Page Comparison

...

This document is made up of two parts: 1) response from the CCCCO from Aug 2019; and 2) the full contents of the Legal Opinion 13-05 - issued in 2014 from CCCCO Legal regarding the implementation of the SSN question in OpenCCC and CCCApply. .

Federal Requirements

Do we need to implement the Social Security number in CCCApply, or can the colleges opt-in/opt-out of display in the Standard application?

Federal Requirements

Federal law requires the California Community Colleges to provide specific information to the Internal Revenue Service (IRS) for the purpose of filing an information return (IRS Form 1098-T "Tuition Statement") for each student in attendance, with a few exceptions. (26 C.F.R. 1-60505-1(b)(2)(ii).)

...

• (A) The name, address, and taxpayer identification number (TIN)(as defined in section 7701(a)(41)) of the institution;

• (B) The name, address, and TIN (taxpayer identification number or SSN) of the individual who is, or has been, enrolled by the institution;

State Requirements

California Education Code sections 76071:

...

The Social Security number is used as a means of identifying student records and to facilitate financial aid.

Gina Browne

Specialist, Student Financial Aid Programs

...

O (916) 324-4744 | gbrowne@cccco.edu

...

Legal Opinion 13-05

...

...

Date: September 16, 2013

To:Linda Michalowski, Vice Chancellor, Student Services and Special Programs

From: Michelle Goldberg, Attorney, Legal Division

IRS Penalties for incorrect or missing TINs on IRS Form 1098-T

RE: Legal Opinion 13-05

...

BACKGROUND

California Community Colleges are receiving Internal Revenue Service (IRS) penalty notices for failure to provide students’ correct tax payer identification numbers (TINs) on IRS Form 1098-T or in some cases for failure to provide a TIN at all.

ISSUES

1) Does California law or other federal law preclude colleges from providing TINs to the IRS?

No, providing student TINs to the IRS does not violate any California law or other federal law.

2) Are colleges required to provide correct TINs to the IRS?

Yes; however, colleges do not need to provide TINs of nonresident aliens. Further, colleges that “act in a responsible manner” as defined by the IRS can be eligible for a waiver of penalties for failure to provide a correct TIN.

LAW AND ANALYSIS

The Tax Payer Relief Act of 1997

In 1997, Congress enacted the Tax Payer Relief Act which, among other things, provided a tax credit to qualifying taxpayers who have incurred expenses related to the first two years of postsecondary education. Those provisions are referred to as the Hope Scholarship Credit and the Lifetime Learning Credit. The Hope Scholarship Credit can be claimed for specified education expenses incurred by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent. (26 U.S.C. § 25A(b).)

Institutions must MUST do the following:

In 2002, the Internal Revenue Service (IRS) adopted regulations (effective December 31, 2003) requiring eligible educational institutions that enroll any individual for any academic period to:

...

Penalties resulting from a failure by the institution to provide a correct TIN can be waived if the failure is “due to reasonable cause.” (26 C.F.R. § 1.6050S-1(e)(3).) An institution can establish reasonable cause if “the failure arose from events beyond the institution’s [...] control, such as failure of the individual to furnish a correct TIN. However the institution [...] must establish that it acted in a responsible manner both before and after the failure.” (26 C.F.R. § 1.6050S-1(e)(3)(i).)

...

individual who fails to furnish a TIN upon request by the institution can be subject to a penalty imposed by the IRS. (26 C.F.R. § 1.6050S-1(e)(4).)

...

State and federal privacy laws

Collection and Use of Social Security Numbers by Community Colleges n

In 2005, Civil Code section 1798.85 was enacted protecting the confidentiality of social security numbers. Persons and entities, including post-secondary educational institutions, could no longer use social security numbers on student identification cards, post social security numbers, require students to transmit his or her social security number over the Internet unless specified security precautions have been taken, or require a student to use his or her social security number to access a web site unless an authentication device is also required to access the web site. (Civ. Code, § 1798.85(a), [partial list].) However, the statute specifically allowed the “collection, use or release of a social security number as required by state or federal law or the use of a social security number for internal verification or administrative purposes.” (Civ. Code, § 1798.85(b).) Thus, Civil Code section 1798.85 does not preclude colleges from collecting social security numbers or providing them to the IRS for the purposes of complying with the requirements of part 26 of the Code of Federal Regulations, section 1.6050S-1 et seq.

