Universities Throw Support to Group's Tuition Reporting Comments

Texas Tech University System and its component institutions appreciate the opportunity to submit comments regarding the August 2, 2016 notice of proposed rulemaking (NPRM), which requests comments on changes to the reporting requirements related to information reporting on Form 1098-T, as well as changes to the definitions of the education tax credits. The system represents component institutions including Texas Tech University, Texas Tech Health Sciences Center and Texas Tech Health Sciences Center -- El Paso. Combined, these institutions file approximately fifty thousand 1098T forms annually.

We understand the purpose of these proposed changes is to simplify the reporting for educational expenses, and we respectfully submit our thoughts on impacts both to taxpayers and universities which may not have been considered to date. In the interest of brevity, we will focus only on the areas of concern to our institution. We fully support the extensive considerations letter prepared by the NACUBO organization.

Proposed Reporting Changes

Currently, the rules allow for certain exceptions to 1098T reporting. While we recognize the Trade Preferences Extension Act of 2015 (TPEA) issued a requirement for taxpayers to have a form 1098T in order to claim a tax credit, these exclusions generally apply to situations where no tax credit eligibility exists. By eliminating these exclusions, we feel strongly that production of 1098Ts will increase substantially, thus creating increased taxpayer confusion resulting in increased calls to both institutions and the IRS to clarify, increased costs of production, and substantial changes to current practices and programming to capture these potentially irrelevant transactions.

Specifically, we oppose removing the exclusion for reporting the following:

• Non-credit courses -- current rules do not require issuance of a 1098T for courses that do not confer academic credit. A majority of these courses do not provide for maintenance or improvement in current job skills and thus would not provide legitimate deduction information causing increased confusion to the taxpayer and potentially ineligible claims for deductions.

• Since many of these courses are currently provided outside of the student reporting system, to require this change would result in institutions significantly increasing the amount of student information housed in our systems, potentially impacting our admissions or system access protocols, collection of TIN and other reportable student data and increased transactional loads on our student system while providing very little benefit to the taxpayer or the IRS. While we recognize the TPEA rules as noted previously, we feel there is a better solution to accommodate TPEA compliance that would generate less taxpayer confusion and we support NACUBO's offer to work with the IRS to develop that solution.

• Non-resident aliens (NRAs) -- current rules allow NRA students to request a 1098T if they feel one is needed and was not issued. Institutions are required to comply with their request to provide a form. We feel the current rule supports the needs of our NRA students as they would be best suited to know whether a 1098T is needed. Texas Tech does not exclude issuance of a 1098T to NRAs if they have a TIN on file. Most of these students who need the form, do not have to make a separate request. By virtue of a student making a request, we are able to request a TIN if one is not already on file, thus increasing the accuracy of the 1098T forms provided to the IRS.

• Formal billing arrangements -- Qualified tuition and related expenses (QTRE) paid under formal billing arrangements may include a wide range of academic activity but generally result in the same concerns if this exclusion was to be eliminated. If a formal billing arrangement is maintained, the institution is less likely to maintain detailed student financial accounts as the payment arrangement is with the third party payor as opposed to a direct arrangement with the student. Generally tax reporting would fall to that payor since they handle the administrative functions of the arrangement and there would not be any payments to report to the student via a 1098T as they did not make any payments of QTRE to the institution. Also, the institution may likely not collect, nor have an opportunity to collect, a TIN from the student under this type of arrangement especially if payment is made at a flat rate rather than by normal billing processes.

The NPRM also indicates a request by the IRS to collect additional data via the 1098T which is not related to statutory changes. While we understand the desire to obtain as complete a picture as possible via this tax form, the data elements requested may be unobtainable under current educational practices, would be inconsistent with other reporting, or are provided by other resources available to the IRS.

• Future Year Payment Amount -- while determining billed amounts attributable to the next calendar year is simplistic in educational term-based models, determining the amounts paid towards those charges is much less clear. Payments may or may not be recorded to a specific term depending on an institution's billing system and processes. In our case, payments are recorded in the current "open" term rather than in the term that is being paid. Payments may be intended to pay specific charges on the account (housing or parking that may have an earlier payment deadline) or may even reflect a deposit for, or pre-payment of, future registration (QTRE). Since these payments may be fluid in their systemic application, as well as aid generally applying after other payments (and potentially in another calendar year thus possibly resulting in refunds of prior payments), calculating the actual dollar amount of payments attributable to QTRE assessed for the first three months of the following year would require a fixed point in application of payments which our system does not currently allow. Combine this with first-in application of payments as defined by the proposed rules (complexities discussed later in this letter), providing this amount would require significant changes to our institutional payment processes, result in increased confusion on what has actually been paid for an enrolled period, and could potentially cause the student to lose scholarship eligibility if QTRE is deemed to be paid first regardless of payment intent and scholarships applied after an initial due date specifically require payment towards tuition and fees which is already reflected as paid in the system.

