Department of the Treasury           
 Instructions for Compliance Questionnaire                                   Internal Revenue Service 
                                                                             
            Colleges and Universities 

                                 GENERAL INFORMATION 

Form 14018, Compliance Questionnaire – Colleges and Universities, asks for information about your 
college or university and how it operates.  Each “Part” of the questionnaire has instructions for how to 
answer the questions in that particular part 
 
There are three ways to complete the questionnaire: 
   1.   Use the enclosed CD that contains an electronic version of the questionnaire; 
   2.   Download the questionnaire from IRS.gov by going to http://www.irs.gov/pub/irs-
      tege/cucp_questionnaire.pdf, or 
   3.   Complete the enclosed paper questionnaire. 
    
Go to http://www.adobe.com/products/acrobat/readstep2.html if you need the latest version of Adobe 
reader. 
 
Complete the questionnaire and return it to us following the instructions in the accompanying letter.  Please 
limit your responses to the information requested.  Do not send books or records with your response. 
 
Below are definitions, references and additional instructions  for the questionnaire.  The first column lists the 
question number and the second column contains the definition, reference or instruction.  
Question 
                            Definitions, References, and Additional Instructions 
 Number 
13, 18,     Gross Assets are resources owned by your organization with future economic value that can 
23E, 24,    be measured and expressed in dollars.  The amount for gross assets is before reductions for 
25, 93 and  related liabilities such as allowances for doubtful accounts, accumulated depreciation etc.  
94          Examples of assets to include are cash, investments, accounts receivable, inventory, 
            supplies, land, buildings, equipment and vehicles. 
             
            Net Assets  are your gross assets less any related liabilities. 
             
            Gross Revenue is gross receipts before reductions for related expenses. 
             
            Total Expenses are all expenses related to your gross receipts that were paid or accrued 
            during the tax year. 
                            SAMPLE
15 and 16   United States includes the 50 states, the District of Columbia, the Commonwealth of Puerto 
            Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, and the 
            United States Virgin Islands. 
17 and 60   For individuals not subject to Medicare taxes*, use the compensation reported on Form(s)  
            W-2, box 1, plus any deferred compensation or other forms of compensation that 
            are generally subject to Medicare taxes but excluded from Federal income tax. 
             
            For a definition of officer, director, trustee and key employee, see below under question 
            number 60. 
             
            *Individuals who have worked for the same governmental employer since March 31, 1986, including 
            breaks in service, and are not covered by a Section 218 Agreement are not subject to Medicare taxes.  

                                 Cat. No. 51975A 

Question 
                            Definitions, References and Additional Instructions 
 Number 
 
17,18,19,   Related Organizations (Related Entity) - An organization is related to (affiliated with) your 
21, 23, 30, organization if it is a:  
31, 35, 51,  •     Parent – organization that owns or controls (defined later) your organization. 
60 and 61    •  	  Subsidiary – organization that your organization owns or controls, including 
                   disregarded entities. 
             •  	  Brother/Sister – organization that is controlled by the same parent that controls your 
                   organization. 
             •  	  Supporting/Supported – organization that supports (or claims to support) your 
                   organization within the meaning of section 509(a)(3) if your organization is a 
                   supported organization within the meaning of section 509 (f)(3), or an organization that 
                   your organization supports. 
             
            Other examples of related organizations include: 
             •  	 An organization that uses a common paymaster.  For a definition of common 
                   paymaster and examples, see Regulations section 31.3121(s)-1(b). 
             •  	 An organization that pays part of the compensation that your organization would 
                   otherwise be contractually obligated to pay. 
             •  	 An organization that conducts joint programs or shares facilities or employees with 
                   your organization. 
             
            Control- For nonprofit organizations, “control ”means: 
             •  	 Power to appoint, elect or ratify a majority of the organization’s directors or trustees, or 
             •  	 Management overlap where a majority of the controlled entity’s directors or trustees 
                   are trustees, directors, officers, employees, or agents of the controlling organization. 
             
            Control under Internal Revenue Code (IRC) section 512(b)(13)(D), means: 
             •  	 Ownership (by vote or value) of more than 50 percent of the stock in a corporation, 
             •  	 Ownership of more than 50 percent of the profits interests or capital interests in a 
                   partnership, or 
             •  	 Ownership of more than 50 percent of the beneficial interests in an entity.  
              
