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Tax Services

The Tax Office provides tax advice internally and monitors tax compliance for all aspects of tax matters within the University systemwide. 

  • Hawaii General Excise Tax
  • Tax Reporting of Scholarships and Fellowships
  • Travel and Moving Expenses
  • Unrelated Business Income Tax

Official name for all forms: University of Hawaii

Federal I. D. Number:  99-6000354

Other Important U.H. Numbers
Dun & Bradstreet (DUNS) Numbers:

  • UH Manoa - 965088057
  • UH Hilo - 195738039
  • UH West O'ahu - 195737551
  • UH Maui College - 95736207
  • UH System - 078495204
  • Hawai'i CC - 195737056
  • Honolulu CC - 195736801
  • Kapi'olani CC - 195736512
  • Kaua'i CC - 195736348
  • Leeward CC - 195736272
  • Windward CC - 195306753

 

Hawaii General Excise Tax (Sales)

The State of Hawaii does not impose a sales tax on the buyer, but a general excise tax (GET) is levied upon the seller. This excise tax is for the privilege of doing business in the State of Hawaii. GET is levied on gross receipts or gross income derived from all business activities in the State. Furthermore, an out-of-state vendor is subject to the general excise tax if the vendor has sufficient presence in the State; presence in the State is established if the vendor has an office, inventory, property, employees, or other representation located in the State. If the vendor meets the criteria of conducting business within the State of Hawaii, the GET is imposed upon the vendor. The vendor may then pass the GET onto the University.

For the official State of Hawaii explanation, please refer to this site.
To search on a vendor's Hawaii tax license, please refer to this site.

Unrelated Business Income Tax

As a state instrumentality, University of Hawaii is generally tax exempt under Internal Revenue Code (IRC) section 115. However, IRC §511 and corresponding Treasury Regulations place a tax on income that is not related to the University’s exempt purposes. For income to be unrelated business income and taxable (UBTI), the activity generating the income must be:

  1. A trade or business – conducted with intent to generate profit.
  2. That is regularly carried on –Determined by looking to frequency, continuity, and whether manner conducted is consistent with the manner of a commercial taxable organization.
  3. And not substantially related to the exempt purpose of the organization – Does not contribute importantly to furthering the University’s purposes; motivated primarily for the production of income.

For further explanation and official guidance, please refer to this site

 

 

FAQs

Frequently Asked Questions

Case Studies +

Hypothetical Facts
A certain office on campus has an “ambassador” scholarship that is intended to promote leadership skills for the recipients. The scholarship is good for one year, renewable if the student meets academic requirements and fulfills his/her leadership role.

In appreciation for the student’s participation, a $400 stipend will be given to the participants from this “ambassador” scholarship. Also, the student participant can receive a summer tuition stipend of $500 in return for helping give campus tours in the summer and performing other tasks as needed. 

Tax Analysis:
There are two stipends here: scholarship of $400 and summer tuition stipend of $500.

Scholarship of $400

  1. If the scholarship is to pay for tuition, student fees, or books, the $400 would be considered a qualified scholarship, which is not taxable;
  2.     If the scholarship is not for tuition, student fees, or books, the $400 would be considered a non-qualified scholarship, which is taxable. For U.S. students, the scholarship payments need to be self-reported on their tax returns. For international students, Form 1042-S would be issued by UH.

Summer Tuition Stipend of $500

  1. Any time students are paid in return for performing duties (doing tasks of some kind), the payments are considered compensation and must be treated as such. 
  2. In this case, because the students receive money for giving campus tours (performing UH tasks), the $500 would be considered compensation under Internal Revenue Code section 117(c).

Hypothetical Situation
Situation #1:  UH was awarded a federal grant to train governmental entities from a foreign country to operate a cancer research facility.  Part of the grant was to pay for travel costs to the U.S. for the international governmental employees. The governmental entity submitted the invoice to UH for travel cost reimbursement. UH was not involved in selecting which employees were sent to Hawaiʻi.

Situation #2:  The University of Michigan signed an agreement to do a joint research project with UH on solar energy. As part of the agreement, UH will pay for the travel costs incurred by the University of Michigan staff.

