Instructor: Thank you for joining us
to learn about private business use
and UVM's bond post-issuance responsibilities.
The official of your area
has delegated you as the PBU coordinator.
This training will cover PBU explanations
and its importance in safeguarding UVM
by complying with these IRS regulations.
We will also discuss what to monitor,
best practices on how to track and report PPU in your areas,
and provide resources.
UVM issues tax exempt bonds to help pay for the renovation
of its lovely older buildings,
as well as the creation of new spaces.
The tax exemption saves UVM millions of dollars in interest.
However, by issuing the tax exempt bonds,
UVM agrees to the post-issuance IRS compliance.
The regulatory tasks that applies to PBU coordinators
is the tracking of private use in the bond funded spaces
until the bonds retire, which could be decades.
As you will learn in this training, PBU is not intuitive,
such as nonprofits being considered
private use per the regulations.
This graphic is from UVMs PBU webpage
where there is a list of the bond finance spaces
with the plan on building numbers.
Let's discuss private business.
Use the PBU definition that is paraphrased
from the section 141 of the IRS regulations
is usage of a tax exempt bond finance property or asset
by a non-governmental person
such as non-profit organizations,
profit businesses and federal or foreign governments
generally equates to non UVM users.
The allowance of private business use usage
for the life of the bond is 10% of proceeds
with a $15 million cap,
that percentage can be reduced to 5%,
which is rare for universities for unrelated to
or disproportionate to governmental use.
Meaning proceeds used for PBU
exceeds the amount of use for our related purpose.
We need to ensure no egregious private use
is ever more than our related use.
Treasury services tracks each bond and its PBU percentage
by relying on what is reported
through annual questionnaires.
As a PBU coordinator,
this is the information you will submit each fall.
UVM is the governmental entity,
so the currently enrolled students,
paid staff, and paid faculty
using space for UVM purposes all qualify as UVM users
and do not need to be tracked.
However, everyone else
who uses and controls the bond finance space
needs to be assessed.
Generally, local and state governmental use
would also be allowed as well as some federal usage
if covered by the ByJoel Act.
General public on campus is not an issue for PBU.
Let's look at the non UVM users
those who need to be tracked.
It is not intuitive.
The words private business use
make me think of profit businesses,
but the regulations expanded
the non-qualified lists significantly.
Separate 501c3s
are generally considered private business use.
All the bolded bullets have separate 501c3s from UVM,
such as the UVM Foundation and UVMMC
and their usage in a tax exempt bond finance space
is private business use.
The next set of bullets are generally designated
as function code 72 in the space survey
as non-institutional agency use.
Some non-institutional use
seems like UVM educational purposes,
but the PBU regulations
match the cost allocation regulations
and consider these individuals as non UVM users
such as visiting professors, alumni, and non SPA research.
It helps to memorize the UVM users and track everyone else.
Another frequent question about non UVM users
is if the usage is free, do I need to track?
The answer is yes, because the operative word is use.
We have covered users.
Let's look at the types of usage arrangements
by non UVM users.
One of the responsibilities of PBU coordinators
is to ensure usage agreements flow to them.
Your officials have been trained in PBU
and were asked to have agreements sent to you for tracking.
This training requested building
and room numbers be added to the arrangements
for ease with reporting.
The next couple of slides will help give context
to the types of PBU scenarios.
It is important that formal or signed agreements
and informal arrangements made verbally or via email
are tracked for the annual reporting.
Leases or lease like arrangements
are almost always PBU from non UVM users.
Management contracts such as Sodexo are PBU.
Research contracts are generally handled by SPA,
but lab leases are tracked by PBU coordinators
or one of their usage administrators on their PBU team.
Watch for naming rights
and economic benefits to third parties.
And keep in mind that UVM users
are currently enrolled students, paid faculty and staff.
Alumni and retired professors are generally PBU
unless they're being paid by UVM.
Short term leases under the regulations are 50 days or less.
Anything over 50 days by a non UVM user
is private business use.
Though we may be allowed to exclude
the 50 days or less arrangements
from the private use calculations,
they do need to be listed in the questionnaires
and retained to show we excluded them appropriately.
Luckily, certain types of leases
are considered incidental use.
As long as all incidental use per bond is less than 2.5%,
we don't have to include them in the calculations,
but the agreement should also be listed
in the annual questionnaires and retained.
If we exceed the 2.5%, we have to calculate them.
Again, general use by the public
does not typically constitute PBU.
This slide will discuss other PBU considerations.
If the naming of a bond finance base
is a strict donation handled by the UVM Foundation,
it is not likely private business use.
However, naming a space with onsite usage, economic benefit,
or naming of an athletic complex
may very well be private business use.
