Robert L. Ehrlich, Jr. and others letter to Charles O. Rossotti, November 27, 2001

Соодггвй of tfje Uniteb States Щои it of JUprESentatibeg MagJjington, 2ЭС 20515 November 27, 2001 Charles O. Rossotti Commissioner of the Internal Revenue Service 1 1 1 1 Constitution Avenue, N. W. Washington, D.C. 20224 Dear Commissioner Rossotti: We are writing to you regarding the Internal Revenue Service’s ("IRS") recent actions regarding national tax exempt organizations that assist colleges and universities in securing and operating new student housing facilities, and the possible negative impact of the IRS's actions upon colleges and universities within our respective states. One such organization is the Collegiate Housing Foundation (CHF). The IRS granted tax- exempt status to CHF in 1997. CHF specifically used this tax-exempt status to assist colleges and universities across America, including schools in our states, in securing and operating new housing facilities for their students. This arrangement has worked splendidly and has helped provide much- needed housing for our students. In September 2000, in an apparent attempt to reverse previously established IRS policy, three IRS employees published a continuing education article questioning the charitable purpose of national entities, such as CHF, which assist multiple schools in obtaining student housing. This article, although it is not supposed to have the force of law, has cast a prohibitive cloud over this beneficial practice. In addition, last December the IRS launched an audit of CHF. This past July, CHF released a notice stating that the IRS's preliminary audit findings indicate that the IRS now believes that it made amistake in granting CHF its 501(c)(3) status, even though CHF complied with its IRS-approved mission. Moreover, the audit recommends that CHF's 501(c)(3) status be revoked. Several constituent colleges and universities have contacted us about the IRS actions. As you might imagine, these schools are gravely concerned that the IRS article has prevented them from using this financing mechanism for current and future housing projects, and that the IRS may revoke CHF’s 501(c)(3) status, possibly causing their existing student housing financing to collapse. Their concern regarding such a collapse is not alleviated by the possibility that the IRS might grandfather the tax exempt bonds issued as part of such financing since they still will be faced with the prospect ofhaving income taxes levied on their projects’ revenues which, even if relatively small, could cause enough of a reduction in their revenue to trigger a default under the financing documents. Moreover, these schools are equally upset that such a successful, efficient and useful financing tool may be revoked for reasons that remain unclear and unconvincing to us, thus removing it as a viable option for necessary future student housing projects.