IRS Sends Pre-Audit Compliance Questionnaires to 400 Colleges and Universities

We have known for some time that the IRS was planning a compliance project targeting colleges and universities. In today's email was a press release from the IRS indicating that the compliance project is now upon us. Excerpt: Approximately four…

We have known for some time that the IRS was planning a compliance project targeting colleges and universities. In today’s email was a press release from the IRS indicating that the compliance project is now upon us. Excerpt:

Approximately four hundred U.S. colleges and universities will begin receiving compliance questionnaires from the Internal Revenue Service in the next few days as part of the agency’s focused effort to study key areas in the tax-exempt community. The college and university questionnaire will focus on unrelated business income, endowments and executive compensation practices. The questionnaires are being sent to a cross-section of small, mid-sized and large private and public four-year colleges and institutions.

The Questionnaire is part of the Colleges and Universities Compliance Project. The IRS says in the press release that, after it receives responses, it will analyze the results of the compliance questionnaire and conduct examinations for a sample of the organizations (i.e. the lucky winners).

Please note that the Questionnaire compiles a lot of detailed information from colleges and universities about the benefits they provide to executives. Some of the items included are:

  • Contributions to employee benefit plans including 403(b) plans, 457(b) plans, 457(f) plans, and health plans
  • Incentives (short term and long term)
  • Contributions to life, disability and long term care insurance
  • Contributions for split-dollar life insurance
  • Loans/credit extensions (including forgone interest or debt forgiveness)
  • Severance
  • Organization-provided housing or utilities
  • Other executive fringe benefits

    The compliance project is patterned after the one targeting hospitals over the last couple of years. (Read the IRS’s summary of the results of that project here.) Many colleges and universities will likely want to assemble a group of professionals, consisting of counsel and others, to assist in this project. (In other words, better to assemble them now in preparing the response, than later when notification of an audit has been received.)

    Important links:

    Colleges and Universities Compliance Project Website
    Actual Compliance Questionnaire Being Sent to Colleges and Universities
    Instructions for the Compliance Questionnaire
    Cover letter Being Mailed to Colleges and Universities

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