Tax Tips for Higher Education

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. In a conversation with DCC’s CFO, we find that they are hosting a conference this summer – “Alaska:August:ACTS” – wherein they’ll receive revenues from registration fees, exhibitor booth rentals, and some food/snack sales. Additionally, there is an option for participants to attend via the internet.

Is this UBIT?

Marathon Bible College (MBC) is a public charity and a school under I.R.C. sections 501(c)(3) and 170(b)(1)(A)(ii). MBC is not an integrated auxiliary nor an affiliate of a church (I.R.C. section 170(b)(1)(A)(i)). MBC has several employees who are ordained, licensed, or commissioned ministers of the Gospel and those employees receive a minister’s housing allowance from MBC.

MBC’s Controller asks us whether these housing allowances would “pass IRS muster.”

Marathon Bible College (MBC) is a public charity and a school under I.R.C. sections 501(c)(3) and 170(b)(1)(A)(ii). MBC rents out their basketball field house to a semi-pro, summer league basketball team. MBC’s employees provide janitorial and laundry services as part of the “rental” agreement. Pursuant to IRS rules, this constitutes a “dual-use” facility rental.
Revenues from the unrelated activities are generally unrelated business income. Expenses may be directly associated with the unrelated business activity or may be reasonably allocated to those unrelated business activities. It is key to utilize a reasonable allocation methodology.

Many exempt organizations pay taxes on rental income from “debt-financed” property. But, colleges generally don’t have to.

Last week, the President’s team issued a one-page framework for tax reform. How might that affect your institution?