Tax Provisions

AJCU has worked extensively to maintain a number of tax provisions that have been important to our Jesuit institutions and to higher education throughout the years. By providing tax credits, deductions, and other benefits, primarily to middle class families, most of these provisions have assisted students and parents in offsetting the cost of higher education. Other provisions have benefited our institutions by incentivizing donations and by supporting research and development at our colleges and universities. For this reason, AJCU will continue to support the preservation of the following tax provisions:

Select Provision Described:

Unrelated Business Income Tax (UBIT)Although colleges and universities are tax-exempt entities, they are subject to tax on any unrelated business income they may generate. Recurring UBIT issues for higher education institutions include:

  1. Determining whether a particular activity is educational in nature, and therefore, qualifies for tax-exempt treatment; and
  2. Determining whether a non-educational activity is exempt from UBIT because income from the activity fits within a statutory exemption.

An example of a university income-generating activity that is subject to UBIT is income from sales of non-educational material such as CDs, DVDs, and other gift items by a campus bookstore.

Tax-Exempt Bonds: The interest earned on tax-exempt bonds issued by state and local governments is excludable from gross income for purposes of federal income taxes. Investors are generally willing to receive a lower rate of return on their investment than they might otherwise accept on taxable investments. Thus, the tax exempt bonds carry a lower cost of capital to the beneficiary (e.g. a university) of the bond proceeds. States can issue two kinds of tax-exempt bonds:

  1. Governmental bonds – the proceeds are used to finance governmental functions (e.g. build public schools or roads) or the proceeds are repaid with governmental funds; and
  2. Private activity bonds – the state or local government serves as the conduit for obtaining and providing the tax-exempt bond financing to certain nongovernmental entities, including private colleges and universities 

*The preservation of these tax programs is very important to our Jesuit Institutions. AJCU supports the extension of the IRA charitable rollover and Research and Development deductions, and the preservation of charitable contribution deductions.