: 479-575-4717