October 16, 2008 | Read Time: 1 minute
As part of its efforts to police nonprofit organizations, the Internal Revenue Service will ask some 400 colleges to disclose intimate financial details, including spending on perks like housekeeping services for executives, and their income and losses on business activities like catering and travel tours.
The IRS plans to disclose the overall findings of the 42-page questionnaire, but will not identify individual institutions. It also said the responses could lead to audits and even penalties, as well as lesser actions.
The survey focuses heavily on business activities such as running a hotel or a commercial research venture with a for-profit company, which may be taxable, unless the operation loses money. The IRS wants to find out why nearly half of colleges’ unrelated businesses break even or take a loss every year.
Another section asks how colleges compensate their six highest-paid executives, including dues for health clubs or social clubs, private use of an institution’s aircraft or boat, personal travel for family members, or loans, among other things.
The questionnaire also examines how colleges invest and spend their endowments and compensate their five highest-paid employees other than executives, who could include athletics coaches or researchers.
In recent years, the IRS has taken several similar actions to make sure that tax-exempt organizations are following the rules. Sen. Charles E. Grassley of Iowa also has used his position as the top-ranking Republican on the Senate Finance Committee to question the role and practices of nonprofit organizations, including asking whether colleges should distribute a set part of their endowment each year and whether hospitals deserve tax-exempt status.
