Tax Agency Offers Guidance to Disaster-Relief Charities

The Internal Revenue Service has taken steps to help disaster-relief charities and their donors in the aftermath of Hurricane Katrina.

The IRS announced that it would speed the processing of requests for tax-exempt status from new organizations that will assist hurricane victims. New organizations should file Form 1023 and write at the top of the form “Disaster Relief, Hurricane Katrina.”

However, the tax agency encouraged people to work with existing organizations already involved in aid efforts. “Such organizations, including churches, are frequently able to administer relief programs more efficiently than newly formed organizations, because they already have fund-raising and distribution infrastructures in place,” the revenue service said.

The tax agency has expedited its processing of applications in past disasters. The IRS faced criticism for the practice after the September 11, 2001, terrorist attacks because it quickly approved some organizations for tax-exempt status that were not formed to respond to the disaster, had listed only the vaguest descriptions of their missions, or had proposed seemingly implausible goals (The Chronicle, March 7, 2002). The IRS denied that it took any shortcuts.

In another move, the IRS announced that charities affected by Hurricane Katrina would have the chance to get extra time to file their informational tax returns.

Details of these and other IRS actions are available online at http://www.irs.gov/newsroom/article/0,,id=147085,00.html.

In addition, the IRS urged donors and tax-exempt groups — as well as people who want to form charities — to read its booklet, “Disaster Relief: Providing Assistance Through Charitable Organizations,” known as Publication 3833. The booklet is available at http://www.irs.gov/newsroom/article/0,,id=108362,00.html.

Meanwhile, the IRS said that, because President Bush declared the hurricane a federal disaster, corporate foundations may provide money to employees of their corporations who need help as a result of the hurricane. Without government authorization, such payments would be considered improper “self dealing” by corporate foundations.