Wisconsin’s Way Out of UCLA’s Taxable Hotel Dilemma: But We Really Have to Hurry!

In an earlier post today citing an online lesson from Stanford, we pointed to UCLA’s hotel tax dilemma.  We learned about Unrelated Business Income (UBI) and Unrelated Business Income Tax (UBIT).  It appears that much of the proposed use of the UCLA hotel is in fact taxable and yet commercial-type business is forbidden in the UCLA case due to the way the hotel is to be financed. 

Now some readers might say that our blog just harps on the negative side of the UCLA hotel proposal and never offers anything positive.  That isn’t really true since we did offer a realistic alternative to the proposal until UCLA got the donors to write a letter saying it was the hotel or nothing.  So – searching for a solution - we continued our internet exploration and have found a way out for UCLA, courtesy of the University of Wisconsin.

The University of Wisconsin, like Stanford, has posted online guidance on the tax issue.  But Wisconsin provides the one example in which a university hotel can take the kind of business UCLA proposes and yet not be taxable.  Below in italics is the example from Wisconsin for a hypothetical university hotel that could be nontaxable:

A University receives an off-campus restaurant as a gift. The restaurant is managed and operated by students in Hotel/Restaurant Management. (Not taxable because contributes importantly to the educational mission.)

Source: http://www.bussvc.wisc.edu/acct/policy/rpa/rpa2ops.html

So there you have it.  All UCLA needs to do is create a new School of Hotel Management and degree and use only hotel school students (free labor!!) to staff the proposed hotel for college credit! 

Of course, any such school and degree program will need Academic Senate and Regents approval before the September Regents meeting where the final approval for the hotel project is to be on the agenda.  But since the Regents are in a mood now to approve anything related to the hotel, getting a rubber stamp approval for a new school should be no problem.  And since UCLA’s administration likes to say that the Academic Senate is just fine with the hotel plan, the powers-that-be on campus shouldn’t have any problem getting quick Senate approval for the new Hotel Bachelor of Management (HOT-BM) degree.

Such a simple idea!  I know you're asking:

Seriously, folks, when the September Regents meeting rolls around, check to see if there is presented any solution to the tax problem.