January, 2000

Montana University System

Regents Taxation Committee

The Montana University System Regents Taxation Committee sent out a questionnaire to each of the campuses regarding the treatment of certain tax related issues. This initial questionnaire focused entirely on institutional funds, as opposed to funding from separate entities such as foundations and booster clubs. The responses from the questionnaire clearly reflect that the Montana University System is generally in compliance with IRS regulation. Further work is needed to ensure system-wide consistency in application and methodologies used in complying with these regulations. The goal of the Taxation Committee is to review these issues, seek expert advice regarding tax laws, and then recommend guidelines or polices to the Montana University System Policy Committee.

Issues:

Vehicle Usage:

All of the campuses provide a vehicle to an employee or employees.

All of the campuses withhold taxes for personal usage. The method for computing taxes and the determination of "personal use" vary by campus. Some campuses are using the "commuting" method and others are using the "lease value" method. Logs are required for most employees, but the documentation required and the repository of the logs differs.

Committee Action:

The Taxation Committee will further review the tax codes to determine the proper method for computing taxes on personal mileage. The Committee will draft a policy, which will proscribe a consistent treatment among the Montana University System units including:

Moving Expense:

The campuses are consistently applying IRS Publication 521 regarding moving expenses, including pre and post employment acceptance.

Committee Action:

The Taxation Committee will draft a policy affirming the campuses procedures in following to IRS Publication 521.

Faculty, Staff, Administrator Tuition Waivers:

The requirement by the IRS to tax educational benefits provided to employees is very confusing. It is not surprising that there are differences in interpretation by the MUS campuses. IRS Notice 9-68 refers to what is considered a "graduate level course" under I.R.C. Sec. 127. The question is does "graduate level course" mean that any employee taking a class who has a baccalaureate degree or just classes taken toward an advanced degree?

Committee Action:

The Taxation Committee will consult with tax experts and the Higher Education Tax Listserv. After this further research, the Committee will draft policy to ensure consistency in the application of tuition benefits and recommend guidelines that the campuses should follow.

Gifts and Awards:

Any cash gift or award is taxable; there is no de minimis rule when it comes to cash. The MUS campuses seem to appropriately handle gifts and awards by processing them through payroll and withholding appropriately.

Committee Action:

The Committee will recommend a policy that all cash gifts and awards, either from the institution or a related foundation, be processed through the campus payroll system with appropriate withholdings.

Travel:

Most of the Montana University System campuses do not tax same-day travel per-diem. The State of Montana’s policy is to tax same-day travel per-diem.

Committee Action:

The Committee will poll the Higher Education Tax Listserv and seek advice from tax experts regarding this issue. Based upon earlier reviews at the campus level, the Committee believes that the monetary amount of taxes involved is probably not worth the expense of a special payroll modification.

Memberships & Subscriptions:

The campuses consistently follow State policies regarding memberships. State policy prohibits the purchase of individual memberships with state funds.

Committee Action:

The Taxation Committee recommends that the campuses continue to follow State policies regarding memberships and subscriptions. Where institutional funds are used to purchase a membership that benefits the institution, the President/Chancellor or his designee should provide prior approval.

Parking:

The Board of Regents recently approved a Pre-Tax Parking Program. There do not seem to be any other issues related to parking.

Committee Action:

No further action required by the Committee

Housing:

The MUS provides housing for a variety of employees. All of the Presidents/Chancellors are provided housing and must live there as a condition of employment. Housing is also provided at some of the Experiment Stations, Research Stations, and for Resident Hall Advisors.

Committee Action:

The Taxation Committee will conduct further research into the calculation of "qualified" minimum wage calculation where housing is provided in lieu of wages (resident advisors.) The Committee will recommend wording in Regents contracts where housing is furnished as an institutionally recognized condition of employment. The Committee will also recommend that appraisals (or market surveys) be conducted every three years to document the value of employer provided housing, as mandated by the IRS Codes.

The next meeting of the Regents Taxation Committee is scheduled for February 15, 2000, in the Office of the Commissioner of Higher Education. The campus fiscal officers and the University Foundation directors will be invited to attend to discuss taxable benefits provided by sources external to the institution.