Department of Education Issues Proposed Rule on Title IX

Today, the U.S. Department of Education (ED) issued a proposed rule changing how colleges and universities must handle allegations of sexual assault and harassment under Title IX of the Education Amendments of 1972. This long-awaited proposal is the first action by the Education Department since last September, when it rescinded guidance issued by the Obama administration in 2011.

Education Secretary Betsy DeVos criticized the Obama guidance as “overly prescriptive and lacking due process for the accused.” At the same time it rescinded the Obama guidance, the ED issued an interim question-and-answer document for schools on how to investigate and adjudicate allegations of campus sexual misconduct under federal law.

While we are still reviewing proposed changes, the ED has provided summary information on the proposal in its press releasefact sheet and background and summary document. The public has 60 days to comment on the proposal.

In the next few weeks, we will provide more information on how you may comment and will seek your input on the proposal via a survey to help inform CUPA-HR’s comments.

For further background information, view the archived webinar Facing the Challenges of DOE’s Recent Title IX “Interim Guidance.”

National Science Foundation Issues New Harassment Reporting Requirement

NSF said it made the changes to “ensure the research and learning environments it supports are free from harassment.” Under the new requirement, institutions that have been awarded grants (nearly 2,000 colleges and universities) must notify NSF within 10 days of any findings or determinations that any NSF-funded principal or co-principal investigator (PI) violated the law or the institution’s policies with respect to harassment, including sexual harassment or assault, or if the institution has taken administrative actions or sanctions against the PI or co-PI because of alleged harassment. This includes reporting interim measures when a PI or co-PI is placed on administrative leave pending an investigation. NSF requires the awardee organizations to report via a secure online portal.

NSF originally issued proposed changes on February 8 with Important Notice No. 144, along with a request for comment. CUPA-HR, joined the American Council on Education and five other higher ed associations, in filing comments on May 4. In our comments, we discussed our shared goal of eliminating sexual harassment and sexual assault from the scientific and education workplace; applauded NSF’s efforts to institute reporting requirements to enable receipt of timely and pertinent information pertaining to PIs and co-PIs at awardee institutions; and offered several questions, comments and recommendations to help ensure that the new policy was narrowly tailored to remedy documented discrimination in the workplace and carefully drafted to minimize burdens, confusion and unintended consequences.

For more information, NSF has also released a Q&A document. 

2017-18 CUPA-HR Chapter Successes & Updates

We are extremely impressed with the work accomplished last year by our Western Region CUPA-HR chapter boards and volunteers. InterMountain West, Washington, Utah, Rocky Mountain are just a few of our chapters that challenged themselves to do more and offer unique opportunities for their members in 2017-18. The Southern California chapter remained strong and continued to produce three one day conferences last year. They also completed a member survey to ensure they were meeting the needs of their constituents. By reaching out in this way they were able to secure a list of host schools for the upcoming year. The Northern and Central California chapter offered a full day conference at Oracle’s Redwood City Campus and utilized many of Oracle’s learning and development offerings. And a little bit farther north, the Oregon chapter celebrated its 10 year anniversary with a two day event held on the Oregon coast!

Please see 2017-18 CUPA-HR Chapter Successes & Updates for more details.

DOL Issues Opinion Letter on Wellness Activities

On August 28, the Department of Labor (DOL)’s Wage and Hour Division (WHD) issued six new opinion letters to address compliance issues under both the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). As WHD states, “an opinion letter is an official, written opinion by WHD on how a particular law applies in specific circumstances presented by the person or entity requesting the letter.”

The August announcement builds upon DOL’s June 2017 statement that it would reinstate the issuance of opinion letters — a longstanding practice of DOL before it was eliminated during the Obama administration and replaced with broader “Administrator Interpretations”— and the January 2018 reissuance of 17 opinion letters drafted at the end of the Bush administration yet withdrawn by the Obama administration before they could be mailed.

