The Internal Revenue Service (IRS) has announced that it will focus new enforcement efforts on the unrelated business income tax (UBIT) positions of colleges and universities. While the scope of these inquiries is not entirely clear, the IRS has stated that it will review the allocation of income and expenses between for-profit and nonprofit entities that operate within university systems. The IRS intends to design the compliance project in 2007 and implement it (presumably through compliance checks or audits) in 2008. Therefore, this upcoming year provides an opportunity for your institution to meaningfully review and consider its UBIT positions and disclosures. In sum, proactive steps during 2007 could dramatically strengthen the position of your institution if it is selected for review as a result of the IRS' enforcement initiative.   

Along similar lines, Congress recently passed the Pension Protection Act of 2006 (PPA), which included a number of significant charitable reform measures. Of specific impact to colleges and universities is the new requirement that Forms 990-T be made available to the public. As Form 990 has become widely available to the public, without request, through publication on the internet at www.guidestar.org,  many speculate that Form 990-T will become similarly available. This requirement will likely invite public scrutiny of an organization's unrelated income and expenses. Most communities have witnessed newspaper or magazine articles devoted to the compensation practices of charities, with the information gleaned from Forms 990. It is reasonable to assume that this new transparency of an institution's Form 990-T may invite similar public interest and debate. Therefore, it is important that institutions carefully consider their UBIT positions and the information and message that they publicly communicate through their Forms 990-T. 

If you have any questions regarding these developments, please feel free to contact Marilee J. Springer, Michael Buker or Michael N. Red.