            Control includes indirect control.  For example, if your organization controls Entity A, which in 
            turn controls Entity B, your organization indirectly controls Entity B.  Rules under section 318 
            (relating to constructive ownership of stock) apply for purposes of determining constructive 
            ownership of a corporation or other entity. SAMPLE
             
            A central or parent organization of a group of organizations that has a group ruling controls 
            the subordinate or local organizations.  
             
            For stock corporations and other organizations (taxable or tax-exempt) with owners or 
            persons having beneficial interests, “control” means:  
             •  	 Ownership of more than 50% of the stock (by voting power or value) of a corporation, 
             •  	 Ownership of more than 50% of the profits or capital interest in a partnership, 
             •  	 Ownership of more than 50% of the profits or capital interest in a limited liability 
                   company, regardless of whether the entity is treated as a corporation or a partnership 
                   for federal tax purposes or the designation of the interests as stock, membership 
                   interests, or otherwise under state law, 

                                              - 2 -            Instructions  for Compliance Questionnaire 
                                                                                College and Universities  
                                                                                                   

Question 
                               Definitions, References and Additional Instructions 
 Number 
 
               •     Being a managing partner or managing member in a partnership or limited liability 
                     company that has three or fewer managing partners or managing members 
                     (regardless of which partner or member has the most actual control), 
               •     Being a general partner in a limited partnership that has three or fewer general 
                     partners (regardless of which partner has the most actual control), 
               •     Being the sole member of a disregarded entity, or 
               •     Ownership of more than 50% of the beneficial interest in a trust. 
                
            See Regulations sections 301.7701-2, 3, and 4 for more information on classification of 
            corporations, partnerships, disregarded entities, and trusts.  
18          Direct Controlling Entity is the entity that is directly above the related entity.  For example, if 
            your organization controls Entity A and Entity A controls Entity B then Entity A directly controls  
            Entity B. 
20, 21, 22, Controlling Organization or Controlled Entity    has the meaning described in section 
23          512(b)(13).  See the definition above under “Control.” 
23 thru 31  If you are part of a “university system” and you did not file your own Form 990-T but instead 
            filed as part of the “university system’s” Form 990-T, answer questions 23 thru 31 based on 
            what you reported to the “university system” for the tax year ending in 2006.  Do not check the 
            box in question 26 unless the “university system” never filed a Form 990-T.  For question 27, 
            the total of each column will not match the total that was reported on the university system’s 
            Form 990-T. 
             
            For information on unrelated business taxable income including definitions, examples of 
            activities and exclusions to unrelated business taxable income, see Publication 598, Tax on 
            Unrelated Business Income of Exempt Organizations, or IRC sections 511 through 514.   
             
            A list of the explanation codes to use in column “c” of the table in Question 23 is at the 
            end of these instructions.   
28 and 29   Direct Expenses means salaries and benefits, supplies, and other expenses directly related 
            to the actual conduct of the activities. 
             
            Indirect Expenses are expenses that are shared by multiple activities or programs, such as 
            facilities and administration costs related to the organization’s infrastructure (e.g., space, 
            utilities, custodial services, security, information systems, administration, materials 
            management, and others). SAMPLE
32 thru 59  Endowment Funds include quasi endowment, term endowment and true endowment.  See 
            questions 48, 49 and 50 respectively for a definition of each type of endowment. 
             
            External Party    means someone other than your organization or a related organization. 
42 and 43   Wages or Salary is compensation received by employees for services performed.  Wages 
            are usually based on an hourly pay rate, and salaries are a fixed sum paid for a specific 
            period (monthly, quarterly, annually). 
             
            Asset-based fees are fees that are set according to the asset size of the portfolio (e.g. 
            advisement and management fees). 
             
            Mutual-fund fees are fees such as sales commissions, loads, and annual 12b-1 fees. 

