Your Department, CSU, Chico

Project Director Advisories

11.30.2005 -Payee Data Record Information

Due to the number of questions we have been receiving related to our previous email, we want to provide you with additional information. We want everyone to understand up front the reason for the requirement of the Payee Data Record. We understand this will cause an increase in paperwork for our projects. However, we need to comply with the IRS laws and requirements of the CSU Chancellor Office regarding Non-Resident Aliens (NRA).

There are very complex IRS tax laws regarding payments made to foreign persons (i.e., individuals, corporations, partnerships) that are not residents of the US. If the foreign person does not have a tax treaty exemption or some other exemption from federal taxes, we are required to withhold 30%. Due to the difficulty in understanding all the laws, many organizations have not properly reported payments made to non-resident aliens. It appears that after 9/11, the IRS has realized this lack of compliance and is cracking down.

CSU System
The CSU system is one of the most recent targets of the IRS. There are 4 CSU campuses that recently became subject to a full-blown IRS audit that will last a minimum of 1 year. There are 7 other CSU campuses that received a letter of inquiry to gather information on NRA payments made in the 2000 and 2001 years. The Chico campus received one of these inquiry letters. The CSU Chancellor Office has been involved in informing campuses of the possible non-compliance issues and has set up training workshops.

Payee Data Record
To meet the IRS and Chancellor Office requirements, effective with the 2004 calendar tax year, we will require the Payee Data Record form to be completed to identify who is a NRA. It is the only non-discriminatory method to gather this information and is the equivalent to the legally required I-9 Form for all employees. We will be reviewing all potentially taxable income payments made (e.g., fee for service, honoraria, scholarships, fellowships, stipends, certain travel, prizes, awards, etc.) for this purpose.

The Payee Data Record form only needs to be completed once, unless information on it changes, and does not have to be completed on payments to:
Foundation employees,
School districts, or
Federal, State and Local governments

If the box is checked that says I am not a US citizen, then we know we have a foreign person.

NRA Tax Software
The Chancellor Office has assisted the CSU campuses in purchasing software to help analyze payments made to NRA’s. Just recently, our campus purchased the Arctic Int’l software called Glacier and we have been testing the system. Once a foreign person is identified from the Payee Data Record, the Foundation will need to collect additional information so that their data can be entered into the software. The software then provides an analysis to determine their tax status for federal withholding purposes.

We appreciate your patience as we work through refining our procedures and will communicate these procedures or additional information as soon as possible.

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