Congressional Hearing Examines College and University Tax Compliance
5/17/2012
On Wednesday, May 16, Joanne DeStefano, Vice President for Finance and Chief Financial Officer at Cornell University, testified on behalf of NACUBO at a House Ways and Means Subcommittee on Oversight hearing on the operations and Internal Revenue Service oversight of tax-exempt organizations. Subcommittee Chairman Charles Boustany (R-LA) called the hearing to examine a number of issues, including the ongoing IRS College and University Compliance Project.
When announcing the hearing, Chairman Boustany said, "This review allows us to examine the state of the tax-exempt sector, as it currently exists today, and consider this information as we continue the Committee's efforts toward comprehensive tax reform. In both cases the goal is the same-to ensure that the tax-exempt sector is operating in an efficient manner and that the laws governing tax-exempt organizations are being applied fairly and evenly."
"Many colleges and universities have long had institutional policies and practices in place reflecting a commitment to stewardship, accountability, and the highest standard of compliance with federal and state laws and regulations," emphasized DeStefano in her testimony. "Both private and public colleges and universities had well-established, sound and effective governing structures prior to IRS linking good governance with strong tax compliance and introducing governance-related questions to the Form 990," she continued.
DeStefano also took the opportunity to reiterate that NACUBO would like to see the Form 990 add value and increase public understanding of colleges and universities, rather than merely increasing college and university administrative costs and creating confusion. She specifically pointed out a concern with Form 990 regarding Schedule K-1 and strongly encouraged the IRS to eliminate the proposed requirement that K-1s serve as the basis for income reported on the 990.
In his first question to the panel, Chairman Boustany wondered whether the recent revision to the Form 990 had met its goal of increasing transparency. DeStefano suggested that it had, but the volume of information available is overwhelming and has perhaps led to less understanding. Congressman Tom Reed (R-NY) was particularly interested in DeStefano's statement that, "although sometimes less visible to the public and to students and families, compliance with tax and other federal rules, regulations, and requirements by institutions is a part of the cost of a college education," and asked for more information about specific costs and burdens.
"As stewards of federal education, research, and student aid funding; as large employers; as significant operators of, in some cases, massive physical plant operations; and as home to our nation's college students, institutions of higher education take very seriously their approach to compliance with a host of federal rules and regulations, including those issued by the IRS," DeStefano said in closing her testimony. "Ultimately, we hope the IRS uses all of the information it has garnered as part of the compliance project to continue to explore valuable and sensible approaches to streamlining reporting requirements."
Other witnesses included Roger Colinvaux, Associate Professor, The Catholic University of America; Diana Aviv, President & Chief Executive Officer, Independent Sector; Michael Regier, Senior Vice President of Legal and Corporate Affairs, VHA Inc.; and Bruce R. Hopkins, Senior Partner, Polsinelli Shughart. Colinvaux elicited a number of questions from the panel about the complexity of the tax-exempt sector. Several Subcommittee members also raised questions about 501(c)4 organizations-"social welfare organizations" that can participate in political activities.