While the recent batch of newly released opinion letters address a variety of issues, one of the letters answers an individual’s request for WHD to opine on whether the FLSA “requires compensation for the time an employee spends voluntarily participating in certain wellness activities, biometric screenings and benefits fairs.” The fact pattern set forth in the letter is as follows:

The employer allows (does not require as it is completely voluntary) its employees to participate in biometric screenings which test such things like an employee’s cholesterol level, blood pressure and nicotine usage, as the participation in such screening could reduce the individual employee’s insurance deductibles. The employer also allows employees to participate in wellness activities that may reduce an employee’s insurance premiums. These activities can include attending health classes, participating in Weight Watchers and using the employer-provided gym; however [these activities] are completely voluntary and do not relate to the employee’s job. Finally, the employer also allows employees to attend benefits fairs to learn about topics like employer-provided benefits and financial planning. Again, employees’ attendance at the fairs is entirely optional, open to all employees and not related to the employees’ jobs.

DOL analyzed the facts set forth in the letter using the U.S. Supreme Court’s 1944 determination in Armour & Co. v. Wantock that the compensability of an employee’s time depends on “whether it is spent predominantly for the employer’s benefit or for the employee’s” and separate regulations (29 C.F.R. § 785.16.) which provide that an employee is not entitled to compensation for “off duty” time — “periods during which an employee is completely relieved from duty and which are long enough to enable him to use the time effectively for his own purposes.” Based on that analysis, WHD found that because “the activities described in the letter predominantly benefit the employee, they do not constitute compensable work time under the FLSA.”

As such, WHD concluded that regardless of whether the activities occur on-site or during regular working hours, “the FLSA does not require compensation for the time employees choose to spend engaged in the activities described in the letter.”

DOL encourages the public to submit requests for opinion letters to WHD using this website and reminds the public that the request must state that the opinion is not sought by a party in a WHD investigation or for use in any litigation that was initiated prior to the submission of the request.

Wildfire Projects Tackle Recruitment, Faculty Education, Employee Relations and Hiring Veterans

Last July we shared with you how six early-career HR professionals started a journey to develop their skills and careers in higher ed. We recently had the pleasure of watching that class of CUPA-HR’s Wildfire program — Shamika Patterson, Tapiwanashe Nhundu, Chris Roediger, Thuy Nguyen, Heather Butterfield and Drexel King — as they ended their program year at CUPA-HR’s Association Leadership Program (ALP).

The capstone to their experiences involved giving back to the higher ed HR community in two ways —sharing successful practices and mentoring their peers.

Sharing Successful Practices

Each Wildfire program participant spends the year developing and carrying out a project, the goal of which is not only to develop their competencies as higher ed HR professionals and leaders, but also to contribute a body of knowledge to the higher ed HR community.

Here’s what the group worked on:

Recruitment and Selection

Nhundu’s goal was to bridge the gap between marginalized populations within her institution’s surrounding community in need of employment and eager hiring managers ready to enhance their campus departments. To achieve this, she partnered with organizations such as Berkshire Community College, McCann Technical School and Berkshire Immigrant Center, and identified opportunities to use the partnerships with these organizations to fill skills- and experience-gaps within the college’s workforce.

Butterfield paired her Wildfire project with research she’s conducting to attain her master’s degree in business administration from Viterbo University. She’s exploring how HR professionals in higher ed can screen for civility in the recruitment and hiring process. She expects to complete her research late this summer and will be sharing the outcome with us.

Faculty Education

Patterson set out to create a level of consistency among recruiting practices for faculty departments in her school. She used her Wildfire program shadow visit experience to learn what other institutions are doing and is developing a faculty recruitment handbook to help improve the process at her institution.

Nguyen took on the challenge of educating faculty in her school on HR processes and procedures to help streamline and improve collaboration with HR. She developed and conducted educational sessions with faculty departments in her school that were well received. She’s shared some of her materials with us in the Retirement Planning Toolkit in the Knowledge Center.

