University Accountability Act
The University Accountability Act would add a new penalty regime to the Internal Revenue Code aimed at tax-exempt educational institutions (primarily nonprofit colleges and universities) if they are found to violate civil rights under Title VI of the Civil Rights Act of 1964. For each civil rights violation determination by a federal court, the institution would owe a penalty, calculated as the greater of $100,000 or 5% of its annual administrative compensation (the latter only for institutions subject to certain tax reporting requirements). Liability attaches on the judgment date, and penalties would be refunded if the judgment is later reversed, with the caveat that penalties could still apply if a determination is reinstated or redetermined. Determinations of civil rights violations can be treated as a single determined event if based on the same facts. The bill also introduces a process to periodically review an institution’s tax-exempt status after repeated civil rights violations (beyond the first two determinations) and imposes new reporting requirements on specified institutions to disclose civil rights determinations on their tax returns. It makes several procedural changes, including waivers of the usual statute of limitations for assessments and refunds related to these penalties, and it applies to determinations made after enactment.
Key Points
- 1New penalty: A specified tax-exempt educational institution would owe the greater of $100,000 or 5% of its aggregate administrative compensation for each civil rights violation determination (as defined) under Title VI.
- 2Timing of liability: Liability accrues on the date of the federal court judgment; penalties are refundable if the judgment is vacated or reversed, with exceptions if later reinstated or redetermined.
- 3Single determination treatment: If multiple judgments are based on the same facts, they can be treated as a single civil rights violation determination for purposes of penalties and related tax provisions.
- 4Repeated violations and exempt status: After the first two civil rights violation determinations, the Secretary must review the institution’s continued eligibility for tax-exempt status to see if it remains described in the exempt status provisions.
- 5Reporting requirements: Specified institutions must report on their tax returns (Form 990 series) descriptions of each determination, prior related determinations, and related details; state colleges/universities have similar annual reporting obligations, with penalties for noncompliance.
- 6Scope of institutions: Applies to “specified tax-exempt educational institutions” defined as eligible educational institutions under 25A(f)(2) described in 501(c) or 511(a)(2)(B) (i.e., many nonprofit colleges and universities).
- 7Effective date: The amendments apply to civil rights violation determinations made after enactment.