                                                - 3 -       Instructions  for Compliance Questionnaire 
                                                                                College and Universities  
                                                                                               

Question 
                         Definitions, References and Additional Instructions 
 Number 
 
           Performance-based fees      are fees that are based on a manager’s ability to outperform a 
           targeted return rate or performance goal.  These fees may include a base fee, a normal fee 
           for meeting expectations, and a maximum fee for exceeding expectations.   
60, 75, 77 In determining your organization’s highest paid officers, directors, trustees and key 
and 80     employees, include any person who is in a position to exercise substantial influence 
           (described below) over the affairs of the college or university. 
            
           For individuals not subject to Medicare taxes, see the instructions under question 17 above. 
            
           Treat amounts paid by a common paymaster for services performed for your organization as 
           paid directly by your organization.  Treat amounts paid by a common paymaster for services 
           performed for a related organization (defined earlier) as paid directly by the related 
           organization. 
            
           A person has substantial influence over the affairs of your college or university if: 
                
            a)   The person, regardless of title, has ultimate responsibility for implementing the 
                decisions of the governing body or for supervising the management, administration, or 
                operation of the organization (e.g., presidents, chief executive officers, or chief 
                operating officers). 
            b)   The person, regardless of title, has ultimate responsibility for managing the finances of 
                the organization (e.g., treasurers and chief financial officers). 
            c)   The person founded the organization. 
            d)   The person is a substantial contributor to the organization (within the meaning of IRC 
                section 507(d)(2)(A)). 
            e)   The person's compensation is based primarily on revenues derived from activities of 
                the organization, or of a particular department or function of the organization, that the 
                person controls. 
              f)  The person has or shares authority to control or determine a substantial portion of the 
                organization's capital expenditures, operating budget, or compensation for employees. 
            g)   The person manages a discrete segment or activity of the organization that represents 
                a substantial portion of the activities, assets, income, or expenses of the organization, 
                as compared to the organization as a whole. 
                 
           Officer   –An officer is a person elected or appointed to manage the organization’s daily 
                                 SAMPLE
           operations, such as a president, vice-president, secretary, or treasurer.  The officers of an 
           organization are determined by reference to its organizing document, bylaws, or resolutions of 
           its governing body. 
            
           Director or Trustee – A director or trustee is a member of the organization’s governing body 
           that has voting rights.  Members of advisory boards that do not exercise any governance 
           authority over the organization are not considered directors or trustees.  
            
           Do not include an institutional trustee.   An institutional trustee is not an individual or natural 
           person but rather an organization.  For example, a bank or trust company serving as the 
           trustee of a trust is an institutional trustee.  
            
                                             - 4 -          Instructions  for Compliance Questionnaire 
                                                                            College and Universities  
                                                                                          

Question 
                         Definitions, References and Additional Instructions 
 Number 
 
         Key Employees –  A key employee is an employee of the organization (other than an officer, 
         director, or trustee) who has responsibilities, powers or influence over the organization similar 
         to those of officers, directors, or trustees.  
          
         Key employees include the chief management and administrative officials of an organization 
         (such as an executive director or chancellor).  A chief financial officer and the officer in charge 
         of administration or program operations are key employees if they have the authority to 
         control the organization’s activities, or its finances.   
                                                         
 61      Types of  Remuneration: 
          
         Bonus – Includes all discretionary payments based on satisfaction of a performance target, 
         and certain amounts paid at the beginning of a contract before services were rendered (i.e., 
         signing bonus). 
          
         Employee benefit plans – Includes payments to welfare benefit plans on behalf of the 
         person.  For this purpose, health benefits provided by the organization include premium 
         payments, medical reimbursements and flexible spending programs, and employer self-
         insurance.  Health benefits include medical, dental, optical, drug and medical equipment.  
          
         Incentives – Include amounts that are paid or accrued during the year as part of an incentive 
         plan, regardless of whether the incentive plan is annual or long-term.  An  incentive plan is any 
         plan providing compensation intended to serve as incentive for performance to occur over a 
         specified period.  
          
         Life Insurance/Split-Dollar Life – For a detailed description, see Regulation sections 1.79-1 
         and 1.61-22 respectively. 
          
