University of Iowa Related Tax Information

 

The University of Iowa is a federally tax-exempt organization under Internal Revenue Code (IRS) Section 115, as an agency of the State of Iowa.

 

Section 115 exempts income devised from the exercise of any essential governmental functions. The IRS has recognized that education is an essential governmental function. (Rev. Ruling 75-436)

 

The University is NOT a Section 501c3 organization, nor is it a not-for-profit organization.

 

The University of Iowa taxpayer identification number can be found at the following link: http://www.uiowa.edu/~fusas/W9.pdf

 

Tax Compliance at the University of Iowa involves many offices and individuals working together to meet our state and federal obligations. These offices and individuals coordinate the providing of tax advice to University units; assists/reviews the preparation and filing of University tax returns; and participates in the development of policies with tax implications. These offices include the following:

 

  • Benefits – pre-tax and tax-deferred benefits

  • Employment Tax—payroll withholding and nonresident alien taxation

  • Foreign Taxation – University Treasurer

  • Miscellaneous Income – Accounts Payable

  • Real Property Tax – Business Manager

  • Sales Tax – Purchasing

  • Spousal Travel Benefit

  • Student Loan Accounting – Billing Office

  • Unrelated Business Income Tax—Accounting Services

Benefits

The University of Iowa offers many pre-tax benefits as well as opportunities to reduce your taxable income.  Paying for your benefits on a pre-tax basis saves you money because your contributions are subtracted from your salary before federal and state income taxes are calculated and with the exception of your retirement plan contributions, before Social Security and Medicare taxes are deducted.

Your contributions for the following benefits are automatically set up to be paid on a Pre-Tax Basis:

 

Opportunities to Reduce your Taxable Income

Health Care Spending Accounts and Dependent Care Spending Accounts are a great way to save on your taxes, and in effect, pay for eligible medical expenses or dependent day care expenses on a pre-tax basis. Pre-tax contributions from your taxable income are deposited into your accounts to allow you to be reimbursed for qualified expenses.   You make an annual designation for your contributions.

Faculty and staff members participate in either the University Funded Retirement Plan through TIAA-CREF (Teachers Insurance and Annuity Association/College Retirement Equities Fund) or the Iowa Public Employees Retirement System (IPERS).  Under both plans, federal and state income taxes on both the University and the staff member contributions are deferred until the benefits are received.  Through the University’s Group Supplemental Retirement Annuity program, additional retirement savings contributions may also be made on a pre-tax basis by submitting a GSRA Salary Reduction Agreement form.  

Employment Tax

 

Payroll

The University of Iowa Payroll Office is a department of Human Resources within the Finance and Operations area.  The University of Iowa Payroll Office is dedicated to providing reliable, comprehensive payroll-related services. These services include:

  • paying employees accurately and timely for both the biweekly and monthly payrolls
  • providing annual tax information for US Citizens and nonresident aliens
  • employment verifications
  • maintaining vacation and sick leave balances
  • payroll-related accounting data
  • handling federal and state withholding tax deposits and reporting
  • auditing of independent contractor payments

The Payroll Office does not give individual income tax advice on personal income tax issues.  Please consult a tax advisor for information on those types of inquiries.

For more information, consult the University of Iowa Payroll Web Site.

 

Nonresident Alien Taxation

U.S. taxation can be very complicated for nonresident aliens (tax terminology).  Please refer to Payroll for tax information.  Although the University of Iowa may not provide tax advice, Payroll can help guide you in the right direction.

Foreign Taxation

 

Any U. S. person who has a financial interest in, or signature authority over, a foreign bank account that has a value in excess of $10,000 at any time during a calendar year must file Form TD F 90-22.1 with Treasury on or before June 30 of the following year.  (See 31 CFR § 103.24.)   A "U.S. person," for purposes of these rules, includes U.S. citizens and residents as well as U. S. legal entities.  It is important to note that this reporting obligation is imposed not only on the college or university that has the "financial interest in" the foreign bank account, but also on the institution's employees who have "signature authority over" the account.

In rare instances a University employee may have signature authority over a foreign account associated with an activity sponsored by a unit of the University.  Study abroad programs would be one example.   Even though the employee cannot use the account for the employee’s own benefit, the employee may be required to file Department of the Treasury Form TD F 90-22.1 and notify the IRS as noted below.

