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Taxation for Universities and Colleges: Six Steps to a Successful Tax Compliance Program by Steve Hoffman

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Chapter One

Awareness

Discovering What Kind of Taxes Your University Is Subject To—How to See the Forest, Not Just the Trees

As a tax manager for three different universities, I had the best job in the world. After all, we were tax exempt. What would I do all day? Colleges and universities are tax exempt, aren't they? I loved entering into discussions with people that had this view of universities.

Defining Tax Exempt

Let's explore what tax exempt means and what it doesn't mean. Technically, according to the IRS, if you are a state institution then your exemption is found in a certain section of the IRS code. If you're an independent, private university then you are exempt under a different section of the Internal Revenue Code. It's that simple.

However, it's important to note that regardless of whether you're a state institution or private, independent institution both are considered nonprofit organizations by the Internal Revenue Service. That may sound like a simple statement. But what I find is that many people in higher education consider themselves to be separate and distinct in some manner and do not really pay much attention to the IRS when they talk about nonprofit organizations. Perhaps they're thinking the IRS means organizations like the YMCA, the American Red Cross, or the Big Brothers, Big Sisters. However, the same rules that apply to those organizations also apply to higher education.

Also, as a tax-exempt organization, whether public or independent, you may be ...

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