2018 Fall issue of Horizons

Exempt Organizations New Tax Law Update – Taxation of Certain Fringe Benefits The Tax Cuts and Jobs Act (the Act), enacted

the same level of discussion as the changes to itemized deductions, but could have a material impact on many exempt organizations. The rules became effective on January 1, 2018 for all exempt organizations, regardless of the year-end of the organizations. Many exempt organizations are currently modeling through the potential implications of the new rules, including how increased UBI could impact budgets for 2018 and future years, estimated timing for federal/state UBI tax payments and internal changes in policies and procedures to mitigate the effect of the new provisions. It should be noted that many details and questions regarding the applicability of the new rules have not yet been addressed by the IRS, although guidance is expected at a later date.

in late 2017, was the most significant change in the tax law in over 30 years. Several provisions of the Act could have a direct or an indirect impact on not-for-profit/tax-exempt entities (exempt organizations). There has been much discussion about decreases in individual charitable giving due to changes in itemized deductions and greater applicability of the increased standard deduction for many taxpayers. The impact of these changes on donations to Section 501(c)(3) organizations could be realized by organizations currently and in the near future. Another change made by the Act is the cost of providing commuter transportation and parking fringe benefits to employees, which is now considered unrelated business income (UBI) to exempt organizations. This change has not created

AIB Folds Into State of Iowa AIB College of Business, founded in 1921, ceased operations on June 30, 2016, by donating its campus facilities to the State of Iowa Board of Regents. Roughly 1,000 students attended AIB, previously the least expensive private college in the state, and AIB had an endowment of about $6.7 million with $1.5 million of debt. Although AIB’s debt to asset ratio was above an acceptable threshold, something significant had to change because AIB was moving through cash at an unsustainable rate and the budget was not balanced. The trustees evaluated the donor base, the ability to increase tuition and the ability to secure additional debt, ultimately leading the trustees to determine that none of those options could be relied upon with confidence to support operations at a long-term sustainable level. The trustees of AIB also evaluated the density of competition of private higher education in the state of Iowa and determined it was such

a competitive environment that to ultimately succeed in the long-term, AIB would need a new strategy and an exceptional commitment to pull it off. The trustees noted that the land and buildings of AIB were in a desirable location, of good quality and the endowment was positive, affirming that it was in the best interest of the school to continue the mission of AIB by donating itself to the State of Iowa Board of Regents. As one AIB trustee commented, the donation to the State of Iowa Board of Regents was favorable because universities under the Iowa Regents would last “forever.” Potential Obstacles Even when a merger has the potential to achieve the desired motivation, there are a myriad of obstacles to consider in the merger process. Some obstacles include determining how the new entity fits, taking on additional debt

Prominent Mergers & Acquisitions in Higher Education

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