Main tax risks in a university setting


In order for the Tax Department to best manage tax risks, it is important for the university community to have a general understanding of some of the risks involved.

There are two main tax risks that exist in a university setting like the University of Michigan:

  1. Tax filings – similar to other taxpayers, the university must file information and other returns for the benefit of the general public, in addition to the traditional filings required of for-profit entities.  As a consequence, the university is subject to challenges by the Internal Revenue Service (IRS) with respect to its returns and if the need arises may need to defend positions taken.
  2. Loss of exemption – as an exempt entity, the university must take steps to maintain its status. In this context, certain transaction or activities may be prohibited.


Examples of the types of filings prepared include reporting of (1) activities that derive unrelated business income tax (UBIT) on Form 990-T, (2) employment taxes including fringe benefits on Form W-2, 941, and 1042-S, (3) payments to applicable vendors on Form 1099-Misc, and (4) education tuition credits on Form 1098-T.

Examples of the types of terms commonly used when discussing how to avoid losing tax-exempt status include (1) private benefit or inurement, (2) intermediate sanctions, (3) rebuttable presumption, (4) legislative activities, (5) political activities, and (6) partnership activities.

Managing tax risks

Many different steps are performed by the Tax Department at the University of Michigan to manage tax compliance, which include (1) communicating tax risks and the need for compliance, (2) holding roundtable meetings with interested parties to identify and resolve current issues, (3) developing close working relationship with high volume tax areas, (4) setting policies and procedures to standarize a university-wide approach.

Please see the Policies and Procedures web page to familiarize yourself with the standards already in place to address tax risks.

If you have a concern regarding tax risks or one of the university's tax filings please contact the Tax Department at