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The 2017 law known as the Tax Cuts and Jobs Act (TCJA) enacted a tax on private, non-profit college and university endowments for the first time. Institutions with at least 500 tuition-paying students and endowments of $500,000 or greater per student now have to pay a 1.4% tax on their endowments. But like all taxpayers, colleges and universities may be tax averse or seek reductions in their tax burdens. That is, colleges and universities may try to avoid the tax through taking action to ensure they do not meet the threshold. Such actions include increasing the size of their student bodies, increasing student aid to ensure a small number of tuition-paying students, and spending down their endowments. Colleges may also attempt to offset taxed revenue by increasing other revenue streams. Examples of such behavior include increasing revenue from auxiliary services, admitting more “ full-pay” students who do not need financial aid, reducing financial aid for tuition-paying students (perhaps even while increasing the number of students who receive enough aid to become non-tuition paying), and admitting fewer low-income students. All of this would be economically rational behavior, but it could produce negative effects for higher-education stakeholder groups, such as students and their families. In this Article, we assess the ramifications of the TCJA’s endowment tax for college and university revenue-seeking behavior. We use a national-level dataset and a quasi-experimental statistical model known as the “Synthetic Control Method,” which is underutilized in legal research, to examine institutional behaviors in the wake of the TCJA’s passage. We find that individual institutions—such as Northwestern University, Duke University and Vassar College, among others—may have changed their admissions, enrollment and revenue-generating behaviors to reduce their overall tax burden, offset losses in revenue or avoid the tax. We suspect that this is evidence of firm behavior to game the endowment tax imposed by the TCJA.

The debt-financed income rules, codified as section 514 of the Internal Revenue Code, stand as a critical measure designed to prevent tax-exempt entities from using borrowedfunds to sell their exemption to for-profit firms hoping to avoid taxes. However, the apparent misfit between section 514 and the purposes for which Congress enacted the provision points toward the possibility of reform. This note explores the mechanics and historical development of section 514, critically examines its policy rationales, and evaluates its effectiveness in achieving its purposes. By comparing various avenues of reform, including expanding section 514's exceptions or repealing the provision entirely, this note aims to offer practical solutions that preserve nonprofits' interest in maintaining their tax-exempt status, without opening the door to abuse.

SDBAs have been panned, extolled, dismissed, and even regulatorily feared by different voices with varying perspectives from within the retirement plan industry. Some even consider them simply a necessary evil, while others see them as having untapped potential which is a perspective this column will explore.

Alternative investments became more common after the 2008 Great Recession due to their promise of higher returns. Although alternative investments may provide higher returns than traditional investments, they come with a higher risk profile, including the potential for higher administration cost associated with unrelated business income tax.

Since the first hybrid enabling law was passed in Vermont in 2008, the number of states offering hybrid forms has grown steadily, as has the number of entrepreneurs choosing statutory hybrids as a middle road between the for-profit and the nonprofit. Plaudits for and criticism of the hybrid form have also proliferated. Proponents have lauded their ability to facilitate socially conscious enterprise. Detractors have questioned the viability of the hybrid form and have suggested that they create more fiduciary conflicts than they resolve. To date, however, there has been no serious scholarly publication addressing the appropriate tax treatment of hybrid entities even though some supporters of hybrids have asserted that these forms deserve tax preferences. In this Article, we close that gap by thoroughly examining the arguments for tax preferences and the likely consequences that would flow from offering such preferences. We conclude that hybrid entities should not receive tax preferences traditionally offered to nonprofit entities because such an extension of tax benefits would likely have a deleterious effect, not only on the charitable sector and the public fisc, but also on hybrids themselves. Such an extension would almost certainly require a much clearer and narrower definition of public benefit that would undermine the much-toutedflexibility offered by the hybridforms, shift the financial risk of a hybrid not providing significant public benefit from its investors and donors to the public at large, place a substantial and likely unsustainable burden on the federal government to ensure that profitmaking does not trump providing public benefit, and threaten to undermine public support both for hybrid forms and for the existing tax preferences enjoyed by nonprofits. At the same time, we also conclude that some modifications to existing tax laws are appropriate in that they would acknowledge hybrids ' virtues while not exacerbating their potential weaknesses.

