Exempt Organizations Advisory - IRS Focusing Attention on Colleges and Universities

Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)

On October 1, the IRS announced that will begin sending compliance questionnaires to approximately 400 U.S. colleges and universities.  The questionnaires, which will be sent to a cross-section of small, mid-sized and large private and public four-year colleges and institutions, will focus on unrelated business income, endowments and executive compensation practices. 

According to the IRS, the questionnaire will gather information from the schools about how they report revenues and expenses from their trade or business activities, classify their activities as exempt or taxable activities, and calculate and report income or losses on taxable activities.  The questionnaire also will gather information regarding how the organization invests and uses its endowment funds and determines compensation of certain highly paid individuals.

The IRS said it expects to receive most of the responses within the next several months, analyze the results of the compliance questionnaire, conduct examinations of a sample of the organizations, and issue a project report in 2009.