In May 2010, the IRS released Interim Report on Nonprofit Colleges and Universities Compliance Project. The interim report includes an executive summary that summarizes responses to a questionnaire about nonprofit colleges’ and universities' tax law compliance. According to the IRS, colleges and universities make up one of the largest nonprofit segments in the country in terms of revenue and assets.
The report contains preliminary information on the respondents' organizational structures, demographics, exempt and unrelated business activities, endowments, executive compensation, and governance practices. The report includes information on a wide variety of activities that might be exempt or taxable, depending on the situation. In most cases, the percentage of colleges and universities that indicated engaging in activity that could be considered taxable was much higher than the percentage of organizations that reported treating the activity as taxable.
The IRS has confirmed that they are focused on the conduct and reporting of exempt or other activities that may generate Unrelated Business Income Tax (UBIT). The IRS has already examined more than 30 colleges and universities as part of this project.
“That is one area we are going to focus on in our ongoing analysis of the data,” said Lois G. Lerner, director of the IRS’s Exempt Organizations division. “We need to understand if this apparent disparity is appropriate or whether it indicates a broader compliance concern in the unrelated business income area.”
Additional information will be made available as the IRS completes its analysis. To read the interim report, questionnaire, or executive summary, go to www.irs.gov/charities/charitable/article/0,,id=220698,00.html.
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Compiled by Paul Doetsch, CPA, Partner, pdoetsch@legacycpas.com