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HEERF II: Students Enrolled Exclusively in Distance Education

HEERF II: Students Enrolled Exclusively in Distance Education

On December 27, 2020, the President signed the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA) (P.L. 116-260).  This law has some similarities—as well as important differences—from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116–136) that was enacted on March 27, 2020.  One of the differences is that CRRSAA/HEERF II added allocations for students enrolled exclusively in distance education.

SITUATION:

Denali Christian College (DCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

We talked with DCC’s CFO about HEERF II funding and some of the differences between HEERF I (CARES Act Section 18004) and HEERF II.

“So, we can now give financial aid grants to students who are exclusively enrolled in distance education, correct?”

“Yes,” we answered.  “Students enrolled in exclusively distance education courses are included in the CRRSAA section 314(a)(1) allocation formula.  According to the Department of Education, amounts apportioned for students enrolled in exclusively distance education courses may be used only for financial aid grants to students.”

“Great.  Where can we find out more about HEERF II funding?”

“One of the best resources is ED’s “Higher Education Emergency Relief Fund (HEERF) II Public and Private Nonprofit Institution (a)(1) Programs (CFDA 84.425E and 84.425F) Frequently Asked Questions” (updated March 19, 2021).”

The link to that resource is…

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HEERF II: Students Enrolled Exclusively in Distance Education

Has Your Institution Received a Contribution of “Qualified Intellectual Property”?

ISSUE:

Form 990, Part V, Line 7g, asks, “If the organization received a contribution of qualified intellectual property, did the organization file Form 8899 as required?”

SITUATION:

Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

We were reviewing TBC’s Form 990 with their CFO.  He wondered about whether they might have received “intellectual property” according to Form 990, Part V, Line 7g.

“We aren’t sure what intellectual property is and there is not an entry in the wonderful Form 990 Glossary about it.  Have we missed something?”

We answered. 

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HEERF II: Students Enrolled Exclusively in Distance Education

Opening a Thrift Store?

ISSUE:

As Bible Colleges and Seminaries contemplate alternative sources of revenue in these fast-changing times, could a “thrift store” that operates as a ministry and a money-maker be a viable option?

SITUATION:

Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

The Controller at MBC called to ask about how the IRS taxes “thrift stores.”

“We have some space in a building on campus where we used to keep our bookstore inventory.  Now, most textbooks are electronic and we’ve moved our T-shirts, coffee mugs, etc. to a storage closet.  With that space freed up, we have been wondering what to do in there.

“MBC formed a task force of faculty, students, staff, and alumni to brainstorm about different ideas for alternative revenue sources.  One of the top ideas was to open a thrift shop that could also operate as a ministry.  The idea would be to have the store open six days a week and take certain donations of clothing, furniture, and household items.  We could also give away items as needs arose.  Part of the plan would be to have events in August and January where students could ‘win’ Monopoly money that could be spent to help furnish their apartments and/or dorm rooms.  As we think this through, would we have to pay taxes on net income from the store?”

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HEERF II: Students Enrolled Exclusively in Distance Education

100% Deduction for Food and Beverages

ISSUE: Although it will not affect most not-for-profit institutions – unless you have UBIT deductions – the Taxpayer Certainty and Disaster Tax Relief Act of 2020 added a temporary exception to the 50% limit on the amount that businesses may deduct for food or...

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HEERF II: Students Enrolled Exclusively in Distance Education

Updated: Form 1098-T and “Student Grants”

ISSUE:

In December 2020, the IRS issued guidance that CARES Act “student grants” from Higher Education Emergency Relief Fund (HEERF I) would not be reported on the 2020 Form 1098-T.  Now, the IRS has issued updated guidance on whether higher education institutions have any requirements under the I.R.C. to report information on Form 1098-T for 2021 with regard to emergency financial aid grants under HEERF I, HEERF II, or HEERF III (from the CARES Act, CRRSA, or ARP.)

SITUATION:

Denali Christian College (DCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

DCC’s CFO called to ask us about whether student grants might need to be included in the 2021 Form 1098-T – which would be filed in early 2022.

“Some of the HEERF student grants – from all three sets of funding – may be applied to student accounts or used by students to pay us for tuition, fees, other charges.  Do we have to report any of that on Form 1098-T for this year?”

“Great question.  On March 30, 2021, the IRS updated their Higher Education Emergency Grants FAQs.  The FAQs do not specifically cover student grants from HEERF III (ARP).  The Q&A format contains a lot of information for students and schools included in six FAQs.  In FAQ #6, they specify that any amounts of student grants that qualify as ‘qualified tuition and related expenses’ (QTRE) must be reported by institutions in Box 1 of Form 1098-T.  Further, you do not need to report the grants in Box 5.”

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