Pam, you are clearly in the right, as we have discussed before.  The
students volunteered their time to perform the research, but their costs
were paid by the research agreement.  There is a primary benefit to the
research project.  The fact that performing this research also advanced
their total learning is irrelevant.

You might consider reporting the students time as third party cost sharing,
valued according to A-110 guidelines at the going price for student
research assistants.  This would clearly record the benefit to the research
project.  That would prevent any argument that the students got taxable
benefits -- you cannot tax the same thing twice.  The fact that the
research agreement is not taxable rests on the fact that it was performed
by a tax free entity and was scientific research, not  that it received no
benefit.

The fact that the students are required to travel abroad and to write a
paper to complete their program does not NECESSARILY make ANY KIND OF funds
spent for this travel taxable.  The students actually performed a funded
research project.

HOWEVER, if the students had received a travel fellowship to do travel
required by the educational program, then that amount would become
taxable.  BUT even that sort of tax liability would be between the IRS and
the individuals;  the university would be required to report to the IRS the
payment of the award, but not to withhold.  The are required to withhold on
"wage" payment, but not on "fellowship" payments.

Listserve readers, Pam has been having this running battle with her finance
people for some time now.  Please chip in all the help to her you
can.  Someone with better apparent tax credentials than mine -- I've been a
tax preparer for 30 years, but am not a CPA nor licensed to practice before
the IRS -- could lend weight to her argument.

Chuck

At 01:33 PM 11/17/2004, you wrote:
>I have run into an impasse with our Comptroller, and I need HELP.
>
>We have a PI that has a sub from another university to carry out research
>for the USAID.
>
>Our PI has master's students that are helping to conduct this research
>under this contract.  The students receive no salary or stipend for their
>help.  However, project funds are used to pay for the student's travel
>to  Latin America so they can assist the PI with the research.
>
>The problem is that our comptroller's office thinks that the students
>should be taxed on the funds spent on their travel because the students are
>part of a master's program that requires them to travel abroad and to write
>a master's paper.
>
>The comptroller argues that the travel funds are taxable because the
>students are "benefiting" from the travel in that the students can use this
>experience in Latin America to satisfy the travel requirements of their
>master's program and they might actually do some work (i.e., learn
>something) in Latin America that they could write about for their master's
>papers.
>
>I argue that the students are not required to do their master's paper on
>any topic related to this subcontract or to satisfy their field experience
>by working on his project in Latin America. They have other choices. They
>also earn no course credit for their participation in the project.  Also,
>the funds spent for student travel is for the University's benefit (to
>comply with the terms of the sub) not the student's.
>
>Now because of this impasse, I will have to get a no cost extension so that
>we can iron things out and I am told I need to talk to a new tax person
>that has been hired who needs time to "look this up."
>
>Has anyone out there faced anything like this?  I need specific citations
>to back up my position.  It seems to me that this type of reasoning will
>undermine the very point of research in higher ed!
>
>Pam
>
>
>Pamela F. Miller, Ph.D.
>Director, Office of Sponsored Projects
>The University of San Francisco
>2130 Fulton Street
>San Francisco, CA  94117-1080
>TEL  415-422-5368
>FAX  415-422-6222
>EMAIL  xxxxxx@usfca.edu
>
>
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Herbert "Chuck" Chermside, CRA
Director Emeritus, VCU Sponsored Programs
Executive Director, Research Administrators Certification Council
1915 Robindale Rd.
Richmond, VA 23235-3931
804-320-5502
xxxxxx@verizon.net

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