Understanding IRS Forms 990 and 990-T
Financial Compliance and Transparency
As a tax-exempt, not-for-profit institution, Ithaca College is required to file IRS Form 990, Return of Organization Exempt from Income Tax. In making this annual disclosure, the college (1) reports the results of its financial operations, along with certain supplemental data, and (2) preserves its status as a 501(c)(3) organization exempt from income tax.
Because the college also engages in business activities unrelated to its approved tax-exempt purpose, it also is required to file IRS Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T is used to report unrelated business income (UBI), and calculate and report unrelated business income tax (UBIT).
Together, Form 990, Form 990-T and externally audited financial statements provide transparency to the general public regarding the college’s financial transactions during the year and financial position at the end of the year. It is in the college’s best interest to make the data, transactions, and amounts reported to the IRS on Forms 990 and 990-T as accurate and descriptive as possible to help ensure public confidence that the college is operating within standard financial practices for tax-exempt organizations. The college makes every effort to do that by, for example, enhancing narrative disclosures and appropriately classifying financial items.
Finding Forms 990 and 990-T
The Internal Revenue Code requires organizations to make its Forms 990 and 990-T available for public inspection. Copies of the college’s Form 990s filed since 2007 are located on the Office of Business and Finance site in the “Documents” section along with audited financial statements. Copies of Form 990-T are available upon request from the Office of Business and Finance. The most recent Form 990 filing, posted by the college on March 8, 2018, covers the college fiscal year beginning June 1, 2016, and ending May 31, 2017. The Office of Business and Finance prepares the returns with the assistance of Grant Thornton LLP, an international accounting firm with deep expertise in tax law applicable to institutions of higher education.
Reported in Form 990
The amount of information required from the college in Form 990 is extensive; instructions for completing the 12-part form run 100 pages. The filing includes:
- An organizational summary and statement of accomplishments;
- Statements about other IRS filings and tax compliance;
- Information about the governing body and management of the college and its policies;
- Pay of officers, trustees, key employees, and certain highly compensated employees, which may include individuals who are no longer with the college but were employed during some portion of the fiscal year;
- Statement of revenue from related or exempt funds;
- Reporting of expenses, balance sheet, reconciliation of net assets; and
- The college’s financial statements and reporting.
Officers, Trustees, and Key and Most Highly Compensated Employees
Schedule J of Form 990 specifically addresses officers, trustees, key employees, and the five mostly highly compensated employees.
- Officers are persons listed in the college’s bylaws and include the Chair and Vice Chair of the Board of Trustees, the President and all Vice Presidents. Ordinarily, there is no compensation to report for the Chair and Vice Chair.
- Trustees are all who served as trustees during the fiscal year, including the student trustee, staff trustee, and faculty trustee. Ordinarily, there is no compensation to report for trustees other than the staff and faculty trustees.
- To be categorized as a key employee, an individual must receive reportable compensation in excess of $150,000 for the calendar year ending within the college’s tax year, and must also meet the “responsibility test” outlined on Form 990. The responsibility test is subjective and the college works with Grant Thornton LLP to ensure that the test is appropriately applied. As currently applied, any Dean managing more than 10 percent of total undergraduate enrollment and who also meets the compensation threshold is considered a key employee. Additionally, the Associate Vice President for Facilities is a key employee because of the position’s role in determining capital expenditures.
- The five most highly compensated employees are chosen from the remainder of individuals not previously listed as trustees, officers, or key employees.
- In rare circumstances, the college would report an employee as a former officer or key employee if the employee served as an officer or key employee within the last five years and received more than $100,000 of reportable compensation.
Persons reported as an officer, trustee, or key employee met the criteria at any point during the fiscal year (June 1, 2016 to May 31, 2017). However, actual compensation amounts reported are based on the 2016 calendar year.
Form 990 for the fiscal year ending May 31, 2018 will include compensation reported for both former president Tom Rochon and current president Shirley M. Collado, since they both will have been in office for a portion of the 2017 calendar year.
Other Reportable Compensation
“Other reportable compensation” is part of an employee’s total W-2 compensation and can include:
- “Dependent Tuition Remission.” Eligible employees may receive tuition remission benefits covering the balance due of the tuition charged for undergraduate courses taken at IC by qualifying dependents, less any scholarships and grants creditable toward tuition.
- “Pay for additional duties,” which covers faculty and staff compensation in excess of their base compensation. For faculty, this generally comprises pay for additional responsibilities above and beyond their contractual duties. For example, department chair, winter session, summer session, overload, program development.
- “Vacation payout.” Upon departure from college employment, employees are generally eligible for a payout of accumulated unused vacation time.
- “Supplemental retirement plan.” Some employees choose to enroll in the 457(b) nonqualified retirement plan, and employer contributions to the plan are reported here.
- “Deferred compensation.” This is payout of tax-advantaged compensation that is a standard component of many officer / president compensation packages. These payouts are reported as retirement and other compensation in prior years’ Forms 990.
For a complete explanation about how the annual compensation is set for Ithaca College presidents, please visit the Board of Trustees website.
Reported in Form 990-T
Certain activities at the college generate unrelated business income, which is permitted but must be appropriately disclosed on Form 990-T. Activities the college generally reports on Form 990-T include:
- Income or loss from unrelated business activities generated by the college’s passive investments in limited partnerships. These investments are complex investment vehicles that, while generating significant return on investment for the endowment, also spin off a small amount of unrelated business income (or loss).
- Campus Center and Event Services: Sales of event space, catering and residence hall rental space to external organizations for purposes unrelated to the college’s primary mission.
Tax exemption for educational institutions like Ithaca College requires the complete disclosure of its financial activities every year. It is our duty to the IRS to provide all of the information required on Forms 990 and 990-T, and it is our commitment to the public to do so with the highest level of transparency.