Employee Relations

Roediger made a move during her program year from Ohio to Arizona, where she’s now the director of HR for Northland Pioneer College — a school that serves a majority Native American population in a rural area of the state. For her project, she is developing an employee relations committee to boost morale in a workplace culture that has experienced significant and seemingly constant change over the last decade.

Hiring and Retaining Military Veterans

King is a former Marine who recently transitioned from the military to a learning and development role in higher ed HR. From that experience, he wanted to ease the transition for other veterans and help higher ed recruiters, hiring managers and supervisors attract and retain veterans. To do so, King conducted research to uncover best practices in this area. He’ll be sharing the guidance he uncovered in a CUPA-HR Essentials video to be released in the coming months.

Mentoring Peers

As these six professionals finished their program year with capstone projects on recruitment and selection; faculty education; employee relations; and hiring and retaining military veterans, a new group of Wildfire participants is just getting started. This year’s participants are:

                 2018-19 Wildfire Program Cohort

  • Abby King, HR Office Manager, University of Kansas Main Campus
  • Ashley Dugger, Senior HR Generalist & Title IX Coordinator, Sweet Briar College
  • Chi Herrington, Human Resources Associate, Harvey Mudd College
  • Christopher Dominiak, Manager, Benefits Systems & Administration, The University of Arizona
  • Deborah Lee, Senior HRIS Analyst, The Catholic University of America
  • William Budding, Human Resources Coordinator, Harvard University School of Dental Medicine
  • Latasha Gause, Employment Coordinator, Office of HR and Equal Opportunity, Coastal Carolina University
  • Maria Wingenbach, Assistant Director of HR – Total Rewards, Concordia College
  • Mollie Blanchard, Talent Management Specialist, Cochise College
  • Rachel Williams, Director of Talent Development, Ivy Tech Community College of Indiana – System Office
  • Tammi Stuebe, Assistant Director of Human Resources, Mercer County Community College
  • Tyler Mayo, Employee Relations Coordinator, Palm Beach Atlantic University

To enhance the experience by providing guidance and support for the new cohort, Patterson, Nhundu, Roediger, Nguyen, Butterfield and King are serving as peer mentors to the new group of Wildfire participants. They’ll provide thoughtful insight based on their own experiences with the program, needed support for the work the new participants are doing on their campuses, and valued advice on navigating work on campus and within the program.

The experience of being a mentor will help the program alumni build close relations with their peers in higher ed HR, develop leadership skills, and continue to nurture relationships they started during their time with the program. (For guidance on mentoring, check out the CUPA-HR Essentials videos on Making the Most of Your Mentorship and Making the Most of Being a Mentor.)

Learn more about the Wildfire program, and stay tuned to see the 2017-18 cohort’s project results as they’re finalized. If you’re interested in applying for the Wildfire program, mark March 2019 on your calendar — that’s when we’ll be accepting applications for next year.

HR and the Courts: Recent Rulings and Legislation

Each month, CUPA-HR General Counsel Ira Shepard provides an overview of some labor and employment law cases and regulatory actions with implications for the higher ed workplace. Here’s the latest from Ira:

State Prosecutors Beginning to Bring Criminal Charges Against Employers That Violate Wage and Hour Laws

Minimum wage and overtime violations have for decades, as a matter of civil law, been the exclusive domain of government investigations or private lawsuits. However, prosecutors in New York State and California have recently begun to enforce wage and hour violations with criminal actions against some offending employers and their officials, particularly those who have allegedly “institutionalized” wage theft as part of their operating model. Because the construction industry has been ripe with action in this area, special care might be in order during campus construction projects.

ERISA Pension Litigation Against Prominent Universities Continues, With Mixed Results

At least 20 prominent universities across the country have been sued under ERISA in collective actions, facing allegations of excessive administrative fees, fiduciary violations for having confusing and too numerous investment alternatives, and other fiduciary breaches.

Recently, Northwestern University and the University of Pennsylvania received complete victories in their cases, with federal district court judges dismissing the cases as without merit on the basis of the summary judgement motions filed by the universities.

