In this down economy the IRS is doing all it can to improve collection results, which is why it is targeting wealthy individuals, banks, corporations, . . . even universities.
Top Ivy League colleges are in the IRS crosshairs because they raise a lot of money, and not just in tuition & donations. If you attend Harvard or if you dine there as a visitor, you probably expect more than tacos and fries, and brain food is expensive. Harvard University Dining Services consists of 13 undergrad dining halls, a kosher kitchen, and 14 retail locations which offer an “unparalleled dining experience.” And Harvard sports are very popular. Wealthy Harvard alumni are often happy to pay for season tickets, whatever the price.
Even though nonprofit universities are tax-exempt, they must still pay taxes on any collateral income that is generated — any income that is unrelated to their academic objectives. According to a recent Bloomberg article, both Cornell and Harvard Universities have been audited by the IRS to make sure they are paying taxes on revenue generated by university bookstores, restaurants, and sports arenas. Cornell has “passed” its audit, but for Harvard, the jury is still out.