FERPA

Generally, the Family Educational Rights and Privacy Act (FERPA) (20 U.S.C. § 1232g; 34 C.F.R. part 99) precludes educational institutions, including colleges, from disclosing personally identifiable information (PII) from students’ education records without consent. Students’ education records are those records that “contain information directly related to a student; and are maintained by the educational agency or institution or by a person acting for such agency or institution.” (34 C.F.R. § 99.3 “Education Records.”)

...

The FPCO concluded that the Tax Relief Act controlled because it was the more specific statute as well as the more recently enacted statute. (Id.at p. 2, (citations omitted).)

Education Code

State law, like FERPA, precludes the disclosure of PII from students’ education records without consent, except in very limited circumstances not applicable in the instant matter. (Ed. Code,§ 76210, et seq.) A state law actually conflicts with federal law where it is impossible for a private party to comply with both state and federal requirements, or where state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” (Hines v. Davidowitz, (1941) 312 U.S. 52, 67.) Clearly, state statutes prohibiting disclosure of SSNs, etc. from students’ education records directly conflict with federal statutes requiring the disclosure. State law that conflicts with federal law is without effect. (U.S.C.A. art. VI, cl. 2.)

Thus, the IRS regulations supersede state privacy laws which would otherwise prohibit disclosure of specified PII from students’ education records without the student’s consent to the IRS. Colleges may legally provide the IRS with the required information without the student’s consent as necessary to meet the reporting requirements of the Hope Scholarship Credit.

However, FERPA and state law limit the re-disclosure of PII from the student’s education record. These requirements are not preempted or superseded by the IRS regulations. Thus, the IRS is prohibited from re-disclosing the information provided by colleges without the student’s consent (or unless an exception applies). (34 C.F.R. 99.33(a)(1), Ed. Code, § 76243(a)(8)(B) .) Colleges can be sanctioned for improper re-disclosure of PII. Further, in the event the IRS did make an improper disclosure the college would be prohibited from providing the IRS with PII from education records without the student’s consent for at least five years. (20 U.S.C.§ 1232g(b)(4)(B).)

...

Conclusion

Colleges must comply with the reporting provision of IRS regulations 26 C.F.R. § 1.6050S-1 et seq., including obtaining a correct TIN from each student. Colleges that do not obtain correct information from the student can be penalized by the IRS. Colleges that act in a “responsible manner” as defined by the regulations in obtaining the TIN/SSN may be able to have any assessed penalty waived. Colleges that receive a Notice of Proposed Civil Penalty from the IRS should work with their local counsel to file a request to waive the penalty. The IRS has provided comprehensive guidelines that provide information needed to avoid penalties, describes what actions must be taken to request TINs, and explains the requirements for establishing reasonable cause (which can result in the waiver of penalties). (http://www.irs.gov/pub/irs-pdf/p1586.pdf.) If your college has received a Notice of Proposed Civil Penalty you have to answer that notice within 45 days from the notice date (not when it was received, but the date on the notice). It may be possible for colleges to receive an extension of time. A written request should be sent before the expiration of the 45 days to the IRS’ Philadelphia Campus address:

Internal Revenue Service

2970 Market Street 4-E08.141

LIH Unit - Mail Stop E-08.143

Philadelphia, PA 19104

Reasonable cause requests should be sent to the IRS center where you filed your return.(http://www.irs.gov/uac/Where-to-File-Certain-Elections,-Statements,-Returns-and-Other-Documents.)

< End of Legal Opinion 13-05 >

https://www.irs.gov/pub/irs-pdf/p1586.pdf

...

IRS Legal Language

...

§ 1.6050S-1 Information reporting for qualified tuition and related expenses.

(a) Information reporting requirement -

(1) In general.