Situation #3:  The Google CEO was the commencement speaker at the UH commencement exercise.  UH agreed to pay for the travel costs in addition to the honorarium.  The CEO asked UH to reimburse Google for his travel costs.

Tax Analysis
The predominant factor in the tax analysis for the situations described above lies in the determination as to whether the travel costs are business expenses of UH, or a taxable benefit to the travelers.

The travel costs incurred in these hypothetical situations are considered ordinary and necessary business expenses of the University.  These travel expenses are an integral part of the operational cost of the University to achieve its business purpose (operating various programs).  Furthermore, the travel costs are for the business activities of the University. 

Conclusion
For all three situations stated above, the travel costs paid by UH would be considered as business expense and are not income to the travelers.

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The Internal Revenue Service requires the University to withhold a certain amount of federal tax for taxable stipends (i.e. non-qualified scholarship or fellowship, cash awards or other taxable income) paid to, or on behalf of, non-resident aliens (NRA).  These federal tax withholdings (either 14% for non-qualified scholarship or fellowship or 30% for other taxable income) decrease the stipend amounts and may burden the recipients financially. In addition, payments made to vendors on behalf of the recipients would be short by the tax withholdings.
To make these taxable stipends whole (at 100%), departments at the University may want to provide additional funding to cover the federal tax withholdings.  This method of paying for federal tax withholding on behalf of the NRA recipients is called “grossing up”. 
“Gross Up” Formula:

  • Gross Payment = Net Payment ÷ [1.00 – required tax withholding percentage]
Accuracy Verification on “Gross Up” Formula:
  • Gross Payment – (Tax Withholding Percentage x Gross Payment) = Net Payment
Grossing Up” Example on a taxable scholarship stipend of $1,000 for F-1 student:
  • $1,000 ÷ (1 - .014)
  • $1,000 ÷ (.86) = $1,162.79
Verification:
  • $1,162.79 – (.14 x $1,162.79) = $1,000
Student gets $1,000, and IRS gets $162.79 (credited as tax withholding for the student)

Donations to UH +

Q: What do I do when our department receives donations of automobiles, airplanes or boats?
A: Whenever you receive donations of automobiles, airplanes or boats, please be aware of some specific rules governing these transactions:
  • Per AP 8.521 all donations of equipment and controlled property (see AP 8.509 for definition) shall be coordinated with the advice and assistance of the University of Hawai`i Foundation.
  • If UH retains the title ownership of such donation, and its value is $5,000 or more, the donation has to be recorded as equipment.  Consult with Capital Assets Accounting Office (formerly Property and Fund Management Office) at caao@hawaii.edu for specific requirements.
  • There are specific IRS tax code and regulations for recognition of such donations (see page 7 and 8 of Publication 526, and Publication 4302 for details).
  • Donee (i.e. UH) does not establish the value of the donations of automobile, airplanes, boats.  It is the donor’s responsibility.  UH can provide guidelines if requested (i.e. see page 7 of Publication 526.  In general, if donation of a vehicle is more than $500, donor can deduct the smaller of: the gross proceeds from sale of the vehicle by the organization (i.e. UH), or the vehicle’s fair market value on the date of the contribution.
  • There are three filing and disclosure requirements: Form 1098-C (for over $500 automobiles, airplanes or boats), Form 8283, and Form 8282.  The Office of Tax Services will prepare Form 1098-C on behalf of the University.  However, donors need to prepare Form 8283, and the Fiscal Administrator needs to gather adequate information for Form 8282, if donation is being sold within 3 years of donation.

General Tax +

Q: What is the purpose for Form 6166?

A: Click here for answer.

Q: Is University of Hawaii an IRC §501(c)(3) organization?
A:  University of Hawaii (UH) is considered a governmental tax exempt entity. It is exempt from federal income taxes under Internal Revenue Code (IRC) §115(1).  UH is not an IRC §501(c)(3) organization. Contributions to the University are deductible by donors under IRC §170.
Q: Does UH have a memorandum explaining the tax status of the University?
A: Click "here" for copy .
Q: What is Form W-9?  Who can sign such at UH?
A: When a department at UH is receiving payment, a Form W-9 may be requested by the payor for UH's federal identification number.  Tax Office at UH can prepare such form and sign it,  and provide the address of your office and an email address where such signed form will be forwarded to.
Q: Is the request of "tax exempt certificate" similar to the request of "tax exempt status" by vendors?
A: No, tax exempt certificate does not provide evidential support of tax exempt status of University (UH). Tax exempt certificate is a document that indicates being exempt from "sales tax" on selling tangible items by the vendors. Whereas, tax exempt status of the University relates to being exempt from "federal income tax" on taxable income of the University. For further explanation to this answer, click HERE for copy of memorandum.

