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Table of Contents
Preface xiii
Acknowledgments xxi
About the Author xxiii
1 Awareness 1
Defining Tax Exempt 1
The Six Steps of Tax Compliance 2
The Five Things You Need to Do First 4
Task 1: Look at Management 4
Task 2: Assess the Current State of Your Tax Compliance Program 5
Task 3: Develop a Team Approach 7
Getting a Hold on the Process 7
The IRS Is Paying Attention 9
Why You Should Care 12
Task 4: Assess Your Risk 13
Task 5: Review IRS Communications 17
Open Them! 17
Statistics on Tax Staff 19
The Different Kinds of Tax 20
Employment Tax: The First Tax to Know about Because It’s the Largest One for Your University 20
Unrelated Business Income Tax (UBIT): Not a Distant Cousin Tax but a Close Relative to You Tax 21
Sales Tax: It Is Close to Home 21
Excise, or Exercise-Your-Checkbook Tax 22
Borrowed Money Can Mean Tax, Too 22
Overseas (International) Tax 22
In Summary: Build Your Village 24
2 Identification 25
Steps in Identifying Your Needs 26
Independent Contractors 27
Unrelated Business Income Tax (And What Does Macaroni Have to Do With It?) 30
UBIT Applies to All and Can Be Necessary 31
It’s Okay to Have Unrelated Business Income 32
The IRS Cares about UBIT 32
The Three Tests for UBIT 34
The Trade, or Business, Test 35
Regularly Carried on Test 36
The Not Substantially Related Test 37
Advertising Is Always Subject to UBIT 40
Things You Generally Don’t Have to Worry About: Common Exceptions to UBIT 40
Convenience Exception 41
Go Ahead, Ask Around: The UBIT Questionnaire on Campus 41
Allowable Deductions from UBIT 43
Allocating Expenses: The IRS Hasn’t Clarified 43
Unrelated Debt-Financed Income: Got a Bonded Building? 45
Research as UBIT 45
Foreign Students: The IRS Calls Them Nonresident Aliens 46
Sales Tax 48
Identifying Sales Tax Savings in Other States 50
Employment Tax and Fringe Benefits 50
Excise Tax 52
Overseas and International Tax 53
In Summary 54
3 Compliance 55
Policies 56
Enforcing Policies 58
Give Them the Right Tools for the Job 60
Centralize the Tax Responsibilities 63
Keep Tax at the Forefront of Your Mind 64
Fringe Benefits 67
No Additional Cost Services 68
Qualified Employee Discounts 69
Working Condition Fringes 69
De Minimis Fringes 70
Qualified Transportation Fringes 71
Examples of Common Fringe Benefits 72
University-Owned Automobiles 72
University-Owned Airplanes 73
Professional Dues, Publications, and Meetings 73
Travel and Entertainment Expense Reimbursements 73
Supper Money and Taxi Fares 74
Gifts and Awards 74
Athletic Facilities 74
Spousal Travel 75
Free or Discounted Theater or Athletic Tickets 75
Club Memberships 76
Domestic Partners 77
Leave Donation or Sharing Programs 77
Cell Phones 77
In Summary 78
4 Reporting 81
Questions About Reporting Tax Obligations, Answered 81
When are the Tax Deposits and Tax Forms Due? 82
Who Is Preparing the Tax Forms? 82
How Do You Know They Are Done? 83
How Do You Learn about Lapses of Reporting? 83
When Reporting Begins 84
Payments to Human Research Subjects 85
Getting People Used to Thinking About Taxes 86
The Tax Calendar 87
In Summary 89
5 Monitoring 91
Policies And Procedures 92
Consistency and Ease of Use 93
Provide Multiple Paths to Information 94
Simulated Audit 98
Your Tax Manager Position 99
In Summary 100
6 Tax Nirvana 103
The Land of “ahh . . . ” 103
You Can Finally Rest 104
Passing the Baton to You 105
The Tax Pyramid Compliance Program Steps, Simplified 106
Awareness Simplified 107
Identification Simplified 107
Compliance Simplified 108
Monitoring Simplified 108
Reporting Simplified 108
Tax Nirvana Simplified 108
In Summary 109
7 Your Audit Defense 111
Building An Audit Defense 111
Setting the Tone 112
Types of Audits 114
Before the Audit 115
During the Audit 116
After an Audit 122
You Don’t Have to Go It Alone 125
Hire a Tax Manager 125
Centralize All Tax Reporting Functions to the Extent You Can 125
Monitor and Control Tax Compliance at Your University 126
Getting Your Bearings 126
Concluding Remarks 129
Appendix 131
What a VP Wants from a Tax Manager 131
A Knowledgeable Tax Staff That Understands Laws and Regulations as They Apply to Higher Education 132
A Tax Staff That Understands They Work for the University, Not the IRS 132
A Tax Staff with a Calm Approach 133
A Tax Staff That Solves Problems Creatively 133
A Tax Staff with Personal Detachment 134
A Tax Staff Willing to Work with Others to Achieve Reasonable Results in a Tax Issue 134
A Tax Staff Willing to Accept Risk 135
A Tax Staff That Knows the CEO/CFO Is in Charge 135
A Tax Translator Guide to UBIT Determination 137
UBIT Compliance Checklist 160
Unrelated Business Income 160
Description of Activity 162
General 162
Advertising and Sponsorship 163
Services 164
Products 165
Rental Arrangements 165
Rental of Property 165
Foreign Activities 166
Foreign Accounts 166
Foreign Offices 167
Foreign Grants 167
Foreign Employees 167
Investments in Foreign Entities 168
Other State Activities 168
Commercially Sponsored Research 168
Partnerships and Joint Ventures 169
Activities/Expenditures 169
Political 169
Definition 169
Lobbying 169
Definition 170
University of Central Florida UBIT Questionnaire 172
University of Notre Dame UBIT Questionnaire 175
Index 177
