The IRS mailed 400 questionnaires to nonprofit colleges and universities in October 2008, seeking data on endowments, compensation and income from businesses unrelated to their missions of teaching and research. It picked more than 30 institutions to audit on the basis of answers and is reviewing an additional 13 that failed to respond, the agency said.
This is all about Senator Charles Grassley’s complaint (he’s the ranking Republican on the Finance Committee) that many extremely wealthy universities, holding billions of dollars, hoard their endowments. Since non-profits get all that money in large part because they get amazing tax breaks, they’re obliged to use it… To spend it, reasonable amounts of it, so that, for instance, students aren’t priced out of an education, or made to take on outrageous debt.
The IRS survey found that 344 institutions had an average spending target of 4.7 percent to 5 percent of their endowments each year on operations.
… Grassley, the ranking Republican on the Senate Finance Committee, said he’s concerned that 5 percent has become a “ceiling” for colleges and that wealthier institutions should be spending more. The finance committee held hearings in 2007 on rising tuition costs and growing endowments at colleges including Harvard University in Cambridge, Massachusetts, and Yale University in New Haven, Connecticut, prompting the institutions to provide more financial aid.
… Forcing universities to spend more of their endowments would discourage diversified investing and push them toward more conservative portfolios, said James K. Hasson Jr., a lawyer at Sutherland Asbill & Brennan in Atlanta, who represents tax- exempt institutions.
“A mandate would remove flexibility and creativity from the tools available to colleges,” Hasson said. “There doesn’t seem to be a crying need for a legal mandate.”…
Right. With a mandate, Larry Summers, when he was president of Harvard, wouldn’t have been able to put together those clever credit default swaps.
May 15th, 2010 at 4:55AM
Just a continuation of Reagan’s attack on the foundations — Republicans think it’s unnatural for (what they see as) liberal entities to have a lot of money.