December 11, 2008 | Read Time: 1 minute
The Internal Revenue Service has announced its plans to monitor tax-exempt organizations in 2009, including a comprehensive study of fund raising and spending by charitable organizations and a broad effort to educate the agency’s staff members on governance issues.
Lois G. Lerner, director of the exempt-organization division of the IRS, said it is important to keep an eye on nonprofit organizations as demand for their services rises during the economic downturn.
“We believe that compliant organizations are better positioned to serve the public interest and meet the growing demand for their services,” said Ms. Lerner in a letter accompanying the department’s goals.
In 2009, the service expects to begin a study of how tax-exempt groups raise and spend money compared with how much they spend to achieve charitable goals. The focus will be on organizations that raise unusually large amounts of money, have unrelated trade or business income, and spend relatively little on their programs.
The IRS also will look at how charities and donors account for noncash gifts, such as pharmaceuticals or used clothing, that are given to tax-exempt groups that then donate the goods to a different nonprofit group. The IRS is concerned that donors and charities are assigning the donations inaccurately high values.
And the agency will train its agents in how to consider governance issues in determining whether an organization qualifies as a charity. Critics of the IRS have charged that the agency is using the lack of conflict-of-interest policies or the lack of independent board members to reject organizations’ applications for tax exemption, even though the law does not require those policies.
