U-Hall Dips Into Student Groups’ Funds

Faculty of Arts and Sciences (FAS) organizations will now face a University-levied tax on the tax-deductible money that they receive from donors—a policy that affects student groups that hold gift accounts through Harvard.

In an e-mail sent to student group leaders on Sept. 7, Assistant Dean of the College Paul J. McLoughlin II wrote that a 15-percent tax on group gift accounts—which enable groups to solicit tax-deductible donations—will be phased in during the next three years.

The tax starts at 5 percent this fiscal year, which lasts until June 30, 2007, and will increase to 10 percent next year and 15 percent in Fiscal Year 2009. Student groups must pay the tax whenever they withdraw funds from these accounts.

For example, this fiscal year, “if you would like to withdraw $100 from your gift fund, you will actually need to withdraw $105,” McLoughlin wrote in an e-mail.

The tax applies to all gift funds within the FAS and is thus not levied solely on student groups.

“It’s an assessment that’s been applied at other places. FAS only recently decided to apply it,” FAS Director of Communications Robert Mitchell said, adding that the policy is used at other schools at Harvard.

“We made discreet inquiries into whether student groups could be exempt,” Associate Dean of the College Judith H. Kidd said.

She added that she did not know why student groups were required to pay the tax.

The FAS Office of Finance and Budgeting could not be reached yesterday for comment.

The reason for the levy of the tax on all of FAS starting this year was not immediately made clear.

While Kidd said that “probably a small percentage” of the College’s 370 student organizations have gift accounts, she added the accounts are a convenience for student groups.

Harvard processes checks from donors and spares groups the trouble of filing for tax exemption status with the Internal Revenue Service.

The University continues to have discretion over the use of these funds, which must be used for the purpose specified by the donor.

“We were a little surprised by it,” said Kevin M. Bache ’07, who is treasurer of the Harvard Mountaineering Club.

He added that while the gift account was not the “lifeblood” of his organization, it was helpful in allowing “alumni to give us a tax-free gift.”

Some student group leaders also expressed frustration with the tax.

“Not only is it hard for student groups to get money outside Harvard, but now when we get money outside Harvard, that gets taxed,” said Daniel Mejia ’07, president of the Harvard College in Asia Project (HCAP), and also The Crimson’s associate business manager.

He added that the funds in his club’s gift account make up 35 percent of the budget.

“The University should have discussed the policy with the relevant student groups before deciding on it,” Mejia said.

—Staff writer Katherine M. Gray can be reached at kmgray@fas.harvard.edu.