Guidelines and Procedures

Accounts Payable provides guidelines for following University policies.

Please note:

The following guidelines do not apply to candidate meals or meals associated with travel. Refer to Travel Policy or Section B.26, Expenditures for Hospitality Search Committee Guidelines, in the University Handbook.

General Guidelines for the Purchase of Food from University Funds

University funds may be used to purchase food in accordance with the University Hospitality Policy. Food provided to employees, however, is generally considered to be taxable income as defined by the Internal Revenue Service unless certain conditions are met. (Reference IRS Publication 15-B and IRS Publication 463.)

Examples of activities that are allowable without tax consequences include:

• Official business of the Board of Trustees
• Official University-wide functions
• University-wide training or recognition
• Events with the primary purpose of student recruitment, recognition, or attendance
• Extended Services courses, where the cost of the course includes a factor for hospitality
• Meals when employees are required to work through a normal meal hour without an opportunity to have the meal at an alternate time
• Meetings or events with members of the community or other non-employees to conduct official University business or represent USI
• Meetings with representatives from multiple departments if the cost per person is less than $50
• Formal employee training, recognition, and celebrations conducted away from the place that the employees’ work is normally performed if the cost per person is less than $50
• Meals provided to the spouse of an employee when the spouse is representing the University and his or her attendance is required or expected

Examples of activities that are allowable, but taxable include:

• Food for the purpose of encouraging or recognizing effort or achievement of employees other than University-wide events to honor employees
• Meetings with representatives from multiple departments if the cost per person is $50 or more
• Formal employee training, recognition, and celebrations conducted away from the place that the employees’ work is normally performed if the cost per person is $50 or more

Examples of activities that are not allowable and will not be paid or reimbursed by the University include:

• Alcoholic beverages*
• Hospitality related to fundraising where the revenue is deposited into the USI Foundation*
• Departmental staff meetings
• Meals or entertainment expenses of elected officials or government employees who are not guests at a University-wide event
• Office parties (birthday, retirement, etc.)

*Alternative funding sources, such as the USI Foundation, may be available for certain expenses not allowed from University funds. Departments should coordinate the payment of such expenses in advance with the Foundation.

Purchase of Gifts, Prizes, Awards, and Giveaways

Payments to individuals for services, appreciation, recognition, prizes, and awards are considered taxable income to the recipient. The amount of the payment will be subject to tax withholding and reported to HR for inclusion on Form W-2 for employees or reported on Form 1099-MISC if the recipient is not an employee of the University.

 These types of payments must only be made directly to the individual from the University (via Accounts Payable or Payroll via Purchasing Card, check or direct deposit) to ensure compliance with Internal Revenue Service (IRS) requirements. Payments made by third parties to individuals for services, prizes, awards, gifts, or giveaways are not permitted and will not be reimbursed by the University.

Form W9 (Request for Taxpayer Identification Number and Certification), or a University ID number for employees/students, must be submitted to the Accounts Payable department for any gift, prize, award, or giveaway provided by the University as outlined in Cash Equivalents and Non-Cash Awards to comply with tax reporting regulations.

 If a gift, prize, award, or giveaway is distributed to an ineligible recipient or Form W9, or University ID number, is not provided to the Accounts Payable Department, the purchase will be considered a gift from the individual instead of the University, and therefore cannot be purchased or reimbursed by the University. (University Handbook.)

Cash Equivalents

The IRS specifically defines gift certificates, gift cards, and any financial instruments redeemable for cash as cash equivalents and states that the value of these items is considered taxable income to the recipient regardless of dollar value. (IRC §274(j)(3)(A); Reg. §1.132-6)

Non-Cash Awards

Non-cash gifts, awards, prizes and giveaways are also considered taxable income and reported at the fair market value of the item. If the unit cost of an item is less than $50, then it will be considered de minimis*** and excluded from reporting.

Apparel for Employees (IRS Publication 5138)

• The value of work clothing provided by the employer is not taxable to the employee if:
  • The employee must wear the clothing as a condition of employment; AND
  • The clothes are not suitable for everyday wear
• Since apparel for employees may be considered taxable income, the purchase must be identified regardless of dollar value

 This chart summarizes the University’s tax reporting requirements and information required for such purchases:

*Note: Form W9 may only be submitted by a U.S. citizen or other U.S. person as defined by the IRS. If an individual does not meet that criteria, then he or she should not fill out Form W9 and must not receive any cash equivalent from the University until tax ramifications have been researched and the disbursement has been approved by Accounts Payable.

 **Recipient information is not required for the purchase of plaques because they cannot be easily converted or otherwise used to benefit the individual(s) in a material or quantifiable way.

 ***De minimis - must be infrequent AND of minimal value (IRC §132(e); IRC §274(j)(3)(A); Reg. §1.132-6)

• USI’s policy defines infrequent as no more than once per month
• USI’s threshold for minimal value for tangible property is $50