Cornell and Harvard Investigated by the IRS

Cornell University was audited as an element of the Internal Revenue Service’s three-year probe of tax compliance at U.S. Universities, which targeted more than thirty state schools and private not for profit faculties such as Harvard.

Joanne DeStefano, Cornell’s chief fiscal officer, told a congressional panel yesterday in Washington that the IRS ended its probe in March, according to a copy of her sworn statement. She claimed at a hearing on tax-exempt organizations that the university’s tax filings were inspected together with its operations that produce supposed unrelated business revenue, which is federally taxable.

The IRS has been stepping up perusal of both private not for profit schools and public faculties 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 revenue that’s unrelated to their educational and research efforts, for instance when the public uses event spaces they open for faculty and alumni.

The IRS found in a survey sent in October 2008 to 400 universities that many are failing to fully account for and divulge what might be taxable income. The survey, which also investigated compensation and endorsements, led straight to the audit of more than thirty of the institutions, including the University of Texas at Austin and the University of North Carolina.

Lois Lerner, the IRS’s director of exempt affiliations, has stated that she expects the agency to finish its audits this year and issue a report. Lamar College, which is a component of the state university system in Texas, declared in January it paid $9,481 in not related business revenue taxes as well as $23,171 in payroll taxes due to the IRS investigations.

Simeon Moss, a speaker for Cornell, didn’t return calls when requesting comments John Longbrake, a spokesperson for Cambridge, Massachusetts-based Harvard, said in an email that the IRS hasn’t completed auditing the school.

Harvard and Cornell are among eight schools in the U.S. Northeast that compose the Ivy League.