If you notice a naming arrangement
with formal or informal use,
economic benefit, corporate sponsorship,
or if it pertains to the athletic center,
please send that arrangement to treasury management email.
It is better to have it reviewed for PBU
than have an auditor find it first.
MCDEP, the main campus district energy plant
formerly called the central utility plant,
was bond financed.
Any building it connects to
whether bond financed or privately funded
brings that building under PBU IRS regulatory scope.
PBU needs to be monitored
and privately funded buildings connected to the MCDEP.
Plan on has designations
as bond financed or indirect bond finance,
but for PBU coordinator purposes, they're treated the same.
Anything connected to the central utility plant
must be tracked for private business use.
Here are a few indirectly bond finance buildings
that were privately funded
and connected to the MCDEP.
PBU coordinators need to track usage by non UVM users
in these privately funded buildings
as if they were bond financed.
The safe harbors to be exempted from PBU calculations
are summarized in the PBU webpage
and should be considered before engaging
in management contracts.
This responsibility falls primarily
to the usage decision maker, your official.
However, if you ever need to assist
with a management contract,
the focus is on control, risk
and benefits and burdens falling to UVM
to be within compliance.
Key areas are no profit sharing,
but with incentive compensation allowed
and who manages space and budgets.
Sodexo is our largest management contract,
which is not within safe harbors
and is considered private business use
and UVM's bond finance spaces.
Why is BPU tracking and reporting important?
We've discussed that UVM issues tax exempt bonds,
and that there are certain IRS rules
on how UVM can spend the funds
and how we use the space funded by that money.
The first risk of this slide
is how the IRS can audit any time
during the life of the bond.
We had a successful audit in 2014 for our 2007 bond,
but audits are costly and time consuming.
There are significant tax compliance issues,
leading to market disclosures and adverse publicity,
which we want to avoid.
Non-compliance could also lead to UVM rating changes,
thus increasing the future cost of borrowing.
We could negatively affect
the future tax exemption allowance.
The worst risk is a retroactive IRS declaration,
making the bond interest taxable to the buyer,
which traditionally is paid by universities
because no one ever wants to upset bond holders.
To mitigate risk, UVM provides PBU education,
tracks non UVM usage of bond finance spaces,
follows the record retention requirement
and works with outside PBU consultants and bond council.
We all play a part in this compliance.
Let's safeguard UVM together.
We have briefly mentioned record retention.
We need to keep digitally all non UVM usage agreements,
tracking and anything used for the calculation
of the PBU percentage for the life of the bond,
plus any tax exempt bond refunding plus three years.
Again, this is decades of records
that UVM needs to maintain.
UVM also needs to retain any changes
with tax exempt bond finance spaces.
Any transfers or purchases or sales,
treasury services helps by collecting the contracts
and the annual reports.
But PBU coordinators should keep their monitoring data.
Treasury services is happy to help create
record retention mechanisms with PBU teams.
For the PBU calculations other than SPA,
the length of time and days, not hours,
amount of space used, and the amount of bond proceeds
are utilized to calculate the PBU percentages.
PBU coordinators track and collect
days of use and location for each non UVM user arrangement,
but do not need to worry about
the bond proceeds or square footage.
We'll take care of that.
PBU coordinators apply this information
to treasury services in their annual questionnaires.
SPA uses the revenue method
and submits multiple spreadsheets for PBU calculations.
Who tracks what on campus?
SPA tracks SPA agreements.
Third party events fall to UES primarily.
Leases and sales of bond finance assets
are tracked by real estate operations.
Everything else in bond finance spaces
are tracked by the associated PBU coordinator,
including those lab leases.
The private business use website list official and delegate,
also known as PBU coordinator responsibilities.
Monitor non-UVM user arrangements,
create methods to track and oversee usage
in bond finance buildings, advise your PBU team
and send data to treasury services.
Training is required every other year
per our UVM post issuance bond compliance policy.
There are many people on campus
helping UVM remain in regulatory compliance.
Officials are tasked with PBU regulations
when creating contracts and allowing space usage.
Officials and their teams know
what is going on in their spaces,
which is why we rely on you as PBU coordinators
to assist in this compliance.
Private business use is just one of the
many post issuance compliance requirements,
but non UVM user usage is the one your work focuses upon.
We highly recommend creating
your own PBU teams for your areas.
PBU monitoring best practices.
One, set up your team.
People who fill out the space survey,
your official and any usage administrators are ideal.
Two, ensure all usage arrangements flow to you.
Three, check arrangements to see
if they are located in a bond finance building.
Four, evaluate if it is a non UVM user
and if it is, set up tracking.
Five forward PBU arrangements
to the treasury management email.
