Tax Tips for Higher Education

ISSUE
Under the new tax law, interest on a home equity loan for individuals may be deductible – contrary to some news reports.

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

SCC has hired a new Dean of Students.  As he moves to town, the SCC accounting team has informed him that his moving expenses will be taxable to him in 2018.  The new dean has bought a house and plans to add on to it in 2018.  He asks the SCC accountants about the new rules for deducting home mortgage interest.  He is especially interested in whether or not he might get a deduction for the interest on a home equity loan they are taking out to pay for the addition.

ISSUE:
Reimbursing business use of cell phones is generally not income to the employee.  Thanks to a somewhat neglected change in the tax law, now it looks like computers, laptops, and other peripheral equipment are treated likewise.

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

While we were on-site at DCC, preparing their Form 990 and Form 990-T for the year ended June 30, 2017, their CFO asked us about “listed property.”

“Do we have to get some type of checklist from each employee that we reimburse monthly for cell phone use?  It seems like I remember that from a few years ago,” he asked.

We told him, “Generally, No.  There was a requirement for that for a time, but Congress “de-listed cell phones in 2010.  And, the new tax law (“Tax Cuts and Jobs Act”) has a provision that makes ‘computer or peripheral equipment’ no longer listed property.

We tell DCC’s CFO that it would appear that the treatment for no-longer-listed computer property used for business would be treated in a like manner to the treatment of cell phones used for business purposes (not taxable to the employee and not subject to the automatic excess benefit rules).

ISSUE:
Generally, the historical exclusion from income for reimbursed or paid-by-employer moving expenses is suspended through 2025.

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

MBC’s CFO called us to ask about their policy of paying for and/or reimbursing moving expenses.  Because they are located in the Florida Keys, many of their new hires have to move a great distance – at great cost.

Our answer is that, beginning January 1, 2018 (through December 31, 2025) the new tax law makes any payment for or reimbursement of moving expenses taxable income to the employee.

Institutions should be careful about promises made to current, new, and future employees with regard to moving expenses. Also, any policies and procedures based on the suspended provisions should be updated to conform with current tax law.

ISSUE:
There is a lot going on in the tax and accounting arenas.  We’ve got some good solutions at the ABHE Annual Meeting in Orlando.

ISSUE:
Riding your bicycle to work is a good thing, right?  Well, it no longer has the tax benefit it might have in 2017.

SITUATION:
Idaho Bible College & Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(i).  They are not required to file Form 990 annually.

IBCS’s Controller called us to say that, historically, they have paid a monthly “reimbursement” to several staff and faculty who ride their bikes to campus.  Prior to the enactment of the new tax law (January 1, 2018 in this case), “qualified bicycle commuting reimbursements” of up to $20 per qualifying bicycle commuting month were excludible from an employee’s gross income. A qualifying bicycle commuting month was any month during which the employee regularly used the bicycle for a substantial portion of travel to a place of employment and during which the employee does not receive transportation in a commuter highway vehicle, a transit pass, or qualified parking from an employer.