| In 1996 Congress passed “intermediate sanctions” legislation. This law authorized the Internal Revenue Service (IRS) to assess personal tax liability on insiders who improperly benefit from transactions with their nonprofit institutions. A former IRS assistant commissioner called this the most significant guidance provided to tax-exempt organizations in the history of tax administration. The law applies to private colleges and universities, as well as to many public institutions of higher education.; In 1998 the IRS published proposed regulations for the statute. The regulations included an optional “safe harbor” called the rebuttable presumption of reasonableness. It stated that, if the institution follows certain steps in approving the transaction, then the transaction is presumed to be reasonable and the burden of proof shifts to the IRS.; The research question for this qualitative study was: “Should private colleges and universities adopt policies and procedures now to comply with the rebuttable presumption of reasonableness? Why or why not?”; Forty-eight telephone interviews were conducted in late 1998 and early 1999 with people knowledgeable about intermediate sanctions. A representative sample was selected from each of seven segments of the population: education associations, other professional associations, attorneys in private practice, tax accountants in private practice, private college and university attorneys, private college and university business officers, and IRS officials. The interview questions were developed during a pilot study.; Reasons in favor of implementing the rebuttable presumption were compared to reasons opposed. Most of the interviewees favored implementation. The data appeared to support that position.; The study listed twenty-three recommendations for private colleges and universities. It also recommended that associations identify risk management strategies for their member institutions. |
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