Issue

Many Christian colleges, seminaries, and universities wonder what – if any – requirements they may have at the multi-state and local tax jurisdiction levels.

Situation

Saltwater Christian College (SCC) is a private college that is exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  Their CFO calls us to inquire about at what point SCC should start looking at potential tax filings in their state and states other than their own.

We say, “Continually and it depends.”  Certainly, states are getting more aggressive in the areas of charitable solicitation registrations (more on this next week!), sales taxes, employment taxes, and property taxes.

Rules

The following checklist – albeit brief – covers many of the issues Christian colleges must address in order to comply with state and local requirements. Because of its generic nature, the checklist may include items that do not apply in some states, or omit items required in some situations. Use it as a starting point to assess your organization’s general level of compliance, and as a thought stimulator to suggest the types of registrations or filings that should be considered for any location.  (One area not covered due to its inherent complexity is the issue of state registrations for on-line students.

General Registration

  1. Is the organization registered with the Secretary of State for “Authority to do business”?
  1. Is the organization registered with the local city/county for a business license?
  1. If the organization is not operating under a corporate name, has the fictitious business name (“doing business as”) been registered with the county/state?
  2. How frequently do the above registrations need to be renewed?
  1. Have the above registrations been renewed on time?

Corporate/Property Tax

  1. Has the organization registered or filed for exemption from state income tax and/or franchise tax?
  • Is annual/biannual filing required?
  • When is it due?
  1. Has the annual exempt organization return been filed?
  1. Has the state tax return for unrelated business income been filed?
  1. Has the organization registered or filed for exemption from personal property tax?
  • Is annual/biannual filing required?
  • When is it due?
  1. Has the organization registered or filed for exemption from real property tax?
  • Is annual/biannual filing required?
  • When is it due?
  1. Has payment of tax on non-exempt property been made on time?
  • Is annual/biannual filing required?
  • When is it due?
  1. Are there separate filings for city/town, county, and state with respect to the above?

Employees

  1. Does the state impose a personal income tax?
  1. Is the organization registered to withhold and remit state income tax for employees permanently located in the state?
  1. Does the state have guidelines for when transitory employees become liable for state income tax? (Requirements may apply to employees in the state to do fundraising.)
  1. If the organization has employees regularly in the state for periods long enough for the employee to be subject to state tax, does the organization withhold and remit state income tax for the employee(s)?
  1. Does the organization file all required city/county employment tax returns?
  1. Does the organization comply with the workers’ compensation laws of any state where it has employees located permanently, or for long terms?
  1. Is the organization registered with the state unemployment insurance board?
  1. Does the organization comply with state safety compliance laws, including reporting of accidents?
  1. Does the organization comply with state employee notice requirements, including required postings of notices of state wage and hour laws, state unemployment insurance, state disability, state nondiscrimination laws, and other state requirements?

Fundraising

  1. Is the organization registered (or exempt from registering) for charitable solicitation registration laws?
  1. Does the organization keep all the records required for compliance with the charitable solicitation laws? Record keeping laws may apply even in states where the organization is exempt from filing requirements.
  1. If the organization ever offers charitable gift annuities to residents of the state, has it complied with the state’s requirements?
  1. Are all the professional fundraising counsel and solicitors used by the organization registered (if required) in every state where the organization solicits contributions?
  1. If revocable trusts or deposit agreements are being used, is the organization in compliance with state securities laws in all states where these are offered to residents?

Bottom Line

There are many factors that come into play with regard to state and local tax (SALT) issues.  Your institution should be careful and deliberate about monitoring this as the time required can be extensive and penalties for failure to report may be excessive.  It would be wise to consult with a qualified tax advisor on these issues.

 

Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.