August 19, 2004 | Read Time: 1 minute
The Internal Revenue Service has begun contacting nearly 2,000 charities and foundations as it officially kicks off an effort to crack down on groups that are providing excessive pay or benefits to their top executives.
The majority of the organizations selected by the IRS were chosen because “specific aspects of their operations have raised questions that must be answered,” Mark W. Everson, commissioner of internal revenue, said in a statement last week announcing the move.
In addition to contacting those whose returns raised red flags, the IRS is questioning some randomly selected groups to compare their responses.
With this move, the IRS has broadened the scope of the inquiry it announced two months ago, when officials said they would begin looking into the excess pay of hundreds of organizations (The Chronicle, June 24).
Steven T. Miller, commissioner of the IRS’s tax-exempt and government entities division, said the nonprofit groups selected for questioning fall into three categories: those that appear to pay excessive salaries; those that offered loans or other questionable benefits to their executives; and those that disclosed insider dealings, such as having a board member whose company was hired by the charity to provide services.
So far, the IRS has sent letters to about 200 groups, according to Mr. Miller. It will contact the remainder throughout this year and next.
If the IRS is satisfied with a charity’s initial response to its questions, it will drop the matter, Mr. Miller said. But if the questions shed light on abuses, the IRS could impose penalties or even revoke a group’s tax exemption, he said.
