IRS audits some income at UGA

By Laura Diamond

The Atlanta Journal-Constitution

The Internal Revenue Service is auditing the University of Georgia regarding income made from activities not associated with teaching students.

UGA is among more than 30 institutions asked by the federal agency to provide financial records on several areas, including tax payments on unrelated business taxable income. That income includes revenue made from catering, parking services or other activities outside the college's core teaching mission.

"They are auditing us in these areas," UGA spokesman Tom Jackson said Wednesday. "We're answering all their questions, and the main issue we're dealing with is the unrelated income."

The examination, first reported by The Athens Banner-Herald on Wednesday, stems from questionnaires the IRS sent to about 400 public and private colleges in October 2008.

That 33-page questionnaire covered many areas, including how colleges pay their top leaders; how they spend endowments; and their taxable activities.

Based on the answers from the 344 colleges that responded, the IRS opened examinations on more than 30 institutions, according to a May 7 report from the agency.

The IRS did not identify which institutions are undergoing the additional review or how they were selected. The agency's policy is not to discuss or comment on audits, spokesman Mark Green said.

Nonprofit groups, such as colleges, must pay tax on income they receive from revenue considered not connected to their primary mission, which would be teaching for higher education groups.

This commercial activity has been a rising concern for different federal government agencies as colleges find money from resources other than students' tuition payments. For example, many colleges operate golf courses, catering services and conference centers.

Colleges can run some commercial activities without generating taxable revenue, the IRS said in the report, providing campus bookstores as an example. Still, the IRS referred to these activities as "an area for further study."

Once the IRS finishes its audit of UGA and the other institutions, it will issue a final compliance report. Green could not say when that report will come out.

A similar compliance report was previously conducted on nonprofit hospitals.