New Procedure in Place for Research Contracts with Tax and Bond Issues - 07/14/09
Sponsored Program Services (SPS) and the Office of Treasury Operations have co-written a procedure for reviewing sponsored research contracts to ensure that the University’s tax-exempt status for bonds is not jeopardized. The process document, “Identification of Potential Private Use Research Contacts,” is available on the Sponsored Program Services Web site.
The document explains that because the University issues tax-exempt debt to finance construction and improvements to facilities across its campuses, it is subject to federal tax rules and regulations. This requires the University to monitor and limit certain types of industrially supported research that benefits one entity to the exclusion of another. Such research is defined as “private use.” If private use activity in a bond-supported building exceeds an established limit, the bond may no longer be considered tax exempt.
According to SPS, in the vast majority of cases the procedure won’t impact the conduct of sponsored research. However, if a project were to jeopardize a tax-exempt bond, SPS would either negotiate the contract further or, if necessary, alert the department and principal investigator that an alternative site must be found.
Departments with research space in a building supported by a tax-exempt bond may contact the Office of Treasury Operations to determine if this issue is likely to arise.