August 23, 2007 | Read Time: 1 minute
The Internal Revenue Service has proposed that two large national donor-advised fund operators lose their tax-exempt status because they allegedly have been using some of their funds for donors’ personal benefit.
Acting IRS Commissioner Kevin M. Brown, in a letter to Sen. Charles E. Grassley, said the agency has identified more than 200 donors for examination and it is investigating 11 donor-advised funds that “account for a significant portion of the assets and income in the donor-advised fund universe.”
The agency’s policy is not to disclose which funds are under scrutiny, or which could lose their tax-exempt status.
Mr. Brown said the IRS has found that some charities are advertising that donors can shelter their assets in a tax-free investment fund. In some of the cases under investigation, he said, the donors have used their money in donor-advised funds to be reimbursed for their expenses or to pay college-tuition bills for their children.
As part of the Pension Protection Act of 2006, Congress ordered the Treasury Department to investigate donor-advised funds and recommend potential ways to ensure they are providing appropriate benefits to charitable causes.
Staff members of the Senate Finance Committee have said they will be looking closely at those recommendations to determine whether Congress needs to place new limits on the funds.