Moving Expenses +

See AP 8.863

Operational Topics +

Q: Are there tax implications when the University of Hawai'i provides qualified campus lodging to its employees or students?
A: Yes, there are potential tax implications.  Qualified campus lodging by IRS definition is "lodging furnished to the university employees, their spouses, or one of their dependents by, or on behalf of, the institution or center for use as a home.  The lodging must be located on or near a campus of the educational institution or academic health center."  The federal tax law allows an exemption for the value of qualified campus lodging for amounts in excess of:
   1.  Five percent of the appraised value of the qualified campus lodging OR
   2.  The average rent paid by individuals for lodging provided by the institution (other than lodging provided to employees or students) during the year for comparable lodging - in other words, the fair market value of residential rental space.  For example, a faculty member pays $200 a month for lodging.  Other employees pay $400 for similar lodging.  The appraised value of the lodging is $55,000.  Five percent of this amount is $2,750.  The faculty employee would have to include a total of $350 in his income for the year ($2,750 - (12 x $200)).
Q: For vendors who are LLCs, what is the essential source document to obtain for creating vendor information in KFS?
A: LLC stands for Limited Liability Company.  It is a form of a business entity that a vendor may have chosen for his or her business.

For tax purposes, a LLC could be treated as a sole proprietor if it has a single member.  In contrast, if a LLC has more than one member, then it could elect to be taxed as a corporation, partnership or S corporation.

Fiscal administrators should check for missing information on Form W-9 from vendors who are listed as LLC.  The UH Disbursing Office relies on the information from Form W-9 for KFS processing.  If Form W-9 is not adequately completed, fiscal administrators should follow up with the LLC vendors on missing information (i.e. missing SSN, FEIN or spelling of vendor name).  If there is uncertainty in the KFS vendor setup, information on the completed Form W-9 should be used as the reference source.

Q: Are there tax implications for the employees receiving cash awards?
A: Employees receiving cash awards (i.e. excellence in teaching, service awards, etc.) need to be aware of the tax implications to their paycheck.

In general, the cash award is given to the employee before the recording and processing of such amount into the payroll.  Because of this subsequent process in payroll, the employee may see a smaller pay check due to the additional increase in taxes withheld in the employee's paycheck.

Prior to awarding the cash award to the deserving employee, department personnel should inform the prospective awardee that taxes will be withheld in an upcoming paycheck for receipt of cash award and to be aware of any adjustment in their paycheck.

At the end of the tax year, the amount received for these cash award will be reported in the individual's IRS form W-2 as wages in kind.

In KFS, cash awards should be processed as a Disbursement Voucher (DV) using payment reason code "A" and object code 7244.

Q: What are the proper State of Hawai'i tax forms to file for employees working outside of Hawai'i?
A: If a UH department hires someone who works solely outside of Hawai'i, it is important that the proper tax forms are filed in a timely manner so that no Hawai'i state taxes are withheld for the employee in the payroll process.  These forms have to be approved by the Hawai'i Department of Taxation before exempting state tax withholding.

Completed HW-6 and HW-7 forms must be filed with the Hawai'i Department of Taxation. Employees working outside of Hawai'i will need to complete Form HW-6, while department personnel for these employees will need to complete Form HW-7. Once both forms are completed, the departments shall mail both forms to the Hawai'i Department of Taxation.

Q: Are travel costs paid by the University of Hawai'i for someone interviewing for a job at the University of Hawai'i be taxable?
A: No, travel costs paid by University of Hawai'i for job interviewees are not taxable.

Pursuant to IRS Revenue Ruling 63-77, reimbursements (to the extent that they do not exceed the actual expenses incurred) made to individuals by a prospective employer like the University of Hawai'i for expenses incurred in connection with the interviews for possible employment are not includible in the gross income of such individuals and are not taxable.

