Tax Liabilities of Professional Development Accounts

The Office of the General Counsel has advised the College that honoraria payments from outside entities are taxable to the faculty member if the faculty member has control over where the funds are paid. In other words, if the faculty member has the option of receiving the payment directly or having the payment directed to the College, the payment is considered taxable income to the faculty member regardless of which payment option the faculty member selects. Because nearly all payors in this situation give the faculty member that option to select the payment recipient, there is no benefit to the faculty member to have the payment deposited at the College of Nursing. The faculty member is still subject to tax on that income and the faculty member’s use of the funds is then restricted to University business purposes. Effective July 1, 2009, the College of Nursing will no longer accept honoraria or other payments from non-University entities for services performed by faculty members outside of their regular faculty appointment. Faculty members must accept such payments personally, and faculty members are encouraged to consult with their tax advisor about proper reporting of such payments as income. The College may still designate College funds as professional development funds for use by a particular faculty member. Examples of such situations include awards given by the College and incentive payments based on practice revenue. In those instances, the funds may be used for professional development expenses such as travel to professional conferences, professional memberships, and subscriptions. These funds may not be used to purchase equipment. The funds remain the property of the College and if the faculty member for whose benefit the funds were designated leaves the College, the funds remain with the College. Those funds that are already in College of Nursing 240 accounts and designated as professional development accounts are still available for use by the designated faculty/staff member with the same parameters explained above.