The University of Chicago took a different route and settled its case, reportedly for $6.5 million, after the presiding judge denied the university’s motion to dismiss and certified two classes of plaintiffs. Other judges have allowed similar lawsuits to proceed against Columbia University, Emory University, Johns Hopkins and Princeton, denying respective motions to dismiss.

Other judges have granted class status to lawsuits filed against New York University and Duke University, which could raise the stakes in ongoing litigation. Most recently, George Washington University filed a motion to dismiss the proposed class action filed against it alleging administrative and fiduciary violations of ERISA, stating the allegations were “meritless” and if allowed to proceed could “needlessly saddle the university with millions of dollars of legal fees, just to defend.”

Supreme Court’s Janus Decision Barring Public-Sector Unions From Collecting Money for Collective Bargaining From Nonmembers May Spur Union-Friendly Legislation in Democratic States

The recent decision of the U.S. Supreme Court in Janus v. American Federation of State, County, and Municipal Employees, Council 31, which bars public-sector unions from collecting money for collective bargaining from nonmembers on First Amendment grounds, is a blow to public-sector unions, including those representing employees, professors and staff at public colleges and universities. Nonetheless, in Democratic and union-friendly states, the decision may spur state legislatures to find other ways to assist public-sector unions, and a wave of public-sector union-friendly legislation may be on the horizon in “Blue” states.

In the Janus decision, the Supreme Court reasoned that collective bargaining itself is a political matter and that collecting money from public-sector employees who are not union members to support collective bargaining is a violation of those employees’ First Amendment rights to support or not support the effort. In areas such as the right of public-sector employees to strike and to seek mandatory arbitration, states which currently bar such activities or are silent on the matter may see a wave of proposals to allow such activity.

NYU Prevails in Adjunct Professor’s Hostile Work Environment and Sexual Harassment Litigation Where Allegations Were Not Tied to a Specific Individual, But Rather the Plaintiff’s Speculation as to the Authors of the Offending Communications

The Second Circuit U.S. Court of Appeals (covering New York, Vermont and Connecticut) recently affirmed a federal district court judge’s decision to dismiss claims made by a former adjunct professor, who, following termination, asserted that she had been the victim of sexual harassment and a hostile work environment and was terminated for raising these issues (Russell v. New York University et al. (Case no. 17-2527, 2nd Cir, July 1, 2018)).

The plaintiff claimed that she had received mailings including pornographic pictures of women and named five professors who she suspected were responsible for the harassment. She claimed that the university took no action against the alleged perpetrators and failed to even warn them to stop the offending conduct. She also claimed that she was terminated shortly after raising these allegations.

The appeals court affirmed the trial court’s dismissal of the plaintiff’s case, holding that the university had no legal duty to take any action against the alleged perpetrators where the plaintiff produced no evidence against them other than her “speculative say-so.” The appeals court also affirmed the dismissal of her retaliatory discharge allegations, holding that in the Second Circuit, the precedent stands that “temporal proximity alone is not enough to establish pretext” to commit unlawful discrimination. The plaintiff’s counsel stated that he intends to continue to pursue related litigation pending in state court.

Mandatory Paid Sick Leave Is Now Required in Almost 20 Percent of States, Plus D.C. and Puerto Rico

Employers in Arizona, Connecticut, Maryland, Massachusetts, New Jersey (effective October 2018) Oregon, Rhode Island, Vermont and Washington, plus the District of Columbia and Puerto Rico, must now provide some kind of paid sick leave to regular employees. While the statutes vary from state to state, many require some kind of paid sick leave for part-time and temporary employees as well. The trend appears to be growing and may affect more states as time goes on.

Supreme Court Bans Mandatory Union Fees for Public-Sector Workers

By Lisa Nagele-Piazza, SHRM-SCP, J.D.
Jun 27, 2018

In a closely watched case, the U.S. Supreme Court overturned 40 years of precedent by ruling that mandatory public-sector union dues are unconstitutional.