• Number of months enrolled full-time -- currently campus systems, federal aid reporting and attendance tracking for institutions is based on academic term rather than calendar months and, in most cases, is handled by our Registrar and Financial Aid departments that have no involvement with tax reporting. Requiring schools to indicate the number of months a student is enrolled full-time would require complex tracking systems to be implemented to capture this uniquely defined data and would cause inconsistencies with other federal reporting. Additionally, students migrate through their educational careers on a term basis so under this rule, a new, incoming freshman may only reflect 4 months of enrollment during a calendar year but should be fully eligible for an educational deduction. Additionally, an undergraduate student who graduates and chooses to move on to graduate enrollment within the same calendar year would face distinctly different definitions of full-time which could not adequately be tracked in a month-by-month counting environment especially when the terms overlap during a calendar month. Additional complexities occur with the advent and exponential growth of online and competency based instruction. These modalities may reflect successful completion of a term-based course but based on the student's progression, may not reflect a full term's calendar month enrollment. We feel strongly that because this same deduction eligibility can be determined from information provided on the taxpayer's federal return, it would be redundant and potentially contradictory to report it on the 1098T.

• • It is equally imperative for the IRS to adequately differentiate between enrollment and attendance if pursuing this and other relevant rules. Many schools are not required to track attendance, and enrollment may be reflected as of a reporting date but due to backdated withdrawals, for hardships, may change after the fact. Reporting either presents the same above concerns but if this rule were to move forward, we ask that the rules be written clearly and would suggest soliciting NACUBO support with drafting those rules.

With the massive conversion of reporting facing institutions and taxpayers (approximately 98% of schools reported in Box 2 prior to the rule change), it will be imperative for the IRS to provide detailed implementation guidance to both taxpayers and institutions, clear and detailed definitions to assist institutions in accurate reporting, as well as assisting taxpayers in claiming deductions accurately, and conducting a thorough review of all rules for consistent references, methodology and application.

Specifically, the definition of payments reported should be expanded to address the issue of proper application towards QTRE as well as not creating an overly burdensome process for institutions to identify scholarships for reporting as detailed below.

• Payments of QTRE -- the current definition of payments is clear on its surface but when applied to educational processes that have been in place for many years, can create some confusion. We suggest that the definition address the term-based approach used historically in higher education thus preventing incorrect reporting of payments when a student fails to pay a term in full, or pays a term early, both of which occur on a regular basis. Under current definitions, it could be interpreted that by failing to pay in full, all QTRE was paid and a full deduction allowed even though there is a significant outstanding balance. This could also potentially restrict the taxpayer from being able to claim their full eligibility of education deductions, due to "front-loading" the reported payment amount and then applying a cap on the maximum deduction. Or, the taxpayer could potentially claim deductions related to payments of QTRE that have not actually been made if they leave the institution without making payment in full on the overall student account. This finite definition creates significant issues when considering multiple years of enrollment, including the need to track QTRE across years with regard to payments that may change application of payment status across those same reporting timelines.

• Scholarship recognition -- the concern with the revised instructions regarding an institution's knowledge, or reasonable knowledge, that a payment represents reportable scholarship income assumes that the institution is somehow a participant in that determination. Institutions receive numerous payments which are not always in a face-to-face transaction allowing an opportunity to address the recipient or payor. Payments may be received online or via lockbox and the payor may not always provide a clear relationship to the student. For example, a parent may remit a payment from their business account which does not qualify as a scholarship for the student but there is no ability of the institution to discern a close relationship between the payor and the student from the payment document itself. Additionally, trust funds or gifts often do not reflect the student as a non-scholarship recipient but lack of evidence to the contrary, in reviewing the payor listed on the payment, universities may erroneously classify the payment as a scholarship rather than accept it as just a payment from a gift that is being reported under gift tax rules. This could also impact tax reporting by the payor if the payor's intent is reported under different tax treatment than what the school has assumed.

• As a point of clarification for reporting that is required within the next few months, we concerns that the instructions for complying with the new SSN verification checkbox are somewhat unclear. Texas Tech component institutions initially load FAFSA data to update a student's SSN. However, the instructions seem to imply that we must solicit correct TIN's from all students, even if we already have one, or otherwise leave the box unchecked on each form. For ease of reporting and programming we prefer to interpret the rule to mean we are validating that we have complied with 1) either reporting the TIN provided by the student or 2) soliciting a TIN from students who either failed to provide a TIN or have one listed that is obviously in error. We seek confirmation of this interpretation prior to the deadline for filing 2016 1098Ts so that we may fully comply with IRS intent regarding this rule.

Texas Tech University Systems and its component institutions respectfully requests that the administration carefully review all of our concerns, along with the more comprehensive NACUBO response; however, we request your particular focus on the concerns with providing proper implementation guidance, and consider a delay in implementation until the 2018 1098T reporting timeframe. This is especially important if the IRS intends to roll out additional rules and/or guidance that may impact our ability to accurately report on 2017 1098Ts. The benefit of this delay would be increased awareness by the taxpayer and tax preparers regarding proper educational expense deductions, as well as providing a level of consistency in reporting across several years while proper guidance is being developed. We feel strongly that this request will assist the IRS in achieving its goal of more accurate taxpayer deductions related to educational costs.

Thank you for your attention and consideration of this request.

Chelle Hillis (signing on behalf of: Jim Brunjes)