Colleges & Universities Under the Microscope
While hospitals continue to be criticized for failing to provide sufficient charity care and other benefits – criticism that is likely to only increase as more information about such activities becomes available because of section 501(r) – Congress, the IRS, and the media appear to have an increasing and skeptical interest in nonprofit colleges and universities. Recent developments include:
- IRS Colleges & University Tax Compliance Report: As previously reported, the report identified widespread underreporting of unrelated business taxable income, although the total amount involved for the 34 institutions examined was only $90 million, and various issues with compensation setting processes and reporting.
- House Oversight Subcommittee Hearing: In response to the above report (and lost once the the 501(c)(4) mess broke), this Ways and Means Subcommittee heard from Lois Lerner regarding the above report.
- Weekly Standard: Are Universities Above the Law?: A wide-ranging critique of college and university governance, citing recent disputes ranging from the Robertson Foundation’s litigation with Princeton University’s to the Association of Alumni of Dartmouth’s litigation against their alma mater.
- Fiscal Times: Backroom Financial Dealings of a Top University: This article highlights the generous compensation and loan packages provided by NYU, which became national news with the nomination of former NYU administrator Jack Lew for Treasury Secretary.
All of this scrutiny comes at a time when many colleges and universities are facing increasing criticism for too high tuition, too generous compensation packages, and exploitation of student athletes. Of course such concerns are not new for nonprofit scholars, including co-blogger John Colombo, who in 1993 wrote Why is Harvard Tax Exempt? (And Other Mysteries of Tax Exemption for Private Educational Institutions), 36 Arizona Law Review 841, and more recently examined the tax treatment of college athletics. But we may be seeing an unprecedented level of scrutiny that will may ultimately shift the nonprofit governance and tax exemption standards for such institutions.
LHM