In a 5-4 vote on June 27, the justices held that states and public-sector unions may no longer require workers to pay agency fees. “Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay,” Justice Samuel Alito Jr. wrote for the majority.

In dissent, Justice Elena Kagan said the decision will have large-scale consequences. “Public employee unions will lose a secure source of financial support. State and local governments that thought fair-share provisions furthered their interests will need to find new ways of managing their workforces,” she wrote.

“This decision frees public-sector employees from being forced to pay union fees as a condition of working for the government,” said Kevin Kraham, an attorney with Littler in Washington, D.C. “This is a landmark win for workers’ rights and the First Amendment, and a significant loss for public-sector labor unions.”

In recent years, there has been a renewed interest at the state level in banning mandatory union fees. Currently, 28 states have “right-to-work” laws that make it illegal to require workers to join a union or pay related fees as a condition of employment. But some of those state laws affect only the private sector.

The Supreme Court’s ruling makes every state a right-to-work state for the public sector, said Shannon Farmer, an attorney with Ballard Spahr in Philadelphia.

“The decision means unions must drive a better value proposition to keep current members and attract new ones,” said Daniel Guttman, an attorney with BakerHostetler in Columbus, Ohio. Now that fees are not guaranteed from all unionized public-sector employees, the services a union provides will need to become more apparent in order to retain their current membership levels, he said.

The Society for Human Resource Management believes in the fundamental right—guaranteed by the National Labor Relations Act—of every employee to make a private choice about whether to join a union, according to SHRM’s 2018 Guide to Public Policy Issues.

Unionization Rates

Union membership in the United States has significantly declined in recent years. In 2017, 10.7 percent of workers were union members, compared to about 20 percent in 1983, according to the U.S. Department of Labor’s Bureau of Labor Statistics (BLS).

In 2017, 7.2 million public-sector and 7.6 million private-sector employees belonged to a union. Although the actual head count was similar in each sector, a much higher percentage of public-sector workers (34.4 percent) than private-sector workers (6.5 percent) were unionized.

BLS statistics showed that union-membership rates were highest for local government workers (40.1 percent), such as teachers, police officers and firefighters. In the private sector, unionization rates were highest in utilities (23.0 percent), transportation and warehousing (17.3 percent), telecommunications (16.1 percent), and construction (14.0 percent).

Seven states—California, Illinois, Michigan, New Jersey, New York, Ohio and Pennsylvania—account for over half of the nation’s union membership, according to the BLS.

Controversial Case

In Janus v. AFSCME Council 31, U.S., No. 16-1466, the Supreme Court was asked to decide if public-sector employees can be required to pay union fees as a condition of employment. Mark Janus, an Illinois state employee, claimed that such fees are unconstitutional under the First Amendment’s rights to free speech and association.

Janus asked the court to overturn its 1977 ruling in Abood v. Detroit Board of Education. In that case, the Supreme Court held that government employees could be required to pay “agency” or “fair-share” fees to cover the cost of collective bargaining, contract administration and grievance adjustments—but that employees can’t be forced to cover a union’s political activities, such as lobbying.

Janus argued that collective bargaining is inherently political and that Abood should be overruled because it failed to apply heightened First Amendment scrutiny. “Employees are forced to pay a union for suppressing their own rights to speak and contract for themselves,” his petition said. “This is perverse, akin to requiring kidnapping victims to pay their captors for room and board.”

Union advocates, however, argue that agency fees prevent workers from “free riding,” or reaping the benefits of union representation without paying for it. This is because unions are required to represent all workers in a bargaining unit regardless of whether they pay fees.

The justices considered the same issue in Friedrichs v. California Teachers Association, No. 14-915. Experts who closely watched the case predicted that it would be decided 5-4 in favor of the worker who opposed mandatory fees, with Justice Antonin Scalia voting in the majority. However, Scalia passed away in February 2016 before a decision was reached, and the remaining justices deadlocked with a 4-4 vote.

