Notice 2018-55, issued today, announces that Treasury and the IRS intend to issue proposed regulations clarifying the calculation of net investment income under the newly enacted excise tax on certain private colleges and universities. Section 4968, enacted by the 2017 tax legislation (P.L. 115-97), imposes on each applicable educational institution, as defined in section 4968(b)(1), an excise tax equal to 1.4% of the institution’s net investment income for the taxable year. The notice provides that the basis of assets will generally be their fair market value on December 31, 2017 for purposes of calculating gain or loss on the sale or disposition of property, consistent with the regulations under section 4940(c). Taxpayers may rely on the rules set forth in the notice before the issuance of the proposed regulations.
The notice also indicates that Treasury and the IRS intend to propose regulations stating that losses from sales or other dispositions of property generally will be allowed only to the extent of gains from sales or other dispositions, and there will be no capital loss carryovers or carrybacks. Treasury and the IRS expect that overall net losses from sales or other dispositions of property in one related organization (or from the applicable educational institution) will be allowed to offset overall net gains from such sales or other dispositions from other related organizations (or from the applicable educational institution), but request comments on this and other issues addressed in the notice. In addition, comments on what other guidance under section 4968(c) is needed and whether, and what type of, transitional relief may be necessary are requested.
Comments should be submitted by September 6, 2018.