AMERICAN BAR ASSOCIATION SECTION OF TAXATION June 15, 2018 The Honorable David Kautter Assistant Secretary (Tax Policy) Department of the Treasury 1500 Pennsylvania Avenue, NW Washington, DC 20220 David Kautter Acting Commissioner Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20024 William M. Paul Acting Chief Counsel Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 Re: Second set of Recommendations for 2019[2018]-2019 Priority Guidance Plan Dear Messrs. Kautter and Paul: The American Bar Association Section of Taxation (the \"Section\") welcomes the opportunity to provide a second set of recommendations for inclusion in the 2018-2019 Priority Guidance Plan. Robert J. Neis, Benefits Tax Counsel, Department of the Treasury Douglas Poms, Deputy International Tax Counsel, Department of the Treasury Thomas West, Tax Legislative Counsel, Department of the Treasury Sunita Lough, Commissioner, Tax Exempt & Government Entities Division, Internal Revenue Service Scott K. Dinwiddie, Associate Chief Counsel (Income Tax & Accounting), Internal Revenue Service Helen M. Hubbard, Associate ChiefCounsel (Financial Institutions & Products), Internal Revenue Service Victoria Judson, Associate Chief Counsel (Tax Exempt & Government Entities), Internal Revenue Service Holly Porter, Associate Chief Counsel (Passthroughs & Special Industries), Internal Revenue Service Marjorie A. Rollinson, Associate ChiefCounsel (International), Internal Revenue Service Robert H. Wellen, Associate ChiefCounsel (Corporate), Internal Revenue Service Kathryn Zuba, Associate ChiefCounsel (Procedure & Administration), Internal Revenue Service As requested in Notice 2018-43 (the \"Notice\"),1 the Section of Taxation of the American Bar Association (the \"Section\") has identified the following tax issues that we recommend be addressed through regulations, rulings, or other published guidance in 2018-2019. 4.Definitional and operational guidance regarding the deduction for qualified business income. a. Applying the rule in the calculation of qualified business income when flowing through multiple tiered entities. b. Clarification regarding the ability/requirement to net the computation of losses from more than one trade or business against gains from another business. c. Whether the taxpayer may consider a management company an integral part of the operating trade or business and not a specified business activity if substantially all of the management fee company's income is from a qualifying trade or business. d. How the rules apply to the qualification of real property rental income as qualified business income. e. If grouping is allowed, whether a taxpayer may treat rental of real estate to a related C corporation as trade or business income under the self-rental principals. f. Guidance regarding the determination of items effectively connected with a business (e.g., section 1245 gains and losses, retirement plan contributions for partners and sole proprietors, the section 162(l) deduction, and one-half of self-employment income). g. In determining the unadjusted basis of assets, how are items expensed under section 179 subject to bonus depreciation treated. h. How the unadjusted basis of assets held January 1, 2018 impact the limitation calculation. i. The determination of the unadjusted basis of property subject to section 743(b) basis adjustments and impact on the limitation calculation. j. The effect, if any, on net investment income tax calculations. 5. Guidance regarding Small Business Accounting Method Reform and Simplification. a. Guidance regarding the transition rules for section 263A for taxpayers who meet the $25,000,000 small business definition and required method change. b. Guidance regarding the annual election under section 266 to capitalize taxes and carrying costs in lieu of deducting the interest, for taxpayer's [sic] owning real estate. c. Guidance regarding the transition rules for section 448 for taxpayers who meet the $25,000,000 small business definition and want to change to the cash method of accounting. d. Guidance clarifying that the aggregation of gross receipts under section 448 for affiliated taxpayers is required in calculating any limitations or exceptions to the general rule, for purposes of the $25,000,000 small business definition and required method change. e. Guidance regarding the transition rules for section 460 for taxpayers who meet the $25,000,000 small business definition and required method change. f. Guidance regarding the transition rules for section 471 for taxpayers who meet the $25,000,000 small business definition and required method change. g. Guidance clarifying the accounting for inventory as non-incidental and the costs required to be capitalized.

[...]we know that the pandemic has increased the number of layoffs and involuntary terminations. [...]there is little more gut-wrenching than paying out this compensation only to later find the individual misused or misappropriated company funds. Hudson explains these new designs afford a more balanced approach to investment risk along with the contribution stability of a defined contribution plan and the monthly income benefit for participants associated with a defined benefit plan. [...]Meredith Jacobowitz and W. Bard Brockman remind us of the importance of clearly stated claims procedures in \"Dot the Is and Cross the Ts: Consequences of Failing to Describe Internal Claims Appeal Procedures.\"

Section 4968, added to the Internal Revenue Code by the statute formerly known as the Tax Cuts and Job Act, imposes a tax on the investment incomes of some college and university endowments. Critics of section 4968 disparage this new tax as selectively targeting what are widely perceived as wealthy, politically liberal institutions such as Harvard, Yale, Princeton, M.I.T. and Stanford. There is a strong tax policy argument for taxing the net investment incomes of all charitable endowments including donor advised funds, community foundations, all educational endowments, and foundations supporting hospitals, museums and other eleemosynary institutions. Like corporations and private foundations that currently pay revenue generating income taxes, charitable endowments use public services and have capacity to pay tax. Section 4968 falls far short of the goal of a comprehensive, revenue generating tax on the universe of charitable endowments. Section 4968 is poorly designed to boot. Most anomalously, section 4968 taxes some relatively small educational endowments while leaving other, much larger endowments untaxed.