         Stock, stock options (equity based compensation) – Include the amount the person 
         received from your organization or a related organization for equity-based compensation 
         (such as stock, stock options, stock appreciation rights, phantom stock, restricted stock, or 
         shadow stock).  Also include the amount based on participation in any equity compensation 
         plan or arrangement sponsored by your organization or a related organization, whether the 
         compensation is determined by reference to an equity interest in a partnership, limited liability 
         company, or corporation.  For information on options, see Regulation section 1.61-15. 
                            SAMPLE
          
         Severance or change of control payments – Include payments to the person for severance 
         or change-of-control arrangements.  A severance payment is made because of termination of 
         employment.  A payment under a change-of-control arrangement is made when the person is 
         terminated or has a change in the terms of his or her employment because of a change in 
         control of the organization.  Treat any payment to a current or former officer, director, trustee, 
         or employee in satisfaction or settlement of a claim for wrongful termination or demotion as 
         severance. 
          
         Personal services - Include personal services provided for the benefit of the person or the 
         person’s family or friends.  Include services that are provided regularly (full-time or part-time) 
         or as needed, whether provided by an employee of the organization or independent 
         contractor (an individual or an organization).  Examples of personal services are a babysitter, 
                                         - 5 -           Instructions  for Compliance Questionnaire 
                                                                      College and Universities  
                                                                                       

Question 
                         Definitions, References and Additional Instructions 
 Number 
 
         bodyguard, butler, chauffeur, chef, concierge or other person who regularly runs non-
         incidental personal errands, escort, financial planner, handyman, landscaper, lawyer, maid, 
         masseur/masseuse, nanny, personal trainer, personal advisor or counselor, pet sitter, 
         physician or other medical specialist, tax preparer, and tutor for non-business purposes.   
          
         Health or social club dues - Include any membership dues paid by the organization for the 
         person’s membership in a health or fitness club or a social or recreational club, even if the 
         club is tax-exempt.  “Dues” include  entrance fees, periodic fees, and fees paid to use the 
         facility.  Health club dues do not include the value of an on-premises athletic facility 
         (described in section 132(j)(4)), or the college or university’s athletic facility that is available 
         for use by its students, faculty, and employees.  
          
         First-class travel   -If your organization paid for first-class travel for the person or his or her 
         companion(s), include the difference between the cost of first-class airline or boat travel over 
         the lower class fare.  Do not include the value of bump-ups to first class where there is no 
         cost to the organization.  First-class travel also includes any travel on an airplane or boat that 
         is owned or leased by the organization. 
          
         Fringe benefits – Include any other fringe benefits your organization provided that are not  
         specifically excluded by a section of the Internal Revenue Code.  For more information on 
         fringe benefits see Regulation section 1.61-21. 
          
         Working condition fringe –    A working condition fringe is any property or service provided to 
         an employee to the extent that, if the employee paid for the property or service, the payment 
         would be deductible by the employee as an ordinary and necessary business expense or 
         depreciation.  In some cases, property provided to employees may be used partly for 
         business and partly for personal purposes, such as automobiles.  In that case the value of the 
         personal use of such property is taxable compensation, and the value of the use for business 
         purposes is a working condition fringe benefit. 
          
         See Publication 15, (Circular E), Employer’s Tax Guide, Publication 15-B       , Employer’s Tax 
         Guide to Fringe Benefits, and Regulation section 1.61-21 for additional information on fringe 
         benefits. 
          
         Deferred compensation – Compensation that is earned or accrued in, or is attributable to, 
         one year but deferredSAMPLEto a future year for any reason, whether or not funded, vested or 
         subject to a substantial risk of forfeiture. 
           
         Under “organization’s contributions,” include the aggregate amount of contributions made by 
         the college or university and any related organizations to the person’s deferred compensation 
         plan(s) for calendar year 2006. 
          
         Under “participant’s contributions,” include any pre-income tax contributions made by the 
         person (participant), such as elective deferrals to 401(k), 403(b) or 457 plans, but exclude 
         after-tax contributions. 
          
         Report deferred compensation even if the person was not vested. 
          
                                          - 6 -              Instructions  for Compliance Questionnaire 
                                                                                College and Universities  
                                                                                                   

Question 
                             Definitions, References and Additional Instructions 
 Number 
 
            Nonqualified deferred compensation plans include section 457 (including 457(b) and (f)) and 
            403(b) plans, and qualified governmental excess benefit arrangements under IRC 415(m).   
             
