Guidance Proposed on Capitalization of Interest Cost
The Governmental Accounting Standards Board (“GASB”) wants to update guidance on construction period interest costs. In its Exposure Draft, Accounting for Interest Cost during the Period of Construction , the GASB proposes expensing interest costs incurred during the construction period. For financial statements prepared using the current financial resources measurement focus, interest incurred during the construction period would still be categorized as an expenditure on a basis in line with governmental fund accounting principles. If approved, the finalized GASB Statement would be applied to reporting periods starting after December 15, 2018. Early application is encouraged. Comments on the Exposure Draft are due March 5, 2018.
Report Recommends Improving Educational Quality at Colleges
The American Academy of Arts and Sciences has issued a study calling for improved educational quality to help college students excel in the 21st century. In its report, “The Future of Undergraduate Education, The Future of America,” the academy proposes a three-part strategy that ensures first-rate learning experiences, increased completion rates and reduced inequities among higher institutions, and controlled college expenses. While the academy believes technology will help boost educational quality, it anticipates some of its goals could take decades to accomplish. More on the American Academy of Arts and Sciences report is available on the Inside Higher Ed website.
Federal Student Aid Changes Proposed
The House Committee on Education and the Workforce has released a proposal to significantly change how the U.S. government distributes student aid. Announced last week as the Promoting Real Opportunity, Success and Prosperity through Education Reform Act, the plan involves deregulating and restricting oversight of portions of federal aid programs. Proposed changes include simplifying student aid options, eliminating the public service loan forgiveness program, and changing the federal work-study program by distributing money to colleges based on student need. Learn more about the proposed changes to federal student aid is available on the Inside Higher Ed website.
FAFSA Mobile App Announced
In its efforts to update the federal student aid system, the Department of Education is planning to make the Free Application for Federal Student Aid (“FAFSA”) available via a mobile application. Office of Federal Student Aid Chief Operating Officer A. Wayne Johnson said the app would make it easier for students to file for federal aid and provide a modernized experience throughout the application process. Johnson also noted that the app could perform many of the functions that student loan servicers can provide borrowers via the web and telephone. The app will likely arrive in April. More on the future FAFSA mobile app is available. Read More.
Tax Reform Could Impact Colleges’ Unrelated Business Income
If the proposed tax reform passes the Senate, colleges could lose their exemption from tax on certain income not connected to their academic mission. The proposal calls for expanding the unrelated business income tax and would include licensing royalties generated from the use of an institution’s name or logo. Colleges and universities with more than one unrelated business activity would also have to calculate the net income or loss from each activity separately and would not be able to offset income from one activity with loss from another. Several higher education groups believe the tax reporting changes could be burdensome. Read More.
Tax Court Says Country Club Must Pay UBTI Taxes
An Ohio country club may not deduct losses incurred from nonmember services. The Tax Court ruled that when Losantiville Country Club filed its annual Form 990-T, the organization did not show intent to profit from nonmember sales since its nonmember sales did not surpass the direct and indirect costs about those sales and thus it could not apply those losses to negate its taxable investment income. Losantiville had claimed losses against investment income earned from 2010 and 2012, resulting in no unrelated business taxable income (“UBTI”). More on the Tax Court ruling on Losantiville Country Club is available on the Journal of Accountancy website.