Except as provided in paragraph (a)(2) of this section, any eligible educational institution(as defined in section 25A(f)(2) and the regulations thereunder) (an institution) that enrolls (as determined under paragraph (d)(1) of this section) any individual for any academic period (as defined in the regulations under section 25A), and any person that is engaged in a trade or business of making payments under an insurance arrangement as reimbursements or refunds (or other similar amounts) of qualified tuition and related expenses (as defined in section 25A(f)(1) and the regulations thereunder) (an insurer) must -

...

(ii) Furnish a statement, as described in paragraph (c) of this section, to each individual described in paragraph (c) of this section.

(2) Exceptions -

(i) No reporting by institution or insurer for nonresident alien individuals.

...

(3) Any other similar arrangement in which the institution bills only an institutional third party for education furnished to an individual and does not maintain a separate financial account for that individual, but only if designated as a formal billing arrangement by the Commissioner in published guidance of general applicability or in guidance directed to participants in specific arrangements.

(b) Requirement to file return -

(1) In general. Institutions may elect to report either the information described in paragraph (b)(2) of this section, or the information described in paragraph (b)(3) of this section. Once an institution elects to report under either paragraph (b)(2) or (3) of this section, the institution must use the same reporting method for all calendar years in which it is required to file returns, unless permission is granted to change reporting methods. Paragraph (b)(2) of this section requires institutions to report, among other information, the amount of payments received during the calendar year for qualified tuition and related expenses. Institutions must report separately adjustments made during the calendar year that relate to payments received for qualified tuition and related expenses that were reported for a prior calendar year. For purposes of paragraph (b)(2) of this section, an adjustment made to payments received means a reimbursement or refund. Paragraph (b)(3) requires institutions to report, among other information, the amounts billed during the calendar year for qualified tuition and related expenses. Institutions must report separately adjustments made during the calendar year that relate to amounts billed for qualified tuition and related expenses that were reported for a prior calendar year. For purposes of paragraph (b)(3) of this section, an adjustment made to amounts billed means a reduction in charges. Insurers must report the information described in paragraph (b)(4) of this section.

...

(c) Requirement to furnish statement -

(1) In general. An institution or insurer must furnish a statement to each individual for whom it is required to file a Form 1098-T. The statement must include -

...

(3) Copy of Form 1098-T. An institution or insurer may satisfy the requirement of this paragraph (c) by furnishing either a copy of Form 1098-T and its instructions or another document that contains all of the information filed with the IRS and the information required by paragraph (c)(1) of this section if the document complies with applicable revenue procedures relating to substitute statements (see§ 601.601(d)(2) of this chapter).

(d) Special rules -

(1) Enrollment determined. An institution may determine its enrollment for each academic period under its own rules and policies for determining enrollment or as of any of the following dates -

...

(3 )Governmental units. An institution or insurer that is a governmental unit, or an agency or instrumentality of a governmental unit, is subject to the requirements of paragraphs (b) and (c) of this section and an appropriately designated officer or employee of the governmental entity must satisfy those requirements.

(e) Penalty provisions -

(1) Failure to file correct returns. The section 6721 penalty may apply to an institution or insurer that fails to file information returns required by section 6050S and this section on or before the required filing date; that fails to include all of the required information on the return; or that includes incorrect information on the return. See section 6721, and the regulations thereunder, for rules relating to penalties for failure to file correct returns. See section 6724, and the regulations thereunder, for rules relating to waivers of penalties for certain failures due to reasonable cause.

...

(4) Failure to furnish TIN. The section 6723 penalty may apply to any individual who is required (but fails) to furnish his or her TIN to an institution or insurer. See section 6723, and the regulations thereunder, for rules relating to the penalty for failure to furnish a TIN.

(f) Effective/applicability date.

The rules in this section apply to information returns required to be filed, and information statements required to be furnished, after December 31, 2003. Paragraph (c)(1)(i) applies topayee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6050S-1 (as contained in 26 CFR part 1, revised April 2013) shall apply.

[T.D. 9029, 67 FR 77682, Dec. 19, 2002; 68 FR 6350, Feb. 7, 2003; T.D. 9675, 79 FR 41131, July 15, 2014]

...

FERPA Example Information

Reference: https://www2.ed.gov/policy/gen/guid/fpco/ferpa/library/hunter.html

...