Some negative complications and loopholes in the new tax law for universities:
https://www.politico.com/story/2017/12/22/harvard-tax-college-endowments-252892
Some negatives
- Colleges and universities, meanwhile, are also worried that the tax overhaul would reduce the incentives for charitable giving to their campuses. Doubling the standard deduction, for instance, means that millions fewer taxpayers would itemize their taxes and be eligible for the charitable deduction.
- Under the changes, nonprofit organizations would now have to account separately for each business unit that produces “unrelated business income” rather than combining them all together. The shift would mean, for instance, that a university’s profits from its dining facility could not be offset by losses in its housing operations — which could increase its tax liability.
A loophole
Some schools hovering around the threshold of the new tax are in the dark about whether they’d end up having to pay. That’s because it’s up to the IRS to issue regulations that spell out exactly how it would measure the university assets that qualify a school for the new tax. The legislation, for example, excludes endowment funds that are used to carry out a college’s tax-exempt purpose but doesn’t define what that is.
But it’s not yet clear how the IRS will define the term — and whether it will include, for example, building a campus library, or whether it applies only to money spent directly on student aid.
All of the above adds to the uncertainty about how to define full time equivalent students.