Executive Memorandum No. 17
University of Nebraska Policy for (1) Disbursements from Foundation Donor Accounts, (2) Accountable Plans for Working Condition Fringe Benefits in Relation to Travel, Entertainment and Club Membership Expenses, and (3) De Minimis Gifts to Employees
Intent and Purpose
This policy is adopted to improve accounting procedures associated with requests from University of Nebraska employees for disbursements from donor accounts held by the University of Nebraska Foundation. While the impetus for such improvements is compliance with federal tax laws, other benefits from improved internal accounting controls are also anticipated. This policy shall also set forth changes in the treatment of travel, entertainment and club membership expenses, paid by or on behalf of the University, in compliance with Internal Revenue Service regulations promulgated since the last policy statement concerning these matters was issued. Finally, this policy shall set parameters for de minimis gifts.
Requests for Disbursements from Foundation Donor Accounts
The University of Nebraska Foundation holds a number of donor accounts, used to support a variety of activities of the University of Nebraska, including academic department and college programs, as well as external relations and University development. Each campus and the central administrative unit of the University of Nebraska shall designate an individual or office that shall receive all requests for disbursement from donor accounts. This individual or office shall review the request solely for the purpose of determining whether the transaction will prompt any actions required by tax laws (e.g. withholding of payroll taxes). This individual or office shall not be empowered to determine the scope of authority regarding the use of the donor account or the merit of the nature of the disbursement. However, no disbursement from a Foundation donor account shall be made until the Foundation receives a notice recorded in physical form (e.g. stamp, printed e-mail, written notice) that the individual or office responsible for the tax review described in this paragraph has conducted the review and made arrangements for any accounting measures deemed necessary by such review.
For the purposes of this policy "donor account" shall mean any account held by the University of Nebraska Foundation, the funds of which are derived from (a) one or more donations to the University of Nebraska Foundation for the benefit of the University of Nebraska or any program or function of the University, or (b) any accrued income earned by such account.
Accountable Plans for Working Condition Fringe Benefits in Relation to Travel, Entertainment and Club Membership Expenses
All campuses and the central administrative unit of the University of Nebraska shall establish "accountable plans" for working condition fringe benefits as that term of art is defined by Internal Revenue Service rules and regulations. Amounts reimbursed or advances given by or on behalf of the University of Nebraska for the travel, entertainment or club membership expenses of University employees and spouses/companions of employees will be treated as compensation to the employee, subject to payroll withholding taxes, unless the employee adequately substantiates a legitimate University business purpose for the expenses under the accountable plan. The accountable plans will require that the employee provide (1) the amount of the expense, including receipts for expenses that exceed $75.00; (2) the time and place of the expense; (3) the business purpose of the expense; (4) and the business relationship of the person entertained. The business purpose must be bona fide and clearly related to the legitimate business of the University. This is particularly so in the case of expenses paid on behalf of spouses/companions. Employees need not substantiate expenses for travel and lodging paid directly by the University, as procedures outside this policy will account for the taxation of such payments, if any.
Non-cash fringe benefits (except motor vehicles covered under separate procedures), such as complimentary tickets to arts performances or sporting events, are covered by this policy. Therefore, (unless another exemption applies, such as "no-additional cost fringe benefits" or "de minimis gifts") employees who receive complimentary tickets and fail to establish a legitimate business purpose under the accountable plan, will be treated as receiving income in the amount of the fair market value of the complimentary tickets.
The following is further explanation of how this policy applies to club memberships. An employee may avoid personal income taxation on a percentage of the club dues paid, to the extent that he or she documents in accordance with the accountable plan that the club usage was related to a legitimate business purpose. If the annual club dues are $1000 the employee documents that 60% of his or her usage qualifies as a legitimate business use, then only 40% or $400 of the club dues will be treated as compensation to the employee. Initiation fees paid on behalf of the employee shall not be treated as compensation to the employee, conditioned upon the fact that by adoption of this policy, it is hereby established that the beneficial ownership of the membership is in the name of the University, not the individual employee. Club memberships, paid for on behalf of the University for its employees, are provided solely for the benefit of the University of Nebraska. Memberships are issued in the names of individuals to comply with club requirements which do not permit "corporate" ownership of the membership. Upon termination of employment, the employee must surrender the club membership to the University, along with any evidence of such ownership such as stock or certificates.
Finally, the provisions of this section are intended to complement the Third Party Payments Policy. A copy of the June 1994 Third Party Payments Policy, as amended in September 1997, is attached hereto.
De Minimis Gifts
Generally, gifts to University of Nebraska employees, their spouses, companions or dependents, are not paid for with funds of the University of Nebraska. On occasion, holiday gifts or other tokens of appreciation may be purchased for University employees with funds held by the University of Nebraska Foundation. Except to the extent that these employee gifts are de minimis, as that term is interpreted by the Internal Revenue Service, the fair market value of the gift shall be included in the employee's reported compensation. De minimis gifts shall not be reported as compensation to the employee. A de minimis gift under this policy shall be defined as one of non-cash tangible personal property with a value of $50 or less. Gift certificates of $50 or less, redeemable in merchandise only shall be treated as de minimis. Cash, gift certificates redeemable in cash, or any other similar gift readily convertible to cash in any amount shall be treated as compensation, subject to payroll withholding taxes.
This policy does not apply to length of service or outstanding achievement awards. Any questions regarding these payments should be directed to the business offices.
September 3, 1997
March 5, 1998
Third Party Payments Policy
Third party payments are those made to University of Nebraska employees from external sources, usually the University of Nebraska Foundation or any athletic booster club. Special attention must be given to those payments made to employees from third party sources when the University determines or directs the amount and recipient of the payment.
This policy does not apply to income received as a result of goods or services (such as consulting) provided by University of Nebraska employees, outside the duties of employment owed to the University of Nebraska, to persons or entities unrelated to the University of Nebraska with which the employee has independently contracted.
Awards or payments made to employees when the University makes the determination of the recipient and the amount of the award or payment will be treated as additional compensation and be paid to the employee through the payroll system. Deductions will be made for income tax withholding, FICA and Medicare. Employer contributions will be made for FICA and Medicare. A wards given to employees from external sources when the University does not in any way recommend or select the recipient, or determine the amount, may be paid directly to the employee by the third party source.
Third party payments to University employees for accountable expense reimbursements are permitted under this policy. Accountable expense reimbursements are those payments made to employees upon the submission of a reimbursement request for personally incurred business related expenses. Such expenses may include travel or entertainment expenses for functions pertaining to or benefiting the University of Nebraska. Receipts or affidavits of the expenses necessary to substantiate the reimbursement must be attached to the reimbursement requests. Accountable reimbursements include, but are not limited to, the University of Nebraska Foundation funded expense allowances provided to the University president, chancellors, and vice presidents and vice chancellors. Expense reimbursements which are not adequately substantiated by documentation will be treated as wage income to the employee and processed as wages through the University's payroll system.
The University of Nebraska and the University of Nebraska Foundation occasionally make travel expense advances to University employees at the direction of University administrative officials. The advances are intended to be repaid once the employee has received a travel reimbursement. Employees must follow established reimbursement procedures to avoid having the advance considered as taxable income and reported on form W-2 with appropriate sums withheld for payroll taxes. Similarly, any sum paid by the Foundation for any moving expense incurred beyond that allowed as a qualified moving expense reimbursement under the Internal Revenue Code will be treated as taxable income and reported on form W-2.
June 24, 1994
September 3, 1997