Schools giving university presidents extra cash to pay their taxes

A new report in the Chronicle of Higher Education finds that out of the nation’s 50 highest paid university presidents, half of them received additional cash to cover taxes on bonuses and other benefits during fiscal year 2010.

The Chronicle’s study comprised of 493 private colleges and universities with annual operating budgets of $50 million or more. It did not break down what the average amount of money university president’s receive for taxes, as universities each deal with the situation in different ways. However the study did show that 36 university presidents received more than $1 million in compensation that year, with the average salary at roughly $400,000.

The practice of giving executives’ additional cash to cover their tax liability on benefits beyond their base salary is known as “grossing up,” and it has been used in both the corporate and non-profit world for years. Recently, however, Congress and the Internal Revenue Service have started to crack down on the practice, and in 2007 the IRS updated its Form 990 to require nonprofits, including private universities, to disclose all corporate perks and cash bonuses, including grossing-up payments.

Despite increased public awareness of the grossing-up payments, colleges have yet to cease providing them. The 2010 report found that among the presidents with the fifty-highest salaries in the country, three-fourths of them still received some form of gross-up payment from the school. Only one, Emory University in Georgia, has officially stopped providing payments to cover employee taxes.

Dean Zerbe, who helped investigate the practice while serving as an aid to Sen. Chuck Grassley (R-Iowa), commented that it is “hugely hypocritical to be out there beating the drum [for Obama], and meanwhile running as fast as they can to get contracts that make sure any taxes don’t affect them.”

Thus, it’s not very shocking to read that 81 percent of campaign contributions that higher-education employees made to presidential candidates went to President Obama, according to a June 2012 Chronicle article.

Ironically, the highest paid university president the year of the study was none other than The New School’s Bob Kerrey, the former Democratic Nebraska Governor and Senator who recently lost a bid to reclaim his U.S. Senate seat against Republican Senator-elect Deb Fischer.

Kerrey netted $3 million in 2010, his final year as president at the New York City-based school, with only a fifth of that coming from his base pay. The Chronicle found that in 2010 the New School paid Kerrey $1.2 million in bonus pay, $420K in nontaxable benefits, and nearly $700,000 in “other pay,” which included severance and retirement pay.

Rounding out the top five were Rensselaer Polytechnic Institute’s Shirley Ann Jackson, Birmingham-Southern College’s G. David Pollick, Washington University of St. Louis’ Mark Stephen Wrighton and Vanderbilt’s Nicholas S. Zeppos. Each of these individuals earned more than $2 million in total compensation in 2010.

(h/t The College Fix)

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