Tax Assessment Areas
- Unrelated Business Income
- External Rate Calculation
- Tax Exempt Bond Compliance
- Private Business Use
- Sales and Use Tax
- 1098-T Forms
- Remitted Tuition Taxability
Syracuse University is exempt from income tax under Section 501 (c)(3) of the Internal Revenue Code on income from activities that are substantially related to its educational and research missions, which forms the basis for the University’s tax exempt status.
If Syracuse University were to carry on a trade or business activity that is not substantially related to its exempt purpose, the University would be subject to tax on the net income of such business activity, even though it may bring funds to support the University’s exempt operations. It is crucial that the University employees understand the types of activities that may be unrelated, and therefore have tax implications. Examples of types of unrelated business activities include, but are not limited to:
- Facility rental to external parties
- Applied research
However there are many exceptions and special circumstances that may cause a revenue stream to be deemed unrelated business income or exempt from tax. Review of the activity must be performed by the Comptroller’s Office. Please contact the Director of Tax Reporting & Financial Projects in the Comptroller’s Office with any questions you may have regarding an activity’s potential income tax ramifications.
Please prepare and submit a memo [PDF] detailing the proposed external income rates. The memo should include the purpose, goal and details of the external income activity, the personnel involved and their hours spent to carry out the activity, details of the buildings and rooms where the activity will be conducted, and the proposed rates will take into effect. Please explain how the rate was computed and what expenses will be directly associated with the external rate income proposed. For example, in the computation illustrated below, the use of facilities for one day would have an external income rate of $500.
|Utilities for the facility (based on prior year)||$40,000|
|Bldg & ground maintenance (based on prior year)||35,000|
|Depreciation (please contact Senior Financial Analyst at the Comptroller’s Office)||100,000|
|Number of days facility is available for use||365 days|
|Per day amount||$500/day|
Once the memo is completed, please send the memo to the Director Tax Reporting & Financial Projects for their review of any possible tax implications. The Comptroller’s Office will prepare an overall tax finding memo and forward it to the respective approving authorities.
Syracuse University has on its campus buildings that were financed with tax exempt bonds (TEBs) and buildings that were funded by other means. As part of the TEB post-issuance compliance, Syracuse University is only concerned with those buildings that have been financed by TEB proceeds. University employees engaged in any activity within these TEB financed buildings need to know if any activity is a qualified or an unqualified activity. The reason being is if Syracuse University were to have an unqualified activity in the TEB financed property, then the TEBs may lose their beneficial tax exempt status. The chart below contains possible qualified and unqualified activities.
|Educational services to external parties||Yes||No|
Please note that these are only examples and each activity must be reviewed for the specific facts in order to determine if such activity is qualified or unqualified. Contact the Director Tax Reporting & Financial Projects for further clarification. An external rate calculation memo must be used for approval of possible unqualified activities.
Private business use means and includes:
- The University’s use of bond-financed property in an unrelated trade or business
- The use of bond-financed assets by third parties pursuant to leases, management, or service contracts that do not meet IRS requirements
- Certain sponsored research arrangements
- Any other arrangements that provide third parties with special legal entitlements to use or occupy (or otherwise benefit from) bond-financed property
Annual measurement of private business use:
- The Comptroller’s Office shall annually review all uses of bond financed property, determine the percentage of private business use of bond-financed property and maintain records of all private business use.
- The Comptroller’s Office must be informed of any significant change in the use of bond-financed property. The Comptroller’s Office will then determine whether the new use constitutes private business use or not. If the use does result in private business use, the Comptroller shall consult with counsel for tax advice on whether that use or arrangement, if put into effect, will be consistent with the restrictions on private business use and, if not, whether any remedial action permitted under the code may be taken by the University as a means of enabling that use.
The University is sales tax exempt in New York State. Accordingly, any New York State sales tax on a purchase for which an employee is requesting reimbursement will not be included when the reimbursement is processed. A New York State sales tax exemption certificate may be obtained by logging into MySlice.
The Bursar’s Office is responsible for producing 1098-T forms each year. Information on these forms and taxpayer relief can be found on their website.
For any questions regarding your 1098-T form, please contact the Office of Student Debt Management at 315-443-9364.
The Syracuse University Educational Assistance Plan (Remitted Tuition Benefits or “RTB”) allows employees and retirees who are eligible to take graduate-level courses at the University pursuant to the University’s Remitted Tuition Benefits Policy to receive up to $5,250 worth of any such courses they take each calendar year on a tax-free basis as long as certain requirements are satisfied. Among the more important requirements that must be satisfied are (1) that the course(s) must not be for education involving sports, games, or hobbies (unless such education is required as part of a degree program), (2) any graduate tuition costs that are covered by financial assistance, a fellowship, or a scholarship from any public or private source other than the University will not be eligible for the $5,250 tax exclusion, and (3) each eligible employee or retiree must satisfy such other requirements for receiving graduate remitted tuition benefits under the Educational Assistance Plan as are specified by the University’s Office of Human Resources.
Below you will find the current tax rules relating to a RTB. As with all tax rules, these are subject to change by the U.S. Congress. In the event that the tax rules change, the new rules will be posted here when they become available from the Internal Revenue Service.
- RTB used by an eligible University employee or the spouse of an eligible University employee for undergraduate courses is generally tax free i.e., RTB used by an eligible University employee for qualifying graduate-level courses is tax free up to $5,250 per calendar year (this tax-free treatment assumes the applicable requirements of the Syracuse University Educational Assistance Plan have been satisfied). However, any RTB used by an eligible employee for graduate-level courses in excess of the annual $5,250 limit is generally taxable to the employee, and subject to tax withholding by the University at the time the benefit is used. The Internal Revenue Service regulations and applicable court decisions set forth circumstances under which graduate level courses in excess of the annual $5,250 limit taken by eligible employees using RTB may be non-taxable.
- RTB used by the same-sex domestic partner of a University employee for undergraduate and/or graduate level courses are generally taxable to the employee, and subject to tax withholding at the time the benefit is used
- RTB used by the spouse of an eligible University employee for graduate level courses are generally taxable to the employee, and subject to tax withholding at the time the benefit is used
- This benefit is not available to spouses or same sex domestic partners of Syracuse University campus ROTC employees and Hendricks Chapel employees and is subject to cessation at any time at the determination of Syracuse University’s Chancellor and President or his/her designee. So, any RTB used by Syracuse University campus employees of ROTC and of Hendricks Chapel (who are not otherwise benefits eligible employees of Syracuse University) for undergraduate or graduate level courses is taxable income to the employee of ROTC and of Hendricks Chapel. The value of the RTB will be reported by Syracuse University on Form 1099 to the IRS and to employees of ROTC and of Hendricks Chapel who use it.
A Syracuse University application form, instructions, and a flow chart to assist eligible employees in their determination of whether the RTB they use for such graduate courses is taxable may be found at the link above. It is recommended that employees carefully read these documents and also consult with their personal tax advisor to determine whether or not their graduate RTB usage qualifies to be non-taxable, and whether or not to submit the application. Please note that tax treatment is based upon the University’s review of the application.
For questions relating to Educational Assistance Plan and the taxation of RTB, please contact Human Resources.