Friday, May 14, 2010

IRS Report on College and Universities Released

The Internal Revenue Service has released an interim report summarizing responses to compliance questionnaires sent to 400 public and private colleges and universities in October 2008. The interim report contains preliminary information on the respondents’ organizational structures, demographics, exempt and unrelated business activities,endowments, executive compensation and governance practices. The survey divided the organizations into three categories: Small (under 5,000 students), Medium (5,000 to 14,999 students) and Large (15,000 or more students). The focus of the report is on UBIT, investments, and executive compensation.

Together with the recently released CBO report on arbitrage by exempt colleges and universities, there is good reason to think that the regulatory winds are blowing for the nonprofit higher education sector. There will likely be new legislation at some point affecting colleges and universities, if not the whole exempt sector, as a result of these reports. A similar IRS study of nonprofit hospitals was begun in 2006 and was directed at community benefit and compensation issues, and there was also a CBO report on tax arbitrage by nonprofit hospitals. The recently enacted of IRC 501(r) as part of the health insurance reform legislation requires that exempt hospitals conduct a community benefit assessment every three years and make fee assistance programs more accessible, among other things.

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