IRF Update - May 25, 2010

IRS Report Questions College and University Compensation, Business Practices

In an interim report (PDF) released May 7, the Internal Revenue Service raises questions about college and university compensation and unrelated business practices. The IRS plans to further analyze these practices in the examination phase of its ongoing college and university compliance project.

Two years ago, the IRS announced the beginning of the compliance project, which is designed to learn more about the activities and scope of public and private nonprofit colleges and universities offering four-year degrees. In October 2008, the IRS sent questionnaires to 400 colleges and universities asking about endowments, compensation and unrelated business income activities. The interim report provides a preliminary analysis of the responses of 344 institutions divided into three categories: small (fewer than 5,000 students), medium (5,000-14,999 students) and large (15,000 or more students).

Key findings include:

• Nearly half (48 percent) of small institutions reported never filing a Form 990-T (unrelated business income tax return) compared to 29 percent for medium institutions and 4 percent for large institutions.
• The percentage of colleges and universities that indicated that they engage in an activity was much higher than the percentage of organizations that reported including that activity on their Form 990-T.
• The highest paid employee (other than an officer, director, trustee or key employee) at large institutions was most often a sports coach (43 percent of organizations).
• At private institutions of all sizes, the use of comparability data was not used as frequently as other methods in determining compensation.
• The average and median target endowment spending rates were consistent among all size categories-4.7 percent to 5 percent.

The CASE analysis of the IRS interim report (login required) includes additional information on the findings.

The report indicates that the IRS is currently studying more than 30 institutions as part of the examination phase of the compliance project. The examinations are focused mostly on unrelated business taxable income and executive compensation issues. The IRS plans to issue a final report that will combine questionnaire findings with findings from the examinations and analyses of institution responses to the new Form 990. The full interim report and an executive summary are available on the IRS website.

Survey Examines Structure, Staffing at Community College Foundations

The Council for Advancement and Support of Education is conducting a survey of community college foundations to help leaders compare their foundation's structure and operations to that of peers.

• Take the CASE Community College Foundation Survey

The survey, which takes about 20 minutes to complete, asks questions about the community college foundation's board and staff, alumni relations, budget/funding, endowment and private philanthropy. The final analysis, which CASE will share with all survey participants, will only report on the aggregate trends and findings-individual responses will remain confidential. The survey deadline is Friday, May 28. If you have questions about the survey, please contact Brian Flahaven, CASE's director of government relations and institutionally related foundations, at flahaven@case.org or 202-478-5617.

Simic to Receive CASE Lifetime Achievement Award

CASE has named Curtis R. Simic, president emeritus of the Indiana University Foundation, as the 2010 recipient of the Lifetime Achievement Award.

The CASE Lifetime Achievement Award honors individuals who have made a significant and lasting impact on the field of institutional advancement through their professional accomplishments, earned the respect and admiration of their professional colleagues and served the profession over an extended period of time. It is presented whenever a worthy recipient is identified.

Simic has been a leading figure in educational advancement for nearly 50 years. His career began at Indiana University when he was named president of the institution's student foundation during his senior year. From there, he advanced through various fundraising positions at public and private institutions, including the University of Tennessee, Yale University, the University of Alabama, the University of Oregon and the University of California, Berkeley.

Simic returned to his alma mater in 1988 and served as president of IU's foundation until his retirement in 2008. He grew the foundation's endowment, built a partnership between the foundation and the institution and boosted voluntary giving from $35 million to more than $100 million a year. He has been a mentor to hundreds of advancement professionals and an active member of CASE, serving as conference presenter, trustee member and founding member of CASE's National Committee for Institutionally Related Foundations.

Simic will be honored at a luncheon on Monday, July 19, in conjunction with the CASE Summit for Advancement Leaders in New York City.

Congress to Consider Bill with Retroactive IRA Charitable Rollover Extension

On May 20, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Acting Ways and Means Committee Chairman Sander Levin (D-Mich.) introduced the American Workers, State and Business Relief Act of 2010 (H.R. 4213), a bill that includes a one-year retroactive extension of the IRA charitable rollover through Dec. 31, 2010. Democratic leaders in both chambers hope to pass H.R. 4213 before Memorial Day although it is unclear if they will have the votes to do so.

Prior to its expiration on Dec. 31, 2009, the IRA charitable rollover allowed taxpayers age 70 ½ or older to direct up to $100,000 annually from their individual retirement accounts to eligible charities, including colleges, universities and independent schools, without having to count the distribution as income for tax purposes. If enacted, H.R. 4213 would retroactively extend the IRA charitable rollover for one year-from Jan. 1 to Dec. 31, 2010.

The overall cost of H.R. 4213, combined with the fact that a significant portion of the bill is not revenue-neutral, may make it difficult for Democratic leaders to secure passage in both the House and Senate in such a short time frame. Though the IRA charitable rollover extension would be paid for, the bill also includes an extension of unemployment and health benefits and a provision to prevent a significant cut in doctors' reimbursement rates under Medicare that are not offset. The House plans to take up the bill on Wednesday, May 26. If the House passes H.R. 4213, the Senate would consider the bill prior to leaving for the one-week Memorial Day recess.

CASE strongly supports the IRA charitable rollover and will continue to urge lawmakers to pass a retroactive extension of the incentive as soon as possible.

How can I receive the CASE IRF Update in my inbox?

Contact Brian Flahaven, director of legislative, foundation and recognition programs, at flahaven@case.org.