The tie vote in Friedrichs left intact a 9th U.S. Circuit Court of Appeals ruling that such fees are permissible. Since then, conservative Justice Neil Gorsuch has joined the Supreme Court, and he cast the tie-breaking vote.

Gorsuch, along with Chief Justice John Roberts Jr. and Justices Anthony Kennedy and Clarence Thomas, joined the majority. Justices Stephen Breyer, Ruth Bader Ginsburg and Sonia Sotomayor joined the dissent. Sotomayor also filed a separate dissenting opinion.

Divided Reactions

The high court’s decision has been met with mixed reactions from lawmakers. Some Republican legislators applauded the decision. “The Supreme Court’s ruling that millions of public sector employees will no longer have to financially support an organization they disagree with, just to keep their jobs, is a victory for free speech and a victory for the American workforce,” said Reps. Virginia Foxx, R-N.C., and Tim Walberg, R-Mich., in a press statement.

However, some Democratic leaders criticized the Supreme Court’s ruling. “Corporate interests have been rigging the system against workers for decades—and the Supreme Court just handed those interests a huge victory in Janus v. AFSCME,” tweeted Sen. Elizabeth Warren, D-Mass. Tom Perez, the Democratic National Committee chair and former secretary of labor, tweeted that the decision “is nothing more than blatant and disgraceful union busting.”

Second Circuit Court Rules That Title VII Covers Sexual Orientation Claims

On February 26, the Second U.S. Circuit Court of Appeals, overruling its own precedent,  ruled that Title VII of the Civil Rights Act of 1964 (Title VII) prohibits employers from discriminating against their employees based on sexual orientation, deepening a circuit court split on the issue which will eventually have to be decided by the Supreme Court.

While Title VII clearly prohibits workplace discrimination on the basis of “race, color, religion, sex or national origin,” and, since 1989, gender stereotyping, the law remains unclear and divided as to whether Title VII protections also apply to sexual orientation discrimination. In fact, until recently, legal doctrine has held the view that sexual orientation discrimination claims are not “cognizable” under Title VII.

However, legal doctrine can change, and in a July 2015 decision in the case Baldwin v. Foxx, the Equal Employment Opportunity Commission (EEOC) held, for the first time, that “sexual orientation is inherently a ‘sex‐based consideration;’ accordingly an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.”

Since the EEOC’s decision, three other circuits (not including this most recent Second Circuit ruling) had revisited the viability of sexual orientation discrimination claims under Title VII with mixed findings. In March 2017, the Eleventh Circuit held that Title VII does not extend to sexual orientation; but both the Seventh Circuit (April 2017) and the First Circuit (January 2018) recently ruled that Title VII does cover sexual orientation claims.

It was during this process of evolving precedent where the case Zarda v. Altitude Express played out in the Second Circuit. In 2010, the plaintiff filed suit against his former employer, skydiving company Altitude Express, claiming he had been fired because he was gay. The original suit, filed in New York federal court, alleged “sex stereotyping in violation of Title VII and sexual orientation discrimination in violation of New York law.”

The district court judge presiding over the matter ruled against Zarda due to the Second Circuit’s then-current precedent, stemming from cases in 2000 and 2005, which held that that “sexual orientation discrimination claims, including claims that being gay or lesbian constitutes nonconformity with a gender stereotype, are not cognizable under Title VII.”

Following the EEOC’s 2015 decision, Zarda asked the district court to reinstate his Title VII claim, but the court denied his motion, as the Second Circuit’s previous rulings still remained binding precedent. Zarda appealed and, in the face of the new decisions from the EEOC and Seventh Circuit, the Second Circuit “convened en banc” to reevaluate its previous positions on the issue. That reevaluation delivered the Second Circuit’s February 26 ruling that “Title VII prohibits discrimination on the basis of sexual orientation as discrimination “because of … sex” and deepened the current circuit court split on the issue.

