Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Taxation and the Sabbatical: Doctrine, Planning, and Policy
John A. Miller and Robert Pikowsky*
Many universities offer faculty the opportunity to apply for a form of paid leave known as a sabbatical. This is one of the most highly prized perquisites of the academic profession because it offers an unrivaled opportunity for professional and personal renewal and growth. It is common practice for faculty who go on sabbatical leave to take up temporary residence at another location during the sabbatical period. This temporary relocation has significant income tax implications that pose opportunities for tax planning and tax traps for the unwary. These tax implications also arise when a faculty member at one institution serves as a visiting scholar at another institution (a scholars’ visit) on a temporary basis.
This Article describes the current income tax treatment of sabbaticals and scholars’ visits and develops the planning and policy issues raised by this treatment. The tax benefits of a sabbatical away from home or a scholar’s visit fall into two major categories. The first of the two is the tax deduction granted by the Code for certain expenses incurred while traveling on business. The second benefit is the exclusion of certain income earned while on a sabbatical
or a visit abroad lasting more than a year. Both of these benefits are circumscribed in ways that undermine their utility and that create risks of their misuse.
Most of the time the tax rules are the same whether the travel is for a sabbatical or for a scholar’s visit. For convenience sake we refer only to sabbaticals,
but the reader should understand this term to include scholars’ visits unless the text notes otherwise.
We begin with a brief overview of the nature of the academic sabbatical and the scholar’s visit. Next we describe the Code’s treatment of business expenses in general and travel expenses in particular. These principles provide the context within which sabbatical travel expenses must be considered. We show how the rules operate in some typical situations faced by faculty on sabbatical leave. We then describe the rules with respect to exclusion of income earned abroad. Then we offer a number of tax planning observations. Finally, we consider the policy implications of the present state of the law with respect to sabbatical expenses and income.
*John A. Miller is the Weldon Schimke Distinguished Professor of Law and Dean Emeritus at the University of Idaho College of Law. Robert Pikowsky is the Director of the Pre-Law Program and an Adjunct Professor of Public Policy at the Georgia Institute of Technology.