IRS Poking Into Endowment Compensation, Practices

August 3, 2009 ( - The Internal Revenue Service (IRS) is taking a harder look at the inner workings of the nation's endowment funds.

According to Barron’s, the IRS is canvassing 400 randomly selected colleges and universities about compensation practices for in-house and third-party endowment managers, as well as a series of related taxation issues.   The report says that the IRS survey will focus on how endowments operate, including practices such as income received from controlled entities and whether their relationship to taxable organizations is at arm’s length.

Harvard University’s Harvard Management Co has provided the most conspicuous example of the kinds of practices the IRS is exploring, according to Barron’s.

The survey could lead to a focused examination of some endowments, possibly leading to a crackdown on some as a result, according to Reuters, citing the report.   The IRS expects to issue an interim report by the end of the year.