College and University Compliance Project Report

On April 25th the IRS released the final report for the Colleges and Universities Compliance Project. This project started in 2008 with questionnaires sent to 400 colleges and universities of different sizes. The IRS asked about demographics, unrelated business income, endowment funds, executive compensation, and governance. From the 400 schools that received the questionnaire, 34 were selected for full examinations, focused primarily on unrelated business income and executive compensation. The report provides information about what the IRS learned and notes that, going forward, the IRS plans to use the information gathered from this project to look at unrelated business income and compensation throughout the tax-exempt sector and increase awareness of the rules through education and examinations.

Significant findings in the report include:

  • Unrelated Business Income
    • Ninety percent of schools had increases in unrelated business income with a total of about $90 million in adjustments.
    • The majority of the adjustments were related to income from fitness and recreation centers and sports camps, advertising, facility rentals, arenas, and golf courses.
    • Adjustments were due primarily to disallowance of losses from activities that lacked a profit motive, misallocation of expenses, errors in computation or substantiation, and classification of activities as unrelated that were determined to be unrelated.
  • Executive Compensation
    • Most schools followed the rebuttable presumption, but the comparability data used by some schools was insufficient.
    • Comparability data was not from similarly situated institutions.
    • Compensation studies did not document the selection criteria for the schools that were included in the surveys, and did not offer an explanation as to why they were considered comparable.
    • Compensation surveys did not specify whether amounts reported included only salary or included other types of compensation for a total compensation amount.

Furlough Days

On April 19th, the IRS announced that its first furlough days will be May 24, June 14, July 5, July 22, and August 30. It might add two additional furlough days in August or September. On these days, the IRS will be closed, including all customer-facing operations, such as toll-free operations and the Taxpayer Assistance Center. Every IRS employee will be covered by the furlough, including the Acting Commissioner and executives.