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Correction: The headline over Tuesday's story about a planned Internal Revenue Service audit of a Utah foundation connected to the family of former Gov. Mike Leavitt was in error. No cause was stated for the audit. Also, the story should have said organizations like the Dixie and Anne Leavitt Foundation are required to donate 85 percent of income to any number of organizations. And The Washington Post reported the Leavitt Foundation gave a relatively small amount to charity until recent years, but it did not assert the foundation failed to meet the legally required donation threshold.
WASHINGTON - The Internal Revenue Service plans to audit a Utah foundation that channeled tax-deductible donations from the politically powerful Leavitt family through Southern Utah University back to the Leavitts in the form of student rent for family-owned apartments.
Southern Utah Foundation President Scott Truman said the organization's board, which met Monday in Cedar City, asked him not to comment on the IRS audit, but that "they feel that we should be OK."
An IRS spokesman said he could not comment on any investigation.
Mark Barton, Southern Utah University's vice president for advancement and regional services, says the state school does not plan to change how it administers the foundation's donation or its housing scholarship program.
"Everything has been checked out [by attorneys] and it's legal," Barton said. He added the university has not received any notice of an inquiry by the IRS.
The foundation already plans to redo its IRS filings because several of its reports were inaccurate, showing that the organization returned money directly to the foundation connected to the family of U.S. Health and Human Services Secretary Mike Leavitt, even though the money actually went to SUU and then to housing scholarships.
The foundation's former accountant Rhea Tuft previously told National Public Radio that she filed the report that way because she knew the money would end up back with the Leavitts.
Nearly $500,000 in charitable contributions from the Leavitt family to the Southern Utah Foundation went to the university and eventually was recycled to the Leavitts through an agreement that student housing scholarships be used only for family-owned apartments.
The circular cash flow provided the Leavitts with tax deductions and income.
The Southern Utah Foundation and the Dixie and Anne Leavitt Foundation said Monday they plan to review their arrangement to ensure they are complying with tax law but want to continue providing housing scholarships to SUU students.
"They need to look back at their organization, and we need to look at ours," said Truman.
The two foundations have been under scrutiny since news reports late last month revealed the Leavitt family took millions in tax deductions for donating to its foundation while the organization had paid out little to charity until last year.
Further news reports showed that some $500,000 the Leavitt foundation paid to the Southern Utah Foundation was used for housing scholarships for apartments owned by Cedar Development Co., a Leavitt family business.
Leavitt family spokesman Dane Leavitt said the family's foundation is reviewing its arrangement to ensure it complies with tax law.
"We continue to analyze that question and we have engaged assistance of others to help us review that," Dane Leavitt said. "What we have seen thus far suggests that it's very hopeful that we'll be able to continue the relationship as the Dixie and Anne Leavitt Foundation supporting the Southern Utah Foundation."
Leavitt would not discuss whether he had been notified by the IRS of plans to audit the Leavitt foundation.
"We're certainly comfortable with the state of our records and comfortable with the transactions we've done that they're consistent with law," he said.
The Leavitt foundation - named for the parents of Mike Leavitt, a former three-term Utah governor - was set up as a nonprofit known as a Type III Supporting Organization, which must donate 85 percent of its income to a primary organization, in this case, the Southern Utah Foundation.
The Washington Post reported two weeks ago that the Leavitt foundation had given a very small amount to charity until recently. The foundation gave a total of $209,000 to charity from 2001 to 2004 but boosted its donations in 2005 and 2006, giving a total of $1.2 million in that time period.
Dane Leavitt, who met with the Southern Utah Foundation board for 90 minutes Monday, said the members agreed that "stronger and more frequent communication" between the two entities would improve how the organizations function.
Dane Leavitt said the organization is also looking at changes to tax law, approved by the Senate last week, that affect groups like the Leavitt foundation.
NPR earlier reported that the Southern Utah Foundation may not qualify as a public charity because it did not receive a significant number of contributions from the public in the past three tax years. The organization receives a large chunk of its money from the Leavitt family.
Though a contributor to the Leavitt family foundation, Mike Leavitt is not a board member nor does he control its actions.
Dane Leavitt says that though his brother Mike may have taken $500,000 in tax deductions because of his donation, he could have realized three times as much in profits had the family sold the stock it donated to the foundation.