            Qualified plans are plans under IRC 401(a), such as 401(k) plans.   
 62 thru 74 Family members – A person's family is limited to spouse; brothers or sisters (by whole or half 
            blood); spouses of brothers or sisters (by whole or half blood); ancestors; children; 
            grandchildren; great  grandchildren; and spouses of children, grandchildren, and great 
            grandchildren.  A legally adopted child of an individual is treated as a child of such individual 
            by blood. 
75 thru 94  Questions 75 thru 94 apply ONLY to private colleges and universities. 
            Do not complete this portion of the questionnaire if you are a public college or 
            university.  Instead follow the instructions in the accompanying letter for returning the 
            questionnaire to us. 
             
            Questions 75 thru 94 ask about the process your private college or university used to 
            establish the compensation of certain management officials.  For information on excess 
            benefit transactions see IRC section 4958, which applies to section 501(c)(3) and 501(c)(4) 
            organizations that are tax-exempt under section 501(a).  Such organizations may, but are not 
            required to, avail themselves of the rebuttable presumption procedures described in 
            Regulation section 53.4958-6 to establish compensation of its disqualified persons. 
             
            For information on reasonable compensation, see Regulation section 53.4958-4(b)(1)(ii)(B). 
            For a definition of disqualified person for section 501(c)(3) organizations, see Regulation 
            section 53.4958-3. 
               
            Compensation consultant   – A person, independent of the organization, that holds himself or 
            herself out to the public as a compensation expert or performs valuations of non-profit 
            executive compensation packages on a regular basis, and is qualified to make valuations of 
            the type of services provided. 
             
            The consultant is independent if he or she does not have a family or business relationship 
            with the officers, directors, trustees and key employees, and if a majority of the consultant’s 
            compensation appraisals, made during the consultant’s taxable year, are performed for 
            persons other than the organization and/or related organizations, even if the consultant's firm 
            also provides tax and audit services to the organization. 
                               SAMPLE
              
 85         Initial contract is a binding written contract between your organization and a person who was 
            not a disqualified person within the meaning of IRC section 4958(f)(1) immediately prior to 
            entering into the contract.  For more information on initial contract, see Regulation section 
            53.4958-4(a)(3). 
             
            Fixed payment is an amount of cash or other property specified in the contract, or 
            determined by a fixed formula specified in the contract, which is to be paid or transferred in 
            exchange for specified services or property. 

                                             - 7 -          Instructions  for Compliance Questionnaire 
                                                                            College and Universities  
                                                                                           

     TABLE OF EXPLANATION CODES (QUESTION 23)   

Choose the appropriate explanation code* from the list below and enter it in the 
appropriate row of question 23 column “c” if you indicated in column “b” that none or part 
of the income from the activity was UBI. 

 CODE                                    EXPLANATION  

  00   Substantially related 
  01   Income from an activity that is not regularly carried on (section 512(a)(1)) 
       Income from an activity in which labor is a material income-producing 
  02   factor and substantially all (at least 85%) of the work is performed with 
       unpaid labor (section 513(a)(1)) 
       Section 501(c)(3) organization—Income from an activity carried on 
       primarily for the convenience of the organization’s members, students, 
  03 
       patients, visitors, officers, or employees (hospital parking lot or museum 
       cafeteria, for example) (section 513(a)(2)) 
       Income from the sale of merchandise, substantially all of which (at least 
  05 
       85%) was donated to the organization (section 513(a)(3)) 
       Section 501(c)(3), (4), or (5) organization conducting an agricultural or 
  06   educational fair or exposition—Qualified public entertainment activity 
       income (section 513(d)(2)) 
       Section 501(c)(3), (4), (5), or (6) organization—Qualified convention and 
  07 
       trade show activity income (section 513(d)(3)) 
       Income from the distribution of low-cost articles in connection with the 
  12 
       solicitation of charitable contributions (section 513(h)) 
       Income from the exchange or rental of membership or donor list with an 
       organization eligible to receive charitable contributions by a section 
  13   501(c)(3) organization; by a war veterans’ organization; or an auxiliary unit 
       or society of, or trust or foundation for, a war veterans’ post or 
       organization (section 513(h)) 
       Dividends, interest, payments with respect to securities loans,  annuities, 
       income from notional principal contracts, loan commitment fees, and other 
  14 
       substantially similar income from ordinary and routine 
       investments excluded by section 512(b)(1) 
  15   Royalty income excluded by section 512(b)(2) 
       Real property rental income that does not depend on the income or profits 
  16   derived by the person leasing the property and is excluded by section 
       512(b)(3)   SAMPLE
       Rent from personal property leased with real property and incidental (10%  
  17   or less) in relation to the combined income from the real and personal 
       property (section 512(b)(3)) 
       Gain (or loss, to the extent allowed) from the sale of investments and 
       other non-inventory property and from certain property acquired from 
  18 
       financial institutions that are in conservatorship or receivership (sections 
       512(b)(5) and 512(b)(16)(A)) 
       Income or loss from the lapse or termination of options to buy or sell 
       securities, or real property, and from the forfeiture of good-faith deposits 
  19 
       for the purchase, sale, or lease of investment real property (section 
       512(b)(5)) 
       Income from research for the United States, its agencies or 
  20 
       instrumentalities, or any state or political subdivision (section 512(b)(7)) 
                                         - 8 -    Instructions  for Compliance Questionnaire 
                                                                  Colleges and Universities 
                                          

