Colleges are pressing MSPs to introduce amendments to the Scottish Executive's charities legislation to prevent them losing tax breaks and up to pound;15 million in annual income.
One of the key tests of a charity under the Charities and Trustee Investment (Scotland) Bill would be its independence from third party control, and there are fears that colleges and post-1992 universities may fall at that hurdle.
Under the 1992 legislation that incorporated colleges, ministers have a power of direction, and can sack any or all of their board members. If a college was wound up or closed down, any funds would go back to the Executive.
A strict interpretation of the new legislation might therefore mean that colleges failed the regulator's test of independence to qualify for charitable status.
Neil Cuthbert, policy adviser for the Association of Scottish Colleges, said that, as the Bill was currently worded, colleges and post-1992 universities were in the same position as the national arts collections which also face potential loss of charitable status.
"The Scottish Executive has said it will make amendments to the Bill to guarantee the charitable status of the national collections and institutions. We are looking for them, at the same time, to come forward with amendments to secure charitable status for FE colleges," Mr Cuthbert said.
The ASC is also looking for a light touch regime from the Office of the Scottish Charity Regulator, since colleges are already closely regulated by the Scottish Further Education Funding Council.
"OSCR should co-operate with other regulators to minimise bureaucracy," Mr Cuthbert said.
In the first stage of the parliamentary debate on the Charities Bill last week, Fiona Hyslop, SNP shadow education minister, commented: "The public will find it bizarre if a private school gets charitable status but the local further education college does not. If that happens, it will be because the independent schools are precisely that - independent - whereas the colleges are not."
Ms Hyslop added that, while independence has its place, so do probity and the principle of accountability for public money. "Colleges could be made independent but, frankly, given the recent history of the management of some colleges, I am not sure that the time is right for that to happen.
Even if it was, the governance of colleges should be driven by the strength of the sector, not by a loophole in the Bill."
She made another point: "Currently, corporation tax is low for colleges because their surpluses are small. However, the Bill could provide a disincentive for colleges to become more successful and grow their surpluses."
Cathie Craigie, Labour MSP for Cumbernauld and Kilsyth, said: "For the same reasons that the (communities) committee argued so hard for the Bill to make provision for the national collections, the Parliament should argue that ministers should retain Scottish colleges' entitlement to charitable status."
Ms Craigie said that the benefits of charitable status go well beyond the FE sector itself. "The nursery in my constituency, which is attached to the college, benefits from the college's charitable status and the fund-raising that it can do. Cumbernauld College benefits from VAT and other tax relief, which allows it to spend money on activities such as marketing, encouraging students to come and study in Cumbernauld and making local people aware of the opportunities that are available to them on their doorstep."
Malcolm Chisholm, Communities Minister, who is in charge of the Bill, promised to give the matter further consideration.