What to track for PBU?
Who is using the space?
Type of organization, building number,
description of use, room numbers, and days of use.
Hopefully the arrangement will specify
a good bit of the information.
How to track PBU?
One, is the agreement taking place in a bond finance space?
Check the bond finance building list on the PBU webpage
or look up the building and plan on.
Two, assess if there is non UVM usage.
Three, is the space reserved in EMS?
No Need to track.
Four, does the contract specify days of use?
Just add it to the questionnaire.
Tracking is not required, but always preferred.
Five, is usage from a SPA contract?
No tracking necessary.
However, keep in mind,
non SPA lab leases do need to be tracked.
Six, not SPA or EMS?
Decide on the simplest method to monitor,
collect date, individual and organization.
There is no need to sign in and out
as we track usage per days, not hours.
One signature and date will suffice.
Use a method that works for you and your team.
Seven, advise your usage administrators on collecting data
for the annual fall reporting.
PBU coordinators need to determine
who may be involved with making usage decisions.
Talk to your officials, ask or present meetings
and create your PPU team.
Train your usage administrators on these regulations.
Reach out to us if you would like us to join your meeting.
Let's look at the annual questionnaires.
Everyone fills out tab one, general information,
responsible party and space survey section.
Please note the responsible party
may only be the PBU coordinator
or the official who has been trained.
As the space survey is the backbone to this IRS compliance,
knowing who filled out the space survey is very helpful.
Please list the best contact
should we have any questions.
Below the responsible party section on tab one
is a listing of the buildings
from the most current space survey
that will be preloaded to your questionnaire.
Please review for accuracy.
In the private business comment section,
please respond to only the spaces
you oversee in a particular building.
Specific route numbers and arrangements
will be added in tabs two and three.
What if there are any space issues on tab one?
Please add to the questionnaire any areas you oversee
that might be missing with a notation.
If an area listed is incorrect,
please leave it on the questionnaire
and mark it as inaccurate.
Email us as soon as possible for resolution.
This training covers the more standard questionnaires
because not all questionnaires ask for the same information.
If you belong to physical plant,
real estate operations, SPA, or UES,
please reach out to treasury and debt
for your specific instructions.
However, for the most part,
tab two will consist of written usage arrangements.
If you have no non-UVM users during this period,
answer no in the upper right hand corner.
Non-SPA contracts need each column to be filled out.
A space survey table
will be provided with your questionnaire,
which is helpful for this section
as room numbers are needed to be listed
for each arrangement.
Record any non-institutional agency designations
with the contract.
Please notate a new amended or terminated agreement
with dates in the description of services column.
Remember, we track days of use not hours.
If a non UVM user controlled a room for a two hours,
it is considered a day for this reporting.
If you have not already sent the arrangement
to the treasury management email,
the last column is a reminder as it should always state yes.
Tab three is for the other usage arrangements
without contracts,
the informal or verbal agreements by non UVM users.
Answer the PBU yes or no question in the upper right corner.
Record any non-institutional agency designations
without contracts.
Treasury and debt will pre-list
any function code 72 non-institutional use
to tab three to be described.
However, if you have a contract,
please move that listing to tab two accordingly.
When reporting time and use,
keep in mind, days of use, not hours.
If there are emails that pertain to the arrangement,
please send them to the treasury management email.
List any verbal usage arrangements from non UVM users.
For verbal usage, please list
in the description of use column,
the UVM contact name, should any questions arise.
Now that you understand private business use more,
what should you expect?
PBU is a year-round data collection task
with reporting each fall.
Training will be provided biannually.
Questionnaires arrive with a space survey table,
post issuance compliance policy,
and a bond finance space list to help assist you.
You will have approximately one month
to complete the questionnaire.
We recommend having your usage administrators
submit to you all collected data by mid-September
for the previous fiscal year.
Let's look at PBU Resources.
The PBU webpage offers lots of assistance
with UVM directed explanations.
You have access to a bond finance space list,
training guides, safe harbor listings,
regulatory summaries, and links to regulations
and the UVM post issuance policy.
Because you only need to track
non-UVM usage and bond finance spaces,
the PBU webpage and planon
are good locations to see if a building has bond financing.
As a space survey is the backbone
of tracking this IRS regulation,
space survey accuracy is vital.
The space survey lists function code 72
to easily assess those non-institutional agency designations
for this annual reporting.
And of course, treasury services available
to assist you and your teams.
Reach out and have us join
one of your PBU coordination meetings for your area.
Thank you for participating
in this private business use training.
Your help in safeguarding UVM
with these IRS regulatory compliance requirements
is greatly appreciated.
Please let us know if you have any questions.
Thank you again, and we look forward to working with you.