5 Changes to Unrelated Business Income Tax and Fringe Benefits Rules Under the New Tax Law

This blog post was contributed by John Graham, vice president and regional director of compliance research at Sibson Consulting.

Since the new tax bill was passed, we’ve received a number of questions as to how the legislation affects higher education and its employees. To help answer these questions, we’ve partnered with CUPA-HR Mary Ann Wersch Premier Partner Sibson Consulting to publish a series of blog posts. These posts will be based on the information we currently have and will be updated as any guidance is issued. The content is for general information purposes only and should not be considered tax or legal advice.

This first post by John Graham will answer some of the questions surrounding the unrelated business income (UBI) tax that applies to tax-exempt colleges and universities as well as relevant changes to the fringe benefit rules.

Unrelated Business Income Tax
Under the new (as well as the prior) tax law provisions, income from what is classified as an “unrelated trade or business” and debt-financed income can give rise to unrelated business income (UBI). To parallel the changes in the corporate tax rate, for tax years beginning after December 31, 2017, unrelated business taxable income, which is UBI after deductions and a $1,000 “specific deduction,” is generally taxed at a flat tax of 21 percent (a special rule applies if the institution’s tax year is not the calendar year). UBI tax is reported by the institution on Form 990-T, which will be updated for 2018 to reflect the changes brought by tax reform.

In addition to the items that have traditionally been subject to UBI tax, the tax reform legislation adds a number of other items. The rationale behind these additions is that since tax reform removed the deduction for these items for taxable corporations, which are subject to a 21 percent tax rate, a 21 percent UBI tax will generally treat tax-exempt entities the same as taxable entities.

Transportation Benefits
Under tax reform, beginning with the 2018 taxable year, UBI of a tax-exempt institution will include the value of any qualified transportation fringe benefit provided on a pre-tax basis to employees. This likely includes buses, van pools, transit passes, parking passes and reimbursements. The language of the law is broad enough to include reimbursement for parking and transit benefits that are paid from pre-tax employee deferrals.

Example: A college provides parking vouchers to 60 employees that pay for $50 per month of parking expenses on a tax-free basis. The annual value of those vouchers would be $36,000 (60 X $50 X 12), which would be treated as unrelated business income. The $1,000 specific deduction would be subtracted from the UBI. The $35,000 balance would then be subject to the UBI tax rate of 21 percent, resulting in a $7,350 tax bill for the college.

As a result of the change, if an institution wants to continue to provide these benefits on a pre-tax or tax-free basis, the institution is required to report the value of the benefits as unrelated business income. On the other hand, if the organization chooses to no longer provide tax-free or pre-tax benefits, the benefits will be treated as increased income subject to higher FICA taxes (and employees will also face higher income taxes), but there will be no UBI tax.

On-Site Athletic Facilities
Under the new law, the value of use of on-premises athletic facilities provided to employees would be considered UBI to the institution. However, it very often will not apply. For purposes of the tax, an on-premises athletic facility is defined under the Internal Revenue Code as one: (1) which is located on the premises of the employer; (2) which is operated by the employer; and (3) substantially all of the use of which is by employees, their spouses and their dependent children. In most cases, on-premises athletic facilities are provided for and used primarily by students. As a result, the value of use of an on-campus fitness center can still be provided tax-free to staff, and will be free of UBIT for the institution.

Moving Expenses
Under tax reform, employees may no longer exclude from income reimbursements received from their employer for their moving expenses. (For example, a university must include in income any amount it reimburses a new professor for moving to the university’s location.) Similarly, employees may no longer deduct any unreimbursed qualified moving expenses. These changes are effective in 2018 and will continue through 2025, when they sunset.

Bicycle Reimbursements
Prior to tax reform, an employer could reimburse qualified bicycle commuting expenses, on a tax-free basis, of up to $20 per month for each month that an employee regularly uses a bicycle for commuting to work. Tax reform has eliminated this exclusion from income. This change is effective in 2018 and will continue through 2025, when it sunsets.

