Ex-UVA President’s Salary Likely Violates Tax Law

The University of Virginia’s Faculty Senate recently voted “no confidence” in UVA’s Board of Visitors “for not protecting the University and its president from outside interference, and for not consulting with the Faculty Senate in a time of crisis, actions that are inconsistent with its duties under the Code of Virginia and the Board’s Statement of Visitor Responsibilities.”

UVA’s Faculty Senate was right to condemn the Board for lack of shared governance. But it was wrong to criticize the Board for not “protecting” then-President Jim Ryan from the consequences of violating anti-discrimination law and stonewalling a federal civil rights investigation. Equally important, the Faculty Senate missed perhaps the most significant reason the Board deserves “no confidence”: the extravagant salary it agreed to pay now ex-President Ryan likely violates federal tax law and places the University’s tax-exempt status in peril.

Lost in all the sound and fury of the Ryan imbroglio is that the Board allowed Ryan—who resigned before he got fired—to remain at UVA as a tenured law professor at 75% of his president’s salary. Ryan’s most recent salary was $1,100,000. Seventy-five percent of $1,100,000 is $825,000, which is an astronomical sum for a law professor at a public university.

Indeed, according to OpenPayrolls.com, the next highest-paid UVA law professor, Naomi Cahn, earned $404,200 in 2024, and the only other law professor in UVA’s top hundred compensation list is Elizabeth Rowe, who received $338,900. Cahn and Rowe are paid a lot, obviously, but much less than Ryan will receive. Rowe’s UVA website states that she has published “over 50 books and articles.” Ryan’s productivity when he was a full-time faculty member paled in comparison.

What makes the enormous salary the Board voted for ex-President Ryan more than merely something for the UVA community to be disgusted about is the patent violation of the Internal Revenue Code’s private inurement prohibition it represents. Many tax laws are complicated. The private inurement prohibition is not one of them.

Tax-exempt organizations such as the University of Virginia are granted a privileged tax status under section 501(c)(3) of the Internal Revenue Code because they pledge to operate to serve the public good. To maintain tax-exempt status, an organization’s activities must primarily benefit the community, not private interests.

The prohibition against private inurement is a strict tax law that states that no part of a tax-exempt organization’s financial assets may benefit an individual. The rule targets transactions with individuals who have a significant relationship with the organization and can influence its decisions for personal gain. The IRS refers to these individuals as “insiders” or, in the context of penalty taxes, “disqualified persons.”

An “insider” is anyone with a personal and private interest in the organization’s activities and a position of influence. This category includes the organization’s Board members and officers, such as the president.

Inurement occurs when an insider receives financial benefits from the organization that are not in furtherance of its exempt mission. The most common type of private inurement is excessive compensation paid to insiders. The courts and the IRS have consistently ruled that any unreasonable benefit or inurement, however small, is impermissible and, this is the important part, can result in the revocation of the 501(c)(3) organization’s tax-exempt status. Paying ex-President Ryan $825,000 a year to teach a couple of classes and publish an occasional article is unquestionably a violation of the private inurement prohibition.

UVA got into this mess because the Board and then-President Ryan thought that anti-discrimination law didn’t apply to the University. Now they seem to think tax law doesn’t apply to the University, either. Ryan lost his job for stonewalling a federal civil rights investigation. UVA’s Board members should lose their jobs for putting the University’s tax-exempt status in jeopardy.