 CODE                              EXPLANATION  

       Income from research conducted by a college, university, or hospital 
  21 
       section 512(b)(8)) 
       Income from research conducted by an organization whose primary 
  22   activity is conducting fundamental research, the results of which are freely 
       available to the general public (section 512(b)(9)) 
       Income from services provided under license issued by a Federal 
       regulatory agency and conducted by a religious order or school operated 
  23 
       by a religious order, but only if the trade or business has been carried on 
       by the organization since before May 27, 1959 (section 512(b)(15)) 
       Income exempt from debt-financed (section 514) provisions because at 
       least 85% of the use of the property is for the organization’s exempt 
  30 
       purposes. (Note:            This code is only for income from the 15% or less non-
       exempt purpose use.) (section 514(b)(1)(A)) 
       Gross income from mortgaged property used in research activities 
  31 
       described in section 512(b)(7), (8), or (9) (section 514(b)(1)(C)) 
       Gross income from mortgaged property used in any activity described in 
  32 
       section 513(a)(1), (2), or (3) (section 514(b)(1)(D)) 
       Income from mortgaged property (neighborhood land) acquired for exempt  
  33 
       purpose use within 10 years (section  514(b)(3)) 
       Income from mortgaged property acquired by bequest or devise (applies 
  34   to income received within 10 years from the date of acquisition) (section 
       514(c)(2)(B)) 
       Income from mortgaged property acquired by gift where the mortgage was 
       placed on the property more than 5 years previously and the property was 
  35 
       held by the donor for more than 5 years (applies to income received within 
       10 years from the date of gift) (section 514(c)(2)(B)) 
       Income from property received in return for the obligation to pay an 
  36 
       annuity described in section 514(c)(5) 
       Income from mortgaged property that provides housing to low and 
  37   moderate income persons to the extent the mortgage is insured by the 
       Federal Housing Administration (section 514(c)(6))  
       Income from mortgaged real property owned by: a school described in 
       section 170(b)(1)(A)(ii); a section 509(a)(3) affiliated support organization 
  38   of such a school;SAMPLEa section 501(c)(25) organization, or by a partnership in 
       which any of the above organizations owns an interest if the requirements 
       of section 514(c)(9)(B)(vi) are met (section 514(c)(9)) 
       Gross income from an unrelated activity that is regularly carried on but, in 
       light of continuous losses sustained over a number of tax periods, cannot 
  41 
       be regarded as being conducted with the motive to make a profit (not a 
       trade or business) 
  42   Receipt of qualified sponsorship payments described in section 513(i) 
       Exclusion of any gain or loss from the qualified sale, exchange, or other 
  43   disposition of any qualifying brownfield property (section 512(b)(18) and 
       (19)) 
  44   Pension Protection Act 
*These codes (with the exception of 00 and 44) were derived from the exclusion codes included 
in the 2006 Form 990 instruction.  
                                   - 9 -	             Instructions  for Compliance Questionnaire 
                                                                          College and Universities