Employee Achievement Awards
Tax reform changes the employer deductibility of most employee achievement awards and the exclusion from income for the employee. The change affects cash, gift coupons, gift certificates, vacations, meals, lodging, tickets to sporting or theater events, securities and “other similar items.” The change does not impact gift certificates allowing the recipient to select tangible property from a limited array of items pre-selected or pre-approved by the employer.

For these purposes, an employee achievement award is tangible personal property awarded: (1) for a length of service achievement or safety achievement, (2) as part of a meaningful presentation, and (3) under circumstances that don’t create a likelihood of disguised compensation.

Let us know what challenges you’re facing due to these tax changes, or share examples as to how you’ve addressed these changes. Email .

ACE Urges Senate to Reconsider Approach to Higher Education in Tax Bill

Reposted from the American Council on Education:

Budget Committee Advances Bill to Senate Floor for Vote

The Senate Budget Committee on Tuesday advanced the chamber’s version of the Tax Cuts and Jobs Act (S. 1), with two key Republicans voting for the measure after previously expressing concerns. ACE has written three letters to Senate leaders this week, urging them to reconsider their approach to higher education as they continue working on the legislation.

The bill was approved by a party-line vote of 12-11. The vote sends the measure to the Senate floor, where it could be considered as early as today in an effort to get legislation to President Trump’s desk before the end of the year.

Two senators, Ron Johnson (R-WI) and Bob Corker (R-TN), reportedly were considering voting against the bill in committee if their concerns were not addressed. Johnson believed the bill did not do enough to help pass-through businesses, while Corker was concerned about the impact on the national debt. However, they ultimately voted in favor of the measure.

Impact on Higher Education

Although the Senate bill retains the student benefits the House bill eliminates, other problematic provisions remain, including those reducing charitable giving, changing the state and local tax (SALT) deduction, and creating an excise tax on private colleges and universities.

The Senate bill also would repeal the deduction for personal exemptions, including for college-age dependents. And while it would retain tax-exempt private activity bonds that are particularly important to private colleges and universities, the Senate measure would repeal advance refunding bonds, an important tool for institutions to refinance outstanding debt at lower interest rates, and broaden the tax on Unrelated Business Income (UBIT), increasing the regulatory burden, complexity, and cost.

Among the letters ACE sent to the Senate this week:

  • Nov. 29: To express continued strong opposition to the provisions in the Senate bill that will make college more expensive and erode the financial stability of public and private, two-year and four-year colleges and universities.
  • Nov. 28: To urge the Senate to reject provisions in the House version of the Tax Cuts and Jobs Act that repeal and make detrimental changes to education tax benefits that help millions of students and their families finance and repay a college education.
  • Nov. 27: To encourage reconsideration of the endowment excise tax, referring Senate members to two articles discussing the fundamental flaws in the provision, one by Michael R. Strain, a scholar at the American Enterprise Institute, and the second by George Will.

The House voted 227-205 Nov. 17 to approve its version of the bill. Among the provisions ACE and the higher education community has raised objections to in that measure are:

  • Sec. 1002: Changes to the standardized deduction, which will reduce charitable contributions to our institutions;
  • Sec. 1002: Repeal of the Lifetime Learning Credit, while not substantially increasing the American Opportunity Tax Credit (AOTC);
  • Sec. 1204: Repeal of the Student Loan Interest Deduction (SLID);
  • Sec. 117(d): Repeal of the qualified tuition reduction;
  • Sec. 127: Repeal of educational assistance programs;
  • Sec. 1303: Changes to the state and local tax (SALT) deduction, which will reduce state budgets and, in turn, funding for public higher education;
  • Sec. 3601: Termination of private activity bonds;
  • Sec. 3602: Repeal of advance refunding bonds; and,
  • Sec. 5103: Creation of a new excise tax on endowments at private colleges and universities.

For more information and to contact Congress on the Tax Cuts and Jobs Act, see the community’s Tax Reform and Higher Education resource page.