To reimburse interviewees, complete the DISB NE-Inv form (Non-Employee Invoice) and process a purchase order in KFS with the corresponding object codes.

Q: Since the University of Hawai'i will no longer be issuing IRS Form 1099-MISC to scholarship / fellowship recipients who are U.S. citizens or resident aliens, is there a document that can be accessed by the department personnel to provide adequate information for the recipient to reference from?
A: With the implementation of AP 8.561 (Tax Treatment of Non-Service Financial Assistance for Individuals), the University of Hawai'i will no longer be issuing IRS Form 1099-MISC for scholarship / fellowship payment made to U.S. citizens or resident aliens.  Although IRS Form 1099-MISC will not be issued to scholarship / fellowship recipients, they are still responsible for self-reporting the amounts received on their individual tax returns.  As such, per AP 8.561, each department is responsible for responding to any scholarship / fellowship recipient's inquiries regarding the amount of financial assistance provided to the recipient.

To assist departments in responding to recipient inquiries, a report has been developed to capture the recipients' payment information. This procedure will guide you on how to access to the report titled Scholarship / Fellowship Payment Inquiry by Last Name in eThority. 

Q: Are there any tax consequences to UH employees for professional development costs paid by UH?
A: The tax consequences for each UH employee will vary depending on whether the professional development cost for such class is job related or not. If it is job related, then no tax consequences to the UH employee. For further explanation to this answer, click HERE for copy of memorandum.
Q: What is the compliance step when other Hawaii Governmental agencies inquire for tax clearance exemption from UH?
A: For contracts with vendors who are state agencies, Hawai‘i Revised Statutes §103-53 (d) (4) specifically exempts certificates of tax clearance on contracts or agreements between government agencies.
Q: Is reimbursement of M & IE to students taxable?
A: M&IE is an acronym for meals and incidental expenses (excluding lodging) as part of the per diem rate annually prescribed by the General Services Administration (GSA) to reimburse employees for business travel.  The IRS adopts the GSA per diem rate for tax purposes and as a result, business travel reimbursements or payments for M&IE to employees are not taxable.

However, travel reimbursements or payments for M&IE to students, in most circumstances, are taxable, since the students are not UH employees.  These payments often are provided in the form of non-qualified scholarships, awards, or prizes.  For specific tax treatments, please refer to AP 8.561, Tax Treatment of Non-Service Financial Assistance for Individuals.

Q: Can you provide some examples of UH travel reimbursements and the tax effects on them?
A: To assist you in obtaining a better tax perspective, the following is a quick summary of various travel reimbursements to various types of payees and its related tax effect:
  1. Student traveled on a class assignment:  This type of travel reimbursement will probably be classified as non-qualified scholarship and should be self-reported by the student on his or her tax return.
  2. Student traveled as ASUH senator to Western Regional Conference of Student Government Officers:  This type of travel reimbursement is considered business travel and will not be reported as income to the extent of receipts provided and no personal travel was taken.
  3. Dean of a school traveled to business conference:  Travel reimbursement will not be reported as income to Dean as long as the travel was 100% business related.
  4. Fiscal administrator traveled to a NACUBO conference:  Travel reimbursements will not be reported as income as long as traveling was 100% business related.
  5. UH staff traveled to California for a business conference and stayed two extra days:  Travel reimbursement will not be reported as income for those days that were business related.  Travel reimbursement for the two extra days (personal days) would be income if such cost were reimbursed by the University for those two extra days. 
Q. What are tax implications on travel expenses for elected or appointed officers who are students at UH, attending conferences for Chartered Student Organizations (CSO) at UH?
A: CSO is a campus-wide student association organized by permission of the chancellor to carry out chartered functions or operations for the purpose of serving the entire student body on its campus and whose activities are financed through mandatory student activity fees. If a travel advance is provided to the CSO student traveler and the advance exceeds the actual costs, then the excess amount may be reported as income to the traveler, unless the excess is returned to UH. The actual travel costs are not taxable to the traveler as it was expended for official business. A CSO is part of the UH's business, therefore the expenses in these CSO programs should be considered as ordinary and business expenses of the University.

