The big news is that the Internal Revenue Service is on the verge of a $12 billion settlement with the country’s biggest college counseling and financial-aid provider, Corinthian Colleges Inc.
On Thursday, the IRS released a statement acknowledging the settlement and saying the agency would cooperate in producing the financial information.
In a conference call on Monday, IRS Commissioner John Koskinen answered a few questions about the settlement, and he said he wouldn’t comment further on the process. He did say that the IRS has had “very good cooperation” from the company.
There are other things we don’t know, including the terms of the settlement. And there are other key questions about the details of the arrangement, as well. But we’re still working on them, so keep coming back. Here are some other important questions about the college-finance settlement and its fallout:
Are you part of the settlement?
No. There is one big provision of the IRS settlement that makes us happy. That provision lets Corinthian Colleges’ existing business, including its more than 40 campuses, keep its current tax-exempt status. It also gives the company permission to keep offering existing student loans — those held by lenders who weren’t part of the government settlement.
Corinthian Colleges had more than 25,000 employees when the IRS first began looking at it last year. According to the OIC, all Corinthian Colleges campuses had more than 10,000 students and more than 50 percent of those students received federal financial-aid.
And in December, the IRS released a statement explaining the company’s tax status. It noted that the company “has not been charged with a crime and will continue to conduct its business as usual, with the IRS’ full knowledge and consent,” and it added: “The IRS does not believe that any of its actions violate the Internal Revenue Code.”
Corinthian Colleges was able to continue offering loans as long as those loans were held by lenders that were not part of the settlement. That includes most of the loans Corinthian Colleges held when the firm filed for bankruptcy. The loan that Corinthian was paying to the federal government was held by a mortgage bank, according to federal court records.
Those loans, and the other loans held by Corinthian College, were protected by the bankruptcy court. And at least so far, the government has not taken any action to try to collect those debts.
Did Corinthian Colleges or the schools themselves know that the company was a risky investment when they took out loans?
Yes, says the OIC. Corinthian Colleges itself was a risky investment.
The OIC asserts that Corinthian Colleges was not a “qualified education service company” at the time of its default. In fact, a July 21, 2013 OIC document titled “Corinthian Colleges Inc. Determination of Non-Taxable Status” said that the school was not a “qualified education service company” at the time it entered bankruptcy, meaning it could not legally take out federal loans.
The documents filed by Corinthian Colleges on its behalf with the U.S. Bankruptcy Court in White Plains, N.Y. included these statements. The company said it was not “qualified education service company” on that July 21, 2013 document and was not “qualified education service company” on May 16, 2014.
And on that July 21, 2013, document, Corinthian Colleges was telling the federal government that it was not a qualified education service company. On that July 21, 2013 document, the school said it was not “engaged in activities that qualify it as a nonprofit tax-exempt institution under section 501(c)(3) of the Internal Revenue Code.
If you are interested in more details about IRS OIC settlement, call (888)489-4889 for a free consultation.