The IRS has recently completed a probe of 30 state schools and private nonprofit schools — including Ivy League institutions Cornell and Harvard — that focused on the schools’ tax filings and the reporting of unrelated business income.
The IRS has been stepping up scrutiny of both private nonprofit universities and public schools as they expand and collect more revenue from operations such as bookstores, restaurants and sports arenas. While the institutions are tax- exempt, they are supposed to pay federal tax on any income that is unrelated to their educational and research missions, for instance when the public uses hotels they open for faculty and alumni.
The IRS found in a survey it sent in October 2008 to 400 universities that many are failing to fully account for and disclose what may be taxable income. The survey, which also probed compensation and endowments, led to the audit of more than 30 of the institutions, including the University of Texas at Austin and the University of North Carolina.
The audit has already resulted in increased collections of payroll taxes and unrelated business income tax. The IRS has not yet finished its examinations.
The Winklevoss twins could not be reached for comment.