Reps. Adams, Raskin Introduce HONEST Act to Protect Colleges from Politically Motivated IRS Investigations

WASHINGTON, D.C. - Today, Congresswoman Alma S. Adams, Ph.D. (NC-12), and Congressman Jamie Raskin (MD-08) introduced the Higher Education Oversight for Nonprofits Ensuring Standards and Transparency Act, or the HONEST Act, to establish new safeguards for IRS investigations of colleges and universities.

The bill comes as the Department of the Treasury and IRS move forward with new regulations affecting the tax-exempt status of private schools, including colleges and universities. Under the new proposal, as many as 18,000 schools could be affected, along with roughly 750,000 students who receive scholarships tied to race, ethnicity, or national origin. The rule would reach beyond admissions to scholarships, student programs, and other policies that colleges use to serve their students.

"I spent 40 years as a professor, and I know our colleges and universities should not have to worry about the IRS being used as a political weapon," said Congresswoman Adams,Ranking Member of the House Subcommittee on Higher Education and Workforce Development. "The HONEST Act does not prevent the IRS from enforcing the law, it simply ensures a fair and transparent process before the federal government investigates a college or university."

"Like other institutions, colleges and universities in the United States are entitled to 'Due Process,' the two most beautiful words in the English language," said Rep. Jamie Raskin (MD-08). "I am glad to partner with Representative Adams to introduce the HONEST Act, which preserves important federal tax investigation authorities while ensuring that colleges and universities get the same Due Process protection as houses of worship receive."

The HONEST Act mirrors protections that already exist for churches and houses of worship, where the IRS must follow added procedures before opening certain tax inquiries. The bill would bring a similar process to colleges and universities, adding due process without taking away the IRS's ability to hold schools accountable when they break the law.

The legislation is endorsed by the American Council on Education (ACE), the American Association of State Colleges and Universities (AASCU), the National Association of Independent Colleges and Universities (NAICU), and the Association of Public and Land-grant Universities (APLU).

"The American Council on Education, the major coordinating body for the nation's colleges and universities, with nearly1,600 member institutions, related associations, and other organizations in America and abroad, strongly endorses the HONEST Act," said a representative of the American Council on Education. "The HONEST Act creates strong guardrails to protect our nation's colleges and universities, both public and private nonprofit institutions, from the misuse of federal tax-exempt oversight authority by the Department of the Treasury and the IRS. This bill would make important enhancements to protections already in law and we hope it will be swiftly taken up and passed by the full Congress."

"Nonprofit organizations, including institutions of higher education, have had their tax-exempt status threatened for no more than failure to operate in accordance with prevailing administrative orthodoxy," said Dr. Charles L. Welch, President & CEO of the AASCU. "Colleges and universities must be able to carry out their missions-advancing academic achievement, research, and workforce preparation-without concern that lawful operations could trigger punitive action. The HONEST Act provides important safeguards to ensure transparency, consistency, and fairness in oversight of nonprofit institutions."

The HONEST Act would:

• Protect academic decisions from being used as a reason for an IRS investigation: The IRS cannot target a school based solely on its curriculum, accreditation, or other academic policies unless there is a violation of federal law.
• Make the IRS explain why it is investigating a school: A senior Treasury official must document evidence of a clear tac regulation violation an inquiry begins.
• Give the school a chance to respond: Colleges and universities must be told what the IRS is looking at and have an opportunity to meet with the agency.
• Put a time limit on investigations: IRS examinations generally must be finished within two years.
• Stop the IRS from repeatedly reopening the same issue: After a clean review, the IRS generally cannot come back on the same issue for five years.
• Require another level of review before serious action is taken: The IRS cannot revoke tax-exempt status or take certain other enforcement actions without additional internal approval.
• Require Congress to be notified: Treasury must report these investigations to the House and Senate tax-writing committees.
• Apply the protections to public colleges and certain university foundations and endowments.

A one pager for the bill can be found here.

The full text of the bill can be found here.