PROCEDURES FOR TAXABILITY DETERMINATION:
SPONSORED RESEARCH AWARD ACTIVITIES

Supplement Form B Goal

To obtain a timely and accurate understanding of each sponsored research award activity and its underlying purpose. This understanding will serve as a basis in making an accurate determination of the taxability of sponsored research award activities.

Procedure for Determination of Research Award Taxability All taxability determinations are to be made during the pre-award stage of sponsored research activities.

1. Forms Required

a. Unrelated Business Income Tax Research Questionnaire;
b. Explanation and Narrative (attached to the questionnaire); and,

Flowchart (attached to the questionnaire).

2. Determination Procedures

a. A qualified employee1 , hereafter referred to as employee, from the Office of Sponsored Programs (OSP) and/or the Health Sciences Center?s Clinical Trial Unit (HSC) will inform the principal investigator of the central and primary issues related to the determination of unrelated business income generating research activities.

b. The employee from OSP and/or HSC will discuss with the principal investigator the specific activities germane to the research that will be undertaken and/or overseen by the principal investigator. This discussion is necessary in order for the employee from OSP and/or HSC to make an appropriate and accurate determination regarding the taxability of the research award activity.

The employee from OSP and/or HSC will review and discuss (with the principal investigator) the specific information found within the ?Unrelated Business Income Tax Research Questionnaire,? as well as the information and
1 A qualified employee is an employee who has knowledge and training in accurately classifying sponsored research activities as either related or unrelated business income activities.
explanations found within the narrative attached to the questionnaire A general discussion of each question found within the questionnaire , as it relates to the research award activity, will allow the employee from OSP and/or HSC to make an accurate determination as to the taxability of the research award activity. (This should be a highly interactive process).

d. The explanation document (attached to the questionnaire) and the questionnaire are to be used simultaneously to ensure that the questions contained within the questionnaire are completely and accurately answered to the best of the principal investigator?s knowledge and understanding.

e. Once the questions (contained on the UBIT questionnaire) are determined to be completely and accurately answered to the best of the principal investigator?s knowledge and understanding, the employee from OSP and/or HSC will make the determination using the flowchart that is attached to the questionnaire.

3. Procedures Subsequent to Determination

a. If the result of the procedures followed in Section 2 of this document is a determination of (the research activity) as an unrelated business income generating activity, then an estimation of the unrelated business income to be generated from the research award activity must be made, withheld, and remitted to the Internal Revenue Service accordingly.

b. If the result of the procedures followed in Section 2 of this document is a determination of (the research activity) as a related business income generating activity, then the appropriate substantiation and documentation must filed in the research award activity?s file.

4. Substantiation of Determination

a. After a determination has been made, the employee from OSP and/or HSC will document the decision (e.g., the questionnaire, narrative, flowchart, and any other relevant documents and/or notes) and include the documents within the appropriate research award?s file.

5. Determination Difficulties

a. If an accurate and ultimate determination is not reached through the course of the procedures outlined in this document, then an estimation of the unrelated business income to be generated from the research award activity must be made, withheld, and remitted to the Internal Revenue Service accordingly.