Prizes, Awards & Gifts +

Q: What are the federal tax law on reporting of prizes, awards or gifts?
A: According to the Internal Revenue Code, federal tax law considers the value of prizes, awards and gifts to individuals as taxable income. Merchandise or products won as a prize or award will be considered taxable income at fair market value. If the recipient is a nonresident alien, he or she may be subject to additional tax rules regardless of amount, depending on circumstances and tax treaties.

IRS regulations stipulate that for employees who receive any gift of cash, gift card, gift certificate or cash equivalent, (an item that is easily converted into cash) for reasons related to their employment, such as employee appreciation, service awards, etc., it must be included in the recipient's gross income since it is considered extra salary or wages, regardless of amount awarded or won. This would also pertain to a tangible award/gift as well, such as a computer, DVD player, etc. The fair market value of that gift would be included in the employee's gross income as well and reported on their W-2 form.

If an employee wins a prize or award/gift for a reason other than related to employment, such as from a contest, program, or raffle that is open to the general public, then the prize and award/gift amount will be treated as 1099 income. The recipient will receive a Form 1099-MISC from UH on any winnings totaling over $600.00 in a calendar year. The recipient will also be required to provide UH with a completed UH WH-1 form, which includes social security number, to be used for issuing a 1099 for tax purposes.

Nonresident aliens (non U.S. Citizens), including international student workers, may be subject to additional tax rules depending on circumstances and treaty status and benefits. Where applicable, taxable income will be reported on Form 1042-S and may be subject to 14% - 30% withholding.

Q: What guidelines are there to consider prizes or gifts as taxable income to the students?
A:
  1. If the gifts consist of gift cards, Internal Revenue Service considers it (of any value) to be equivalent to cash.  As a result, the issuing offices will need to keep track of the winners (i.e. names, social security number, addresses, and value of gift cards) for possible tax reporting.
  2. If the gifts are tangible items such as pens, t-shirts or towels of nominal value ($25 or less per item), purchases of these items are considered business expense of that department and not taxable to the students who received it.
  3. If the gifts are vouchers for a meal at the school cafeteria with no cash value or no cash back, these vouchers are not taxable income to the students.

