Tax & Financial
Take home message: It is important that all individuals comply with all federal, state, and local tax laws that apply to them; both in their capacity as individuals, and in their capacity as U-M employees or affiliates. As a publicly funded institution, U-M must have a transparent and accountable financial management system; this is also critical to allow U-M's activities to be reviewed in order to maintain its tax exempt status (as a 501(c)(3) organization).
- U-M is a nonprofit organization, recognized as exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. Our tax exempt status is dependent on compliance with federal tax law.
- The Tax Department (within Business and Finance) is responsible for U-M's compliance with respect to all tax matters. They maintain a listing of U-M tax policies and procedures, and an overview of the main tax risks that arise in a university setting.
- The different ways in which U-M derives income are outlined on the Donations & other money in compliance page.
- U-M's activities and income are closely scrutinized to ensure that its tax exempt status is not being abused. In particular, if U-M sells goods or services to outside entities, it must be directly and substantially connected to (and in support of) the mission of the University; otherwise, that income may be viewed as "unrelated business income", taxable as if it were earned through a commercial enterprise. The Standard Practice Guide Policy on Sales of Goods and Services to Non-University Entities and Federal Unrelated Business Income (SPG 502.4) delineates the responsibilities and principles to be followed by every faculty and staff member involved in the sale of goods and services by U-M to non-University entities. The SPG also sets out examples of what kinds of activities may be viewed as commercial and derive taxable income.
- U-M is exempt from the payment of sales and use taxes on purchases of tangible property and certain rentals, provided the purchase is for U-M consumption or use and is being paid for from U-M funds: see the Standard Practice Guide Policy on Michigan Sales and Use Tax (SPG 502.03) for details. However, U-M is responsible for collecting and remitting sales and use taxes on items that U-M sells or leases to outsiders, other than in some exempt circumstances. See the SPG 502.03 for further details, including examples of where units need to collect taxes and how to go about it. See also the Tax Department page on sales and use tax examples (login required).
- If you are involved in selling anything on behalf of U-M, there are specific rules that must be followed to ensure that you do not jeopardize U-M's status as a not-for-profit institution. See SPG 502.04 (Sales and Cash Collections), SPG 502.03 (Michigan Sales and Use Tax), and SPG 501.06 (Accepting Credit Card Payments) for more information, and contact the University Treasurer's Office or Tax Department for advice.
- Each Sponsored Student Organization (SSO) is included in the University’s tax reporting process and needs to take no additional action unless it holds its own exempt status. If it holds its own status, it must comply with the IRS reporting requirements.
- Voluntary student organizations are NOT included in the University’s reporting process. Voluntary student organizations must each report their activity in compliance with IRS requirements.
- Student organizations are not permitted to use University of Michigan's sales tax exemption number. You may apply for one for your organization, but the State of Michigan is reluctant to grant this exemption.
- An organization exempt under IRC Section 501(c)(3) is an organization organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes. An absolute requirement for federal tax-exemption under IRC Section 501(c)(3) and certain other organizations described under IRC Section 501(c) is a firm rule that none of the organization's net income or profits can be distributed to officers, members of the organization or any other individual.
- It is crucial that U-M accurately record its income. Remember that sometimes "income" is in a form other than money - such as in-kind or other non-monetary contributions. If you are in doubt about whether something ought to be reported as a source of income or donation, contact the Tax Department.
- The Tax Department is always happy to answer questions about potential tax issues, including questions about whether some source of income may or may not be "unrelated business income" that is taxable.
- If you are an international student, scholar, faculty or staff member, the International Center provides a variety of resources to assist you manage your tax situation. See their Tax and Social Security for links, educational material and other helpful information.
- If your personal tax situation is complex, you may want to hire a professional tax preparer, as U-M cannot give you advice on personal tax questions.
- Often, people will need U-M's federal tax ID number for various paperwork. U-M's tax ID Number is 38-6006309.
For questions about tax issues, contact the Tax Department.
If you are an international student, scholar, faculty or staff member with tax questions, contact the International Center.