In addition, a person who is required to report his or her signature authority over a foreign bank account to the Treasury Department on Form TD F 90-22.1 is required to report such signature authority to the IRS.  And the vehicle is the individual's personal income tax return, specifically, Lines 7a and 7b of Schedule B, Form 1040.  Line 7a asks the taxpayer to respond to the following question:

At any time during [the tax year for which the return is being filed], did you have an interest in or signature authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?

If the answer to this question is Yes, Line 7b asks the taxpayer to enter the name of the country where the bank account is located.

There may be penalties for not filing the required forms.   Instructions and forms can be found at http://www.irs.gov/pub/irs-pdf/p4261.pdf. 

 

 Miscellaneous Income

 

The Accounts Payable Office makes payments and reports miscellaneous income for individuals and companies who have been paid $600 or more in non-employee service payments on a 1099-MISC form.  The Accounts Payable Office also reports other types of 1099 payments.

 

Real Property Tax

 

The Business Manager oversees all leases, easements and real estate transactions at the University. By State law, most leases, easements and real estate transactions (acquisitions, gifts, transfers and sales) must be approved by the Board of Regents. View the Board of Regent's Policy on real estate transactions.

 

Sales Tax


The University is exempt from paying sales tax on the gross receipts from goods and services rendered in fulfilling its purpose as an educational institution.  Taxes are collected on the gross receipts of any activities for which an admission fee is charged, including athletic events, theater, concerts, student organization activities, and others.  The University collects sales tax on sales of goods, food, and services which are available to the general public. (Operations Manual Part V., Chapter 10)

 

If sales tax is billed on an invoice, the University only pays in special circumstances (e.g., when items are purchased and used out of state).  (See Iowa Code, 1977, Section 422.45).

 

An Iowa Sales Tax Exemption Certificate is required when normally taxable items or services are sold tax free.  Normally, these are items for resale or for use in processing, but there are also other reasons for exemption.  UI general tax exemption certificate and forms available for other states can be found on the General Counsel and Purchasing web sites.

The current state sales tax rate is 5%.   SILO (school local option tax) and LOST (local option sales tax) are 1% (except for Webster County which is 0.5%) which are collected in addition to the state rate, for a combined rate of 6%.

 

Spousal Travel Benefit


Spousal travel ordinarily occurs at the expense of the employee.  However, in two limited circumstances, spousal travel may be reimbursable.  The first involves the situation where the predominant purpose of the spouse’s travel is to serve the University’s business purpose in a substantial and material manner.  The second is where the spousal presence is desirable from an institutional perspective.  The tax consequences attendant to these two limited circumstances are set forth below.

  1. Reimbursement without taxing employee

In order for spouse travel to be reimbursed by the University, without any
income tax consequences to the employee, it must meet a high IRS review
standard.  That standard requires that the presence of the spouse accomplishes a bona fide business purpose, i.e. that the presence of the spouse is essential (not just beneficial) to the employee being able to carry out his/her business purpose for the University.

Meets Test

To meet the IRS test, the spouse must perform substantive business related functions, and those functions must be documented.  Documentation such as an invitation naming the spouse, an agenda which details the role of the spouse at the business meeting and the like shall be retained and submitted with the reimbursement request.

Spousal travel for strictly fundraising purposes must meet University of Iowa Foundation travel  reimbursement requirements and be paid for in University of Iowa Foundation funds.

Not Meeting Test
The performance of incidental services such as typing notes or attending social events does not rise to the level of a bona fide business purpose.

  1. Reimbursement to employee

    Where prior institutional permission has been obtained based upon it being
    desirable that the spouse accompanies the employee, but the higher standard is 
    not met, then reimbursement for the spouse’s reasonable expenses, in accord
    with existing University travel policy, will result in that amount being added to
    the employee’s form W-2 as additional compensation.

  2. Unreimbursed spousal travel

    Spousal travel not meeting the above provisions (Paragraphs A and B) will be at
    the employee’s expense.

 

Student Loan Accounting


1098-T – The University Billing Office is responsible for generating this form to assist students and/or their parents, in the calculation of either the Hope Tax or Lifetime Learning Credit. The form reports the amount of tuition billed and the total amount of gift aid released to the student in a calendar year.


1098-E – The Student Loan Accounting Office is responsible for billing and collection of Federal and Institutional student loans.

Unrelated Business Income Tax (UBIT)


Accounting Services is responsible for serving as the data stewards for the preparation and filing of unrelated business tax and reports.

 

 

 

 

 

The Controller's Office is a division within the Finance and Operations organization.