August 9, 2007 | Read Time: 2 minutes
Nonprofit groups are costing the federal government more than $1-billion through unpaid payroll and other taxes, according to a government watchdog unit.
At a recent Congressional hearing, the House Ways and Means Subcommittee on Oversight pressed officials of the U.S. Department of the Treasury for advice on how to combat these abuses without placing unreasonable burdens on law-abiding charities.
At least 55,000 tax-exempt groups have failed to pay taxes, said Gregory D. Kutz, managing director of forensic audits and special investigations at the Government Accountability Office, Congress’s investigative arm.
At the same time, about 1,200 of these groups had received more than $14-billion in grants from federal agencies, Mr. Kutz noted.
Steven T. Miller, commissioner of the Internal Revenue Service’s tax-exempt and government-entities division, said the unpaid bills are partly the result of the fact that his office does not have enough money to properly monitor all charities.
President Bush has asked Congress to give the IRS nearly 11 percent more, or $26.4-million, in the 2008 fiscal year, which starts October 1. Congress must still consider that request.
With the increased money, Mr. Miller said, the IRS would probably spend more to curb some of the most common forms of abuse by tax-exempt organizations.
Lawmakers also heard testimony from nonprofit leaders, who said recent laws aimed at cracking down on abuse have restricted the ability of many organizations to solicit donors.
Diana Aviv, president of Independent Sector, a Washington coalition of charities and foundations, and Steve Gunderson, president of the Council on Foundations, an organization of grant makers, talked to the committee about the Pension Protection Act of 2006, which was designed to promote charitable giving while also closing some loopholes that have allowed abuse.
The law allows older donors to contribute money from their individual retirement accounts directly to nonprofit groups without facing taxes on their investment gains. But it does not cover gifts made from IRA’s to donor-advised funds or to supporting organizations.
That restriction, Ms. Aviv and Mr. Gunderson said, is causing problems for many charities and foundations.
