Tax Extenders Affecting Higher Education Institutions: A Closer Look

On December 18, 2015, President Obama signed Tax “Extenders” legislation into law.  Many of the provisions were made permanent.  The bill contains provisions for several groups such as individuals, businesses and tax-exempt organizations, including higher education institutions. 

Previously Expired Tax Extender Provisions that Affect Higher Education Institutions

  • Tax-free distributions from individuals from individual retirement plans for charitable purposes.  The provision makes permanent the exclusion from gross income for qualified charitable distributions from an IRA.  The exclusion may not exceed $100,000 per taxpayer in a tax year.  The provision is effective for distributions made in taxable years beginning after December 31, 2014.
  • Tax treatment of certain payments to controlling exempt organizations. This now- permanent provision lets payments such as interest, rent, royalties and annuities to a tax-exempt organization by controlled entity to be excluded from the tax-exempt organization`s unrelated business income, provided the arrangements represent fair market value. The provision is effective for payments received or accrued after December 31, 2014.
  • Affordable Care Act “Cadillac Tax” extension.  The excise tax on high-cost employer-sponsored health plan is extended until 2020.
  • Form 1098-T provision.  Beginning in 2016 tax year, educational institutions will be required to report payments for qualified tuition and related expenses in Box 1 of Form 1098-T, rather than in Box 2 as it was an option previously. 
  • Filing dates for Forms W-2 and 1099-MISC.  The provision eliminates the extended deadline for electronically filing forms by employers.  The employers will have to file Forms W-2 and 1099-MISC by January 31.  This provision will become effective for 2016 forms to be filed by January 31, 2017.
  • Safe harbor for de minimis errors on information returns, payee statements and withholdings.  This provision creates a safe harbor from the application of the penalty for failure to file a correct information return or to furnish a correct payee statement.  The error for any single amount cannot exceed $100.  A lower threshold of $25 is established for errors in respect to reporting withholdings.  The provision applies to information returns and payee statements required to be filed after December 31, 2016.
  • Extension of mass transit commuter tax parity.  This provision made permanent the maximum monthly exclusion amount for transit passes and van pool benefits to match the exclusion for qualified parking benefits.  The provision applies to months after December 31, 2014.
  • Extension of tax credit for research and experimentation.  The provision made permanent a tax credit to corporations for research and development activities conducted at universities or other qualifying organizations.  The provision is effective for amounts paid or incurred after December 31, 2014.
  • Extension of energy-efficient commercial building deduction - Section 179D.   The provision extends the deduction for two years, through December 31, 2016.   The provision was not expanded to include 501 (c)(3) organizations.

If you have any questions regarding the extended and/or permanent provisions, please contact the Education Industry Group at Schneider Downs.

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