Scholarship, Fellowship +

In the subsequent Q&As, scholarship/fellowship will be abbreviated as S/F

Q: Who needs to fill out University of Hawaii Form WH-1 when S/F is given?
A: Only recipients who are nonresident aliens are required to fill out UH Form WH-1 when receiving non-qualified scholarship or fellowship. However, it is recommended that the Program Office identifies the residency status (i.e. via S/F application) for U.S. citizen, permanent resident, and resident alien, before making a payment. Furthermore, Pacific Islanders (such as residents of Palau, Marshall Island, Federated States of Micronesia, and American Samoa) should also complete U.H. Form WH-1 since they are not U.S. Citizen. For U.S. corporations or U.S. citizen, permanent resident, or resident alien, Form W-9 is also acceptable alternative for initiating payments.
Q: Where should department process non-qualified scholarship or fellowship for U.H. students who are U.S. citizen, permanent resident or resident alien?
A: A. If the student receives federal financial aid, it is preferable to process nonqualified scholarship or fellowship by U.H.’s Cashier Office or Financial Aid Office through the Banner student information system, which allows the Banner to capture all scholarship and fellowship payments that need to be disclosed to the student payee’s home campus Financial Aid Office as required by federal Title IV regulations. Alternatively, a disbursement voucher (DV) can be processed through the Kuali Financial Systems.
Q: A community college is planning to provide a culinary school student with an all-expenses-paid trip to compete in a national culinary competition. If the winner is selected from a local competition, would the all-expenses-paid trip be reportable to the IRS? Is there a situation where the all-expenses-paid trip would not be reportable?
A: As described, the all-expenses-paid trip is considered a prize that is subject to reporting. However, if participation in the culinary competition was instead a part of the class curriculum as described in the Culinary School’s course catalog, the trip expenses would be a program expense for the class, and would not be considered income to the student selectee. Therefore, it is important to make a link between the payment provided and the academic program, particularly in the event of IRS audit, if the payment is not reportable.
Q: The University is planning to pay for the travelling expenses of a student to present his paper at a conference relating to his field of studies in class. The trip is not an annual recurring situation for the department. Explain the tax treatment of the travel expenses.
A: The travel expenses would be treated as a "non-qualified" scholarship for the student, based on the fact that the conference is not a normal, recurring expense of the University, and the student is benefitting from the trip.If the student is a U.S. citizen, permanent resident, or resident alien, the University is not required to report the value of the trip, but the expenses are considered “income” to the student.If student is a nonresident alien, the University is required to report the value of the trip on an IRS Form 1042-S, and tax withholding may also be required. If the student is on an F, J, M or Q visa, the standard withholding rate of 30% is reduced to 14%. The tax withholding amount may also be reduced or eliminated depending on the student’s country’s tax treaty status.
Q: UH Hilo is planning to send a group of undergraduate computer science students to compete in a computer programming competition on Oahu. This competition is an annual event and all costs are included in the UH Hilo computer science department budget. Explain the tax treatment of the travel costs for the students.
A: The travel expenses are operational business expenses of the UH Hilo computer science department. To the extent that only actual costs are paid, no IRS reporting is required, and the trip is not considered income to the students.
Q: UH Manoa is planning to send student officers of the Associated Students of the University of Hawaii (ASUH) to an annual conference in California for student government officers of various universities. The ASUH is a part of the Chartered Student Organization (CSO), and CSO related events are included in the University’s budget. Explain the tax treatment of the travel costs for the students.
A: The costs are considered an operational business expense of the University. To the extent that only actual costs are paid, no IRS reporting is required and the trip is not considered income to the students.
Q: The UH Law School is sending a group of law students to participate in a moot court competition on the mainland. Explain the tax treatment of the travel costs for the students.
A: Moot court competitions are a part of the Law School’s curriculum, and the students are educated in classes to compete in moot court competitions. The travel cost is thus an operational business expense for the Law School. To the extent that only actual costs are paid, no IRS reporting is required, and the trip is not considered income to the students.
Q: A UH program is paying for the overnight lodging costs (i.e., travel costs) for middle school students to visit a UH campus. The event is not a recurring event, and is not a class requirement or part of a course curriculum. Explain the tax treatment of the travel costs for the students.
A: The travel costs are considered non-qualified S/F expense and constitute a form of financial assistance to the middle school student. However, UH is not required to report on Form 1099-Misc for U.S. Citizen, permanent resident, and resident alien. For nonresident aliens, the amount of the non-S/F expense has to be reported in Form 1042S with proper federal tax withholding.
Q: How should UH treat undocumented alien students who receive scholarship/fellowship?

A: UH has a Board of Regents policy allowing undocumented alien students to pay in state resident tuition if they meet certain criteria.
http://www.hawaii.edu/policy/?action=viewPolicy&policySection=rp&policyChapter=6&policyNumber=209

As stated in this Board of Regents Policy in the above website, the undocumented students need to establish residency by domiciling and being physically present in Hawaii for 12 months, as per Hawaii Administrative Rules 20-4. Furthermore, the undocumented students also need to attend a public or private high school in the United States for at least three years, and graduated from a public or private high school or attained the equivalent thereof in the United States. Based on those criteria, the undocumented students would have qualified as “resident alien” for tax purposes using the substantial presence test in accordance with Internal Revenue Service. Consequently, the reporting of scholarship or fellowship would be similar as to that of a resident alien.

Stipends +

Q: What is the definition of stipend?
A: Per Merriam-Webster dictionary, definition of stipend is "a fixed sum of money paid periodically for services or to defray expenses"
Q: What kinds of stipends are normally paid by UH?
A: Stipends can be classified generally into three main categories:
  1. Stipends for services - payments for doing work as employee.  These payments should be processed in payroll and reported and taxed as wages.

  2. Stipends for educational purposes - payments related to scholarship and fellowship payments.  See AP 8.561 for explanation.  Proper tax reporting for payees who are U.S. citizens or residents involves self-reporting on their own tax returns and should consult their tax advisors for advice.  Whereas, for nonresident aliens, U.H. will report it on Form 1042-S.

