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Nonprofit Tax Compliance

Traditional nonprofit public and private colleges and universities historically have been granted tax-exempt status, which permits them to use more resources to fund the educational activities, academic research, student financial aid, and community programs that fulfill their core missions of teaching, research, and public service. As tax-exempt entities, universities are regulated by both the Federal government as well as State governments. Each year, these institutions must demonstrate their compliance with federal and state laws and regulations that govern tax-exempt entities through tax filings, audits, and public reports.

Although nonprofit universities are tax-exempt entities, they are subject to tax on any unrelated business income (UBIT). In addition, nonprofit institutions of higher education often make voluntary payments in lieu of taxes (PILOTs) to their localities as a substitute for property taxes and, in some instances, they also pay property taxes on any commercial properties that earn a certain amount in annual income.

 

 

Learn about why tax-exempt financing is critical for universities to advance their mission of educating and innovating for the public good.
A statement was issued today by AAU, ACE, and NAICU in response to legislation under consideration by the Connecticut General Assembly to impose taxation on Yale University.
The National Association of College and University Business Officers (NACUBO) offers comments for consideration by the Senate Finance Committee Working Group on Business Income Tax on behalf of the undersigned associations.
The following backgrounder is about Internal Revenue Code Section 501(c)(3) and Section 115 where the vast majority of private and public universities and colleges are tax-exempt entities.