On October 1, 2008, the Internal Revenue Service (IRS) expanded the federal government’s scrutiny of the tax-exempt sector by launching a new research effort that focuses specifically on colleges and universities.

This month, approximately 400 U.S. colleges and universities will receive a compliance questionnaire from the IRS. The questionnaire will focus on unrelated business income, endowments and executive compensation practices.

The questionnaires are being sent to a cross-section of small, midsized, and large private and public four-year colleges and universities, and contain 33 pages of very detailed questions. For example, some of the information requested will ask specifically how each college or university:

• classifies activities as exempt or taxable;
• calculates and reports income or losses from taxable activities;
• invests and uses endowment funds; and
• determines the compensation of executives.

Please visit www.cbh.com/taxexempt to learn more, or to view a sample of the questionnaire. The IRS expects to receive most of the responses within the next several months, analyze the results of the compliance questionnaire, and conduct examinations of a sample of the organizations. We expect a report to be issued on the project next year.

By reviewing the sample questionnaire, we will be able to better gauge what the IRS will consider as key areas of concern moving forward. Please do not hesitate to contact CB&H’s not-for-profit tax specialists or your local CB&H college and university client service partner should you receive a questionnaire or have any questions at all about this initiative.

FOR MORE INFORMATION, PLEASE CONTACT:
R. Russell Coleman, Jr., Partner
Director, College & University Industry Group
rcoleman@cbh.com
800.849.4224

Michael Sorrells, Partner
Director, Nonprofit Tax Services
msorrells@cbh.com
703.506.4440

Janice A. Ratica, Senior Manager
jratica@cbh.com
800.849.4224

About CB&H
As one of the largest regional CPA firms in the Southeast, CB&H is uniquely positioned to impart quality, cost-effective and practical advice to not-for-profit organizations that value the extensive service opportunities normally associated with national firms coupled with the service continuity, value-based fee structure and personal relationships inherent in local firms. CB&H’s Not-for-Profit Group provides proactive solutions to over 1,000 clients, including colleges and universities, trade associations, foundations, community-based charitable organizations, country clubs, public/private schools and religious organizations.