SOFO Updates

Exemption from Illinois sales tax is a privilege that student organizations can use by way of their status as a Registered Student Organization at Northwestern. However, it is important to understand that this exemption is not absolute. Student organizations may not use the University's sales tax exemption for merchandise meant to generate revenue. For example, a group may use the sales tax exemption for t-shirts it purchases for its members. But it may not use the exemption for t-shirts the group intends to sell.

It has also been clarified that student organizations are prohibited from using the University's sales tax exemption on personal purchasing accounts, such as Amazon, Sam's Club, and Costco, among others.

A payment to an individual for support, incentive, or services rendered must follow different processes, paths and approvals. This can be complicated and requires much communication between the student group, advisor, the payee and SOFO. For example, payments to University employees (e.g., faculty, staff, and student temporary employees), must be processed through Payroll and requires additional paperwork and approvals. The value of gift cards issued to University employees must be recorded as imputed income by Payroll.

If a student organization wishes to contract/issue a payment to a non-resident person, who would perform work on U.S. soil, said payment must be processed through HR/Payroll using a specific packet of forms. Because requirements from Homeland Security and treaties between the U.S. and foreign countries may bear strongly on whether (and how) the University can pay a non-resident person, student groups and their advisors should contact the University's foreign tax team prior to any contract being signed. Failure to do so could result in penalties or foreign tax requirements being levied against the student organization. Over $12K was charged to student organizations in foreign tax for FY19.

Payments to non-residents who would perform outside of a U.S. territory (e.g., virtually) requires a different payment process and additional approvals from multiple University departments.

Because of these many requirements, payments to non-residents must be completed by the appropriate University department. As this is the case, student organizations are prohibited from issuing gift cards to non-residents. If this should happen inadvertently, non-resident payees are expected to reimburse the value of the gift cards to the student group so that the prescribed process may be followed.

If your student organization plans to invite a non-U.S. citizen or permanent resident (green card holder) who is currently outside of the U.S., please contact the Office of International Student and Scholar Services at intoff@northwestern.edu. OISS will need to review the details of the visit prior to the official invitation to ensure the visit will comply with immigration rules and regulations.

SOFO's gift card policy was reviewed and re-approved last year by Tax and Regulatory Services. It is the current policy for student organizations that work with SOFO. As of this writing, a first discussion was initiated to review the University's broader gift card policy. SOFO will modify its policy, if necessary, once a new University policy is established.

It is important to note that though the University does not outwardly prohibit the use of gift cards (with non-resident payments being an exception), central administrative departments do advise against using them because of the considerable auditing requirements. Because gift cards represent transfers of cash, or anonymous payments, and therefore earnings for the recipient, it is recommended that groups acquire merchandise of nominal value and relevant to the activity, to give out as incentives/prizes instead. But here too, if student groups equate the greater value of the merchandise with the greater possibility of drawing people for a successful event, similar reporting requirements may kick in. For merchandise distributed as prizes, we were informed that the fair market value of merchandise may require tracking so that if an IRS threshold is reached, the University would be required to include the value in its 1099 reporting to the IRS.

Treasury Operations has informed SOFO that all student organizations that wish to conduct payment transactions online (where a student group is the vendor/seller) must use payment card processing platforms that have been vetted and approved by the University before any transactions can take place.

Tax and Regulatory Services has also indicated that such online activity will likely also place sales tax collection and reporting requirements on the group. Other activities that could activate this requirement are sales to non-NU populations.

The terms charitable gift, contribution, and donation have legal definitions set by the IRS that include a potential benefit to the donor. If individuals or corporations wish recognition (i.e., a tax receipt) for their financial support, this support must be processed as donations through Alumni Relations and Development (ARD). Student organizations are advised to contact Corporate Engagement for activities related to corporate sponsorships or in-kind donations.

Gifts to student organizations has been a topic of extended discussion that has resulted in some guidance being generated within the past year. Gifts received by the University of $10,000.00 or more, over a prescribed time, require the creation of a gift account for the student group, to be managed by its advocate authority (the department that approved its formation or requested that a SOFO account be created for it). While SOFO has created subaccounts specifically to hold gifts processed through the University for student organizations, it does not accept them directly, but by transfer from established University gift accounts. There are, however, restrictions on the amount that can be transferred to SOFO and how it can be used. The limit is generally $2,500.00 but can be more if departmental approval is received. From the guidance, we see that some expenditures must be performed directly from a gift account, rather than the group's SOFO.

Student groups should be aware that any equipment purchased with donations are considered University property and must be regularly tracked, maintained, and documented as such by a University employee.

Use of donated funds for student group-sponsored competitions must be approved by Gift Accounting before payments can be issued to the prize recipients. A review for approval requires a statement from the student group describing in detail how the competition is conducted, who the participants are (NU students and/or others with their affiliations), who is involved in determining the prize recipients, and what criteria are used.

Because of the restrictions placed on charitable gifts, some student groups have inquired about refunding them to the original donors. This runs counter to the IRS definition of a charitable gift--donors have been recorded as such and provided a donation receipt. SOFO was informed that the only reason to refund a charitable gift would be if the student group no longer exists or if the group is involved in activities that are restricted to the University.

The process for ordering through Amazon (and other NU preferred vendors) will be processed through iBuyNU. Login access to iBuyNU is only available for NU faculty and staff. Student groups will need to submit their a copy of their carts and supporting supporting documents to SOFO, where it will be matched to the cart to complete the order.

Communication with Procurement and Payment Services (PPS) will be essential as staff may need to request some items be unblocked or alternate preferred vendors located. PPS has announced that it will no longer allow personal addresses to be added to the NU Financials Ship-To file. Any exception request to add a new Ship-To address must be submitted by the advisor directly to PPS. A PPS approval will result in a new Ship-To code that will need to also be communicated to SOFO.

Corporate card transaction requests are processed with an actual corporate credit card. At no time can this payment card or its relevant account information be provided to a student group. The card also cannot be used in transactions that require creating an account or in accounts that would store the credit card information. Sales tax exemptions need to be worked out with vendors prior to submitting the supporting documentation to SOFO.

Use of Northwestern logos and images came up last year. Please know that even if you have incorporated "NU" or "Northwestern" into your group name, you are not authorized to use them in any design you create for your group and wish to publish or print (e.g., a design for t-shirts). Care should also be taken with the use of "Northwestern University" in your communications, as student groups are not authorized to speak on behalf of the University, or imply that their activities align with the University's mission, or are sanctioned by the institution.

• REQUEST: Please internally review the policy on Use of University Facilities for Political Activities . Pages 3 through 6 of that policy are clear and direct.
• This policy is based on IRS requirements. Engaging in these prohibited activities has wide-ranging consequences, including jeopardizing the University’s 501(c)(3) charitable status.
• It is a reasonable assumption that use of Northwestern’s digital/virtual resources, such as Zoom or similar license, can be included in this policy.