  3. Stipends as awards or prizes - payments made to or made on behalf of a person in which he or she is not providing services as an employee.  Stipends are paid to or for the individual’s benefit.  If the individual’s total award or prize is more than $600, the individual will not be subject to withholding, but the income will be reported on a Form 1099-Misc.  However, if the person is nonresident alien, he or she will be subject to 30% withholding tax and the income is reported on Form 1042-S.
Q: Hypothetically speaking, if a student receives stipends from a federal grant to attend a 4-week project at UH during the summer, what is the tax effect on the stipends for travel costs, lodging, meals, and supplies? Keep in mind that this project is not be for a class. There will not be any college credits, and the supplies will be kept by UH at the end of the project.
A: Since this 4-week project is not part of a class and is also not a credit course, the stipends for these students would not be considered a scholarship or fellowship.

For the stipends paid for travel, meals and lodging costs, the value of the stipends would be considered as a prize or award, and would be reported as income on Form 1099-Misc for the recipients.  If recipients are nonresident alien, Form 1042-S would be prepared.

In regards to the supplies, since these supplies are used in the project and any excess will be kept by UH, the value of these supplies should be considered as a reimbursement of general program expense.  Accordingly, no income would be reported to the recipients.
Q: Hypothetically speaking, student members from UH Finance Club plan a trip to visit Wall Street in New York. UH decides to subsidize each member of the Finance Club with a $500 stipend. Are these stipends taxable to the student members?
A: The dividing line of reportable or not reportable lies in whether the payments are “business expenses” of the University.

For situations involving students in UH organizations, a determination from a business perspective must be made to evaluate if the organization is an integral part of the University.

There are two types of organizations at UH:  RIO (registered independent organization) and CSO (chartered student organization).

CSO are integrated into the UH financial budget, whereas, RIO are not.

To be an integral part of the University, one supporting aspect is having budgets set aside in the respective offices of the University for such organizations.  All organizations considered CSO would be determined as integral and the stipends would not be taxable to students.  For example, student government (i.e. ASUH) would clearly be an integral organization.

If UH Finance Club is a RIO, then payments to such organizations, members or its officers, would not be business expenses of the University.  Accordingly, these payments would need to be reported to the IRS.  In this case, if $600 or more is spent for an individual during the year, Form 1099-Misc would be reported.

Q. If stipends are given to students for travel to attend conferences or present their research and no services were performed for UH, what are the tax analysis and consequences?
A: The key factor in determining income or not income to the students is whether attendance at a particular conference is for the student’s benefit or not.  If the student is attending the conference to pursue their independent educational activities, as described in the first paragraph, these payments (e.g. allowances or reimbursements) would be classified as scholarship and should be self-reported by the student on their tax return if they are U.S. students.  For international students who are still classified as non-resident aliens for tax purposes, such allowances or reimbursements would be reported on Form 1042-S by the University.

If the purpose of the trip is for the student representing UH to fulfill our educational and outreach mission, we then would treat such payments as non-taxable travel reimbursements as part of our accountable plan for business purposes.

Tax Payments on Purchases +

Q: What kind of taxes does U.H. need to pay on its purchases?
A: U.H. will need to pay a Hawaii tax, "general excise tax".
Q: Does U.H. need to pay general excise tax to all vendors?
A: No, if vendors' business does NOT have nexus, U.H. should not pay general excise tax.  Vendors will have nexus in Hawaii if they have property in Hawaii (also affiliate offices), provide services in Hawaii or having business representatives in Hawaii.
Q: Is there a way to find out if vendor is licensed for general excise tax purposes?
A: Yes, type in name of vendor in Hawaii Department of Taxation's website and see if a general excise tax license numbers is found.  The website for such a search is "https://dotax.ehawaii.gov/tls/app "
Q: Is there written guidance by the State of Hawaii Department of Taxation that explains general excise tax?
A: Yes, please click here
Q: How does the Wayfair Decision impact on UH general excise tax?
A: Purchasing from vendors outside of Hawaii has changed with the Supreme Court's decision in South Dakota v. Wayfair, Inc.

Pursuant to Announcement No. 2018-10, vendors (taxpayers) will be required to pass on general excise tax and pay such tax to the State of Hawaii, if any of the following applies:

1. Taxpayer has physical presence. (i.e. having office, employees or representatives, inventory, or other property in Hawaii, or providing services in Hawaii, such as installation).
2. Taxpayer has gross income or proceeds equal to or greater than $100,000 from tangible property delivered in Hawaii, services used or consumed in Hawaii, or intangible property used in Hawaii.
3. In the current or preceding calendar year, taxpayer entered into 200 or more separate transactions involving any combination of tangible property delivered in Hawaii, services used or consumed in Hawaii, or intangible property used in Hawaii.

Instead of using the physical presence test (i.e. offices in Hawaii, representatives working in Hawaii, etc.), economic presence is now used as the required factor for vendors to pass on general excise tax in their sales to UH.

Unrelated Business Income (UBI) +

Q: How is UBI identified? What qualities in the income generating activities would render UBI?
A: A college or university is generally deemed to have UBI when it realizes gross income from any regularly conducted trade or business that is not substantially related to its educational and other exempt purposes. Specifically, UBI exists only if ALL of the following qualities are met:
  1. Activity is a trade or business that exhibits an intent to profit; and
  2. Activity is regularly carried on; and
  3. Activity is substantially unrelated to the exempt purposes of the University.
Q: If facility is being rented out to non-University user, is the rental income consider UBI?
A: If rental only involves space within a facility (usage of the area), the rental income will be excluded from UBI. However, UBI may exist if:
  1. The facility has outstanding debts; or
  2. Additional services (e.g. hospitality services, cleaning or setup services) are rendered; or
  3. Profit is shared between the University and the renter
When equipment (i.e. furniture, audio-visual equipment, etc.) is part of the rental of the facility, the tax considerations are different if the rental value of equipment is equal to:
  1. 10% or lessof total rental income, then it is considered incidental and is not UBI;
  2. 11% to 50% of total rental income, then it is considered UBI in proportion to the percentage of equipment rental value to the total rent;
  3. 51% or more, then 100% of the rent amount is UBI.
Q: When is rental of cellular tower consider as activity having unrelated business income?
A: Scenario 1:  Rental of space on a campus building or freestanding tower to a third-party for placement of cellular transmission equipment, i.e. University allows a third party to place its tower on University real estate, (either ground or existing building).
Determination:  Income is considered tax exempt rent from real property and is not unrelated business income.

Scenario 2:  Rental of antenna space on a tower owned by the University (permanently affixed to either the ground or an existing building).
Determination:  The rental of antenna space on the tower is not eligible for the rental exclusion. Towers are treated as tangible personal property rather than real property. As a result, the income is unrelated business income.

Contact Us

University Tax Office
1408 Lower Campus Road, Room 55
Phone: (808) 956-7162
Email: kenlum@hawaii.edu

Questions related to Payroll:

Payroll Office:  (808) 956-7444
Email:  payroll@hawaii.edu

Questions related to accounts payable (Form 1099-Misc, foreign vendor payments and tax treaties):

Disbursing Office:  (808) 956-7126
Email: uhdisb@hawaii.edu

Questions Related to 1098T:

Contact the appropriate campus representative. For your 1098T campus contact, see 1098T Campus Contacts

Internal Revenue Code

§117  Qualified Scholarships

§511  Imposition of Tax on Unrelated Business Income of Charitable, etc. Organizations

§513  Unrelated Trade or Business

Hawai’i Revised Statutes

§235-2.4(z)  Taxatiion of business income of certain exempt organization
§237  General Excise Tax
§304A-101  Establishment of University of Hawai'i

Administrative Procedures

AP 8.561 - Tax Treatment of Non-Service Financial Assistance for Individual
AP 8.868  - Reporting and Withholding on Payment to Nonresident Aliens and Foreign Corporations

Process Documents

Scholarship Fellowship Brochure

Forms

If you require assistance completing any of the listed forms, please contact the University Tax Office at kenlum@hawaii.edu or (808) 956-7162.

Certification of UH Tax Status
Form 6166 - Certification of U.S. Tax Residency
Form 6166 explanation
Form W-9, Request for Taxpayer identification Number and Certification
Form W-9s, Request for Student’s or Borrower’s Taxpayer Identification Number and Certification
Prize Acknowledgement Form

 

Training

Grant-in-Aid Tab for Scholarship/Fellowship Payment Process

State of Hawaii General Excise Tax