All Non-Profits Can Learn from IRS’ College and University Compliance Project

Whether your organization identifies with the Tea Party or not, the IRS may be taking a deep dive into your financials, hunting for data related to key concerns identified after completing the Tax-Exempt College and University Compliance Project.

The Project started with a questionnaire distributed to 400 colleges and universities in 2008. Since, 34 of these institutions have been examined – 24 of which were issued written advisories – and the implications for all non-profits have been identified:

Underreporting of Unrelated Business Income (UBI) on Forms 990 and 990-T is rampant.  Common offenses?  Classification of advertising, facility rentals, and recreation venues.

  • The IRS will be taking a closer look at UBI, specifically focusing on recurring losses and expense allocation.

Comparability Data used for setting salaries is often weak. Those reporting compensation data (private colleges and universities) encountered compensation surveys that contained data for non-similar institutions, or data that did not take into account all types of compensation – not just salary.

  • The IRS will be addressing this issue through education and examinations.

If you think the recent IRS scandal will mean a lenient next couple of years for exempt organizations, best to rethink that position. There are no guarantees and better to proactively avoid examinations and penalties.

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