Proposed Section 4968 regulations address university excise tax

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July 2019

Overview

The IRS and Treasury on June 28 issued 58-page proposed regulations (the Proposed Regulations) under Section 4968. Added as part of the 2017 tax reform legislation and effective for tax years beginning after December 31, 2017, Section 4968 imposes a 1.4% excise tax on the net investment income (NII) of certain private colleges and universities.

Generally, the Proposed Regulations define and request comments regarding key terms and concepts that will aid an educational institution in determining whether it is an applicable educational institution (AEI) that is subject to the Section 4968 excise tax. For an organization that already has determined that it is an AEI, the Proposed Regulations provide guidance and request comments regarding how to calculate NII.

The IRS and Treasury state that the guidance in the Proposed Regulations may be relied on until final regulations are issued. The deadline for written or electronic comments and requests for a public hearing to be received is 90 days after the date the Proposed Regulations are published in the Federal Register (presently scheduled to be July 3, 2019).

A detailed analysis of the Proposed Regulations with PwC observations will be published in a subsequent Tax Insights.

Click here to access the Proposed Regulations.

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Rob Friz

Health Services Tax Leader, PwC US

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