IRS Releases Final Report on Nonprofit Colleges and Universities Compliance Project: UBIT and Executive Compensation Lessons for All Tax-Exempt Organizations

In October 2008, the Internal Revenue Service (the “IRS”) began work on the Nonprofit Colleges and Universities Compliance Project (the “Project”). The IRS sent out an initial compliance questionnaire to over 400 tax-exempt colleges and universities. Based on the responses, 34 colleges and universities – about 8.5% of the total number of institutions that originally received the questionnaire – were then selected for examination. The IRS has now completed 90% of these examinations. On April 25, 2013, the IRS released the Final Report on the Project, summarizing the findings from the completed examinations and representing the culmination of almost five years of research and analysis.

Although the Project has focused specifically on colleges and universities, the key points raised in the Final Report are applicable to all tax-exempt organizations. Lois Lerner, the Director of the IRS Exempt Organizations Division, recently stated in remarks accompanying the release of the Final Report that the issues discussed “may well be present elsewhere across the tax-exempt sector.” In particular, she emphasized that “all exempt organizations need to be aware” of the Final Report’s findings pertaining to unrelated business income and executive compensation.

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