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Public Higher Ed Should Get Virus Bill Payroll Credit, Groups Say

Posted on Mar. 24, 2020

Higher education organizations are protesting the exclusion of public colleges and universities from a tax credit intended to help employers meet costs associated with the coronavirus.

Although the Families First Coronavirus Response Act (P.L. 116-127) requires public colleges and universities to provide expanded paid sick and family leave, they are excluded from the law’s payroll tax credit because they are state government instrumentalities, according to the higher education groups led by the National Association of College and University Business Officers (NACUBO).

“In effect, this means that the tax credits meant to help employers during this time of volatility are not available to many of our country’s largest employers,” the groups wrote in a March 19 letter to the leaders of the House Ways and Means and Senate Finance committees.

The payroll tax credit is designed to help employers offset the costs of providing mandatory paid sick leave to employees affected by the coronavirus.

“These credit exclusions also treat our nation’s two- and four-year public institutions patently differently from both their private nonprofit and private proprietary counterparts, putting them on unequal financial footing that could result in longer-term economic consequences,” the letter said.

The groups urged the taxwriting committees to remedy the exclusion in future coronavirus legislation.

Filing Extension

NACUBO and other higher education representatives also want the Trump administration to make clear that recently announced extensions for filing tax returns and paying federal income taxes apply to colleges and universities and other tax-exempt organizations.

Colleges and universities, like many EOs, file information returns with the IRS, the organizations noted in a March 20 letter to Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig.

Also, the IRS and Treasury haven’t yet published final regulations on Tax Cuts and Jobs Act provisions that impose excise taxes on the compensation and net investment income of some schools, nor have they released proposed regs under section 512(a)(6) on calculating unrelated business taxable income, the groups said.

“We therefore strongly urge you to grant a 90-day filing and payment extension for exempt organizations, in accordance with their fiscal year filing dates and extension dates,” the groups added.

More Relief Sought

The groups also focused on another issue, raised by the IRS Advisory Council, concerning the many non-U.S. persons who will be stranded in the United States because of coronavirus-related travel restrictions.

Because of the substantial presence test, visiting scholars and students who cannot return to their home countries could incidentally be considered tax residents in the United States, according to the groups.

Therefore, the IRS and Treasury should “offer relief to persons who are unable to return to their countries due to circumstances relating to COVID-19,” they said.

The American Council on Education, NACUBO, and other higher education groups are also seeking other tax relief measures to help colleges and universities weather the coronavirus.

In a memo to Congress, the groups are asking lawmakers to temporarily suspend the taxability of scholarship and grant aid, thereby permitting low- and middle-income students to retain more of this assistance.

Congress should temporarily reinstate advance refunding bonds, which would permit schools to take advantage of lower interest rates to reduce their debt service costs, according to the groups.

To encourage more charitable giving, the organizations favor a universal charitable contribution deduction available to both itemizers and non-itemizers as well as a temporary suspension of charitable contribution limits in 2020. Both measures are included in The Coronavirus Aid, Relief, and Economic Security Act, signed into law March 27.

The organizations support increasing the American opportunity tax credit from $2,500 to $3,000 per year or increasing refundability from 40 percent to 60 percent. They also recommend modifying the lifetime learning credit to cover 100 percent of the first $2,000 of the opportunity credit’s eligible expenses.

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