Alert: Increased IRS Scrutiny of Charter Schools Operated by For-Profit Management Comp... - 0 views
-
Jeff Bernstein on 19 Jun 12In some cases, charter schools are managed by for-profit entities (referred to in this article as "management companies"). The management agreements documenting these relationships range from agreements to provide general administrative support to agreements to provide virtually every service to be offered by the charter school, including curriculum, payroll, compliance reporting, providing teachers and staff through employee leasing, and the purchase and leasing of facilities. Many charter schools are intended to be operated as 501(c)(3) public charities. Historically, the Internal Revenue Service ("IRS") has carefully reviewed other types of charitable organizations operated by management companies to determine whether they qualify as a tax-exempt charities because they are, in fact, operating for the private benefit of the for-profit management company. However, the IRS has not brought a similar focus on this issue to charter schools generally - until now. The IRS is poised to increase its scrutiny of charter school/management company relationships and is now subjecting charter schools to more stringent standards defining such relationships.