During the summer of 2020, NACUBO invited tax professionals from member institutions to participate in a survey on tax concerns related to the Tax Cuts and Jobs Act and recent developments related to tax and regulatory relief offered as a result of the COVID-19 pandemic.
We asked specifically about several provisions: filing and payment extensions granted by the IRS; and the temporary Employee Retention Credit and the payroll credit for paid leave, created as a part of the Families First Coronavirus Response Act (one of the first bills Congress passed after the onset of the COVID-19 crisis).
NACUBO received responses from 129 schools, primarily small private colleges along with some large public universities. As the response rate was small, the results are not generalizable across the higher education sector, but they do provide a snapshot of tax practices for reflection and consideration.
Following formal requests from NACUBO, the American Institute of Certified Public Accountants, and other groups, the IRS extended tax filing relief to more than individual and corporate taxpayers, announcing that filing extensions until July 15, 2020 would apply to all taxpayers, including colleges and universities, that had a filing or payment deadline falling on or after April 1, 2020 and before July 15, 2020. The Form 990-series returns or notices were included in this extension. Thirty-five percent of public colleges and 29 percent of private institutions that responded to the survey took advantage of this relief.
Approximately one in three colleges utilized the delayed filing deadline given the unplanned workplace challenges in the spring of 2020 due to COVID-19; other institutions may have largely completed their FY19 federal tax filing and the extension was not necessary.
Institutions, public and private, were also given the opportunity to postpone payment of the employer’s share of FICA taxes that otherwise would be due on wages for the period March 31-December 31, 2020. The first half is due by December 31, 2021 and the remaining half is due by December 31, 2022. More private colleges than public colleges in our survey implemented the postponement.
The Employee Retention Tax Credit (ERTC) is available for 50 percent of qualifying wages paid to employees during the crisis, with a cap of $10,000 on qualifying wages, so employers may claim no more than $5,000 per employee. However, the refundable credit is available only to private institutions whose operations were fully or partially suspended due to a COVID-19-related shut-down order or whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. Once again, possibly due to program qualification limitations, we saw only partial participation in the program, but the benefit to mid-sized colleges appears to be substantial.
Learn more about pandemic-related tax credit and deferrals on NACUBO’s COVID-19 Employer and Tax Resources webpage. There, you’ll find more information about these and other tax credits and regulatory relief, as well as information on pandemic relief loans available from the federal government.