Allowable and Non-Allowable Costs Guidance
Allowable and Non-Allowable Costs
3. Specific Cost Guidance by Category
3.43. Taxes (including Value Added Tax)
Ref: 2 CFR Part 200, §200.470.
For states, local governments and Indian tribes:
- Taxes that a governmental unit is legally required to pay
are allowable, except for self-assessed taxes that disproportionately affect Federal programs
or changes in tax policies that disproportionately affect Federal programs.
- Gasoline taxes,
motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the
Federal Government are allowable.
- This provision does not restrict the authority of the Federal awarding agency to identify taxes where Federal participation is inappropriate. Where the identification of the amount of unallowable taxes would require an inordinate amount of effort, the cognizant agency for indirect costs may accept a reasonable approximation thereof.
- In general, taxes which the College is required
to pay and which are paid or accrued in accordance with GAAP, and payments made to local
governments in lieu of taxes which are commensurate with the local government services
received are allowable, except for: (i) Taxes from which exemptions are available to the
College directly or which are available to the College based on an exemption afforded the
Federal Government and, in the latter case, when the Federal awarding agency makes
available the necessary exemption certificates, (ii) Special assessments on land which
represent capital improvements, and (iii) Federal income taxes.
- Any refund of taxes, and
any payment to the College of interest thereon, which were allowed as Federal award costs,
will be credited either as a cost reduction or cash refund, as appropriate, to the Federal
Government. However, any interest actually paid or credited to an College incident to a refund
of tax, interest, and penalty will be paid or credited to the Federal Government only to the
extent that such interest accrued over the period during which the College has been
reimbursed by the Federal Government for the taxes, interest, and penalties. (c) Value Added
Tax (VAT) foreign taxes charged for the purchase of goods or services that a College is legally
required to pay in country is an allowable expense under Federal awards. Foreign tax refunds
or applicable credits under Federal awards refer to receipts, or reduction of expenditures,
which operate to offset or reduce expense items that are allocable to Federal awards as direct
or indirect costs. To the extent that such credits accrued or received by the College relate to
allowable cost, these costs must be credited to the Federal awarding agency either as costs
or cash refunds. If the costs are credited back to the Federal award, the College may reduce
the Federal share of costs by the amount of the foreign tax reimbursement, or where Federal
award has not expired, use the foreign government tax refund for approved activities under
the Federal award with prior approval of the Federal awarding agency.