Related News:
Universities Fail to Report Taxable Income, IRS Says
Nonprofit colleges and universities may be failing to report the full extent of their taxable income to the Internal Revenue Service, according to Lois Lerner, the agency’s director of exempt organizations.
The IRS found in a survey sent to 400 schools in October 2008 that about a third of the respondents aren’t filing forms detailing their taxable income even though many operate businesses unrelated to teaching and research. The survey led to the audit of Harvard University and more than 30 other colleges.
Those schools that do file never pay taxes because they claim losses that wipe out any profits, Lerner said the survey found.
“We’re going to be looking at that in the audit to see how colleges and universities are allocating gains and losses,” Lerner said yesterday on a panel at the National Association of College and University Business Officers annual meeting in San Francisco.
The IRS released an interim report in May based on the responses from 344 institutions to the survey, which sought data on endowments and compensation in addition to income from unrelated businesses. The agency is also reviewing 13 schools that failed to respond.
No Forms Filed
Almost half of the 159 so-called small institutions that responded, and about a third of the 94 medium-sized, have never filed a form known as the 990T while about 4 percent of 91 large universities failed to report income from unrelated business activities, Lerner said. She declined to discuss the status of the audits or when the final report will be released.
A small institution is one with fewer than 5,000 students and a medium one has under 15,000, according to the survey.
Even schools that file the 990T may be omitting some unrelated income, Lerner said. The questionnaire the IRS sent inquired about 47 different categories of business activities. More institutions reported involvement in potentially taxable activity than listed those activities in their 990T forms, she said.
To contact the reporters on this story: Pamela A. MacLean in San Franciscot ; Michael McDonald in Boston at mmcdonald10@bloomberg.net.
Rate These Stories
Rate this Page