preview

Herzing University Case Summary

Decent Essays
Open Document

The nonprofit purchased Herzing University for $86 million from the Herzing family, effective January 1, 2015, and continues some leases of property from Herzing family members. According to a press report, a state official said that Herzing likely made the change to avoid new federal regulations and to gain access to state grant funding.24 In response to a request for comment, attorneys for Herzing University (the nonprofit) assert that the purchase price, to be paid over thirty years, and the leases are approved by independent board members at fair market values and that “rigorous conflict-of-interest rules are followed in all such instances.” After questions were raised about the transaction by this author and by members of Congress, the …show more content…

Everglades responded. The IRS requested more information including the Keiser purchase agreement, the management agreement between Everglades Management (previously disclosed as owned in part by Keiser) and the college, any loan agreements, and an explanation of the connections to Keiser College, Keiser Career Institute, and Keiser Management Inc., Susan Ziegelhofer, the president of Everglades College, Inc., responded that there was no purchase agreement: the transfer of the college “was a charitable contribution of the entire educational facility.” She further declares that there are no loans between the for-profit and tax-exempt entities. In response, the IRS requested that Everglades provide the following information regarding loans or payments to Keiser-controlled entities: For each of the following please explain and specify the accounts: a. Accounts Payable and Accrued Expenses please provide a detail [sic] explanation why there is a $50,951.18 debit balance in this account? b. If you have no loan or note agreements who is the loan with and what is the relationship for the Loan Payable of $16,208.41 and please explain the terms and conditions of the …show more content…

Rul. 76-441, 1976-2 C.B. 147, presents two situations concerning school operations. In the first scenario a nonprofit school succeeded to the assets of a for-profit school. While the former owners were employed in the new school, the board of directors was completely different. The ruling concludes that the transfer did not serve a private interest. Part of that conclusion was based on the independence of the board. In the second scenario, the for-profit school converted to a nonprofit school. The former owners became the new school’s directors. The former owners/new directors benefited financially from the conversion. The ruling concludes that private interest was served. The conclusion is stated as follows: “The directors were, in fact, dealing with themselves and will benefit financially from the transactions. Therefore, (the applicant) is not operated exclusively for educational and charitable purpose and does not quality for exemption from federal income tax under Section 501 